Mumbai: The acquisition of Bermuda-based submarine cable operator, Tyco Global Network (TGN), by Videsh Sanchar Nigam Ltd (VSNL) for $130 million, beating three international players, has been an excellent buy for the Tata group as it comes at a time when VSNL was planning of going global. Also in the running for Tyco was Reliance Infocomm Ltd.

However, the moot question is why Tyco choose VSNL, ignoring all other bidders, of which one is believed to be from Latin America and another from Hong Kong, apart from India's Reliance.

According to telecom analysts, money was not the criteria, but a plethora of other factors including synergies in operations.

Moreover, VSNL's cash-reserve of more than Rs700 crore also went in its favour. The cash reserve and the synergies in operations between Tyco and VSNL would ensure that the Tata-group company would not crash bandwidth prices across the globe.

Tyco International wanted to sell off its ailing submarine cable business and had appointed the investment bank Goldman Sachs to conduct the bidding. Even though, analysts say that the sub-sea link was a "disastrous sale", Tyco managed to ensure that the under-sea cable business was in safe hands.

Fortunately for Tyco, the bidders were companies with whom the company had partnered and choosing one among them was not a difficult task.

VSNL's proposed Tata Indicom Chennai-Singapore under sea cable, which went live just two days after the Tyco deal, was also in the Tata company's favour as Tyco's cable laying unit was actively building the submarine cable.

What does it mean for VSNL?
The acquisition of Tyco for $130 billion has been described as a killing for VSNL, because the submarine cable was laid in 2001-2002 at a total expense of $2.5 billion, with different parts of the cable becoming operational at different points of time.

TGN, which has the largest network across Atlantic and Pacific, also has an installed terrestrial network through the eastern seaboard of North America to the western seaboard of the continent, extending from Los Angeles to New York.

The total lit-up capacity amounts to only 70 GB, with a vast capacity still remaining unlit. TGN has a total unlit capacity of around 7,000 GB, of which 3,600 GB is on the Atlantic leg.
Moreover, if VSNL were to set up this kind of a network, with 12 gateways and 30 global points of presence (PoP), the internet and telephony major would have incurred more than the original bid price of $2.5 billion.

According to Tata Industries Ltd Managing Director and VSNL Director Kishore Chaukar VSNL would get Tyco's Fortune 500 companies, part from the specialised employees.