INDIA BUSINESS WORLD - JULY - AUGUST - 2007
The Month that was ...

RELIANCE COMMUNICATIONS BUYS US BASED YIPES FOR $300 MILLION

RELIANCE Communications (RCOM) has acquired US based Yipes Holdings, a provider of managed ethernet and application delivery services, in an all-cash deal valued at Rs 1,200 crore ($300 million). Ethernet is the default standard for computer-to-computer connectivity across the world in offices and organisations.

Yipes will be a wholly-owned subsidiary of Flag Telecom, the undersea cable arm of RCOM. "Yipes will accelerate our entry into the $100-billion global market for enterprise and institutional data services," RCOM chairman Anil Ambani said at a press conference in Mumbai.

"The acquisition would add $50-100 million per year to our EBITDA margins over the next few years," he added.

Founded in 1999 by a group of investors, including Norwest Venture Partners managing partner Promod Haque, Yipes has annual revenues of $100 million and has network presence in the top 14 US metros, which account for 40% of the total US data communications market.

The global ethernet market is valued at $10 billion and it is forecast to grow at a compounded annual rate of 30% to $25 billion by 2010. "Even a 10% share would get revenues of $2.5 billion for us," RCOM president (global business) Punit Garg said.

Yipes would see an investment of Rs 1,000 crore in the next few years to roll out ethernet services in new areas. "This will grow revenues of Yipes by four to five times. We would also expand Yipes in US metro markets from 14 to 30 over the next year," he said.

The acquisition of Yipes will help Reliance Communications overlay latest technology over Flag network. RCOM will expand Yipes coverage within the US and take Yipes to nearly 40 new markets globally, including Middle East, Asia and India, by connecting it to Flag and RCOM network, said Mr. Garg.

Mr. Garg said corporate clients MNCs and small and medium enterprises presented good business opportunities for Yipes in India. "BPOs and ITeS companies will benefit and we hope to take a significant market share," he added.

Yipes CEO John Scanlon said: "The financial sector presents a key opportunity for us as we are well positioned to capture the market by meeting the fast-growing and stringent connectivity requirements of financial exchanges around the world."

On Flag, Mr. Garg said the company was investing $1.5 billion in the company over the next two years to expand network to 60 countries.

Reliance Communications shares rose 3.49% to Rs 574.05.