VSNL Rebrands as Tata Communications

India's Tata Group plans to invest $2 billion during the next three years in its newly combined Tata Communications Ltd. business, which includes global services giant Videsh Sanchar Nigam Ltd. (VSNL) (NYSE: VSL). (See VSNL Rebrands as Tata.)

It has pulled VSNL, VSNL International Pte. Ltd. , Teleglobe, Tata Indicom Enterprise Business, and Cipris under one umbrella to take advantage of the Tata brand. The 130 year-old Tata Group is India's largest private industrial conglomerate, with interests in the steel, automotive, technology, and beverage industries.

As Ovum Ltd. 's Matt Walker put it in a recent research note, the move "brings management smarts, deep pockets, and relationships."

The new Tata Communications will invest around $1 billion in building out its submarine cables and domestic WiMax network, and another $1 billion in network expansion.

The company is building a $250 million TGN Eurasia Cable System linking Mumbai directly to Paris, London, and Madrid via Egypt; and a $200 million TGN-Intra Asia submarine cable linking Singapore, Hong Kong, and Japan with an additional connection to the Philippines. It's also part of the I-ME-WE consortium building a cable that connects India to France via the Middle East. (See VSNL Plans Euro Link, Tyco to Build VSNL Subsea Network , and Carriers Formalize I-ME-WE.)

It will also invest $50 million in the Seacom Ltd. submarine cable project, which will link several African countries to international cable networks. VSNL holds a 26 percent stake in Neotel (Pty) Ltd. , South Africa's second national operator.

VSNL boasts an extensive subsea network that offers both eastward and westward connectivity, which enabled it to get enterprise customers back online within a few hours following the recent cable breaks in the Middle East. (See VSNL Restores Subsea Service.)

The $1 billion earmarked for network expansion will be invested in Tata's MPLS and Ethernet services around the world as it makes the transition from wholesale voice carrier to full-service enterprise carrier to compete with AT&T Inc. (NYSE: T), BT Group plc (NYSE: BT; London: BTA), Verizon Enterprise Solutions , and Reliance Communications Ltd. (RCom) and its FLAG Telecom Ltd. and Yipes Enterprise Services Inc. subsidiaries. (See VSNL Profit Plunges.)

Srinivasa Addepalli, VSNL's senior vice president of corporate strategy, told Reuters his company has formed a network services partnership in China that will provide its multinational clients with access there, while in the U.S. and U.K. it's looking for acquisitions to boost its managed services portfolio.

Within India, Tata Communications is focusing on building a broadband infrastructure to compete with service providers like Reliance and Bharti Airtel Ltd. (Mumbai: BHARTIARTL). It plans to invest around $500 million in its WiMax operations, which it has launched in Bangalore and will expand to 100 other cities starting with New Delhi, Chennai, and Hyderabad. (See VSNL Pump$ Up WiMax Plan$.)

VSNL's shares, now listed as Tata Communications, rose 20.80 Indian Rupees (4.64%) to close at 468.70 (US$11.79) on the Bombay Stock Exchange.

— Nicole Willing, Reporter, Light Reading

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