Wholesale/transport services

Rumor: Subsea, Ethernet Assets for Sale

Reports, including this Reuters story, suggest Indian giant Reliance Communications Ltd. is looking to offload its submarine networks business (Flag Telecom) and Ethernet services business (formerly Yipes) for $3 billion in a bid to raise money to pay down its debts.

According to the speculation, Deutsche Bank AG , acting on behalf of Reliance, has approached AT&T Inc. (NYSE: T), KDDI Corp. , and Verizon Communications Inc. (NYSE: VZ) to gauge their interest.

Reliance has denied the reports.

Flag, acquired by the Indian firm for just $211 million in early 2004, and Yipes, bought for about $300 million in July 2007, are part of the Global Cloud Xchange business that houses the Indian carrier's global operations, including its virtual VPN services business (formerly Vanco). (See Reliance Snaps Up Vanco, Reliance Integrates Global Services, Reliance Bags Yipes for $300M, Reliance Raises Flag , and Reliance FLAGs Up Expansion Plan.)

Reliance Communications certainly has some key decisions to make about its finances. Its most recent financial report, for the fiscal second quarter of 2009, showed a decrease in overall revenues and profits.

However, those dips were caused by intensifying competition and price pressure in the Indian mobile services market, while the company's global operations reported an increase in revenues and earnings before taxes and other costs.

Reliance ended the quarter (September 30) with net debts of 210.8 billion Indian Rupees (US$4.52 billion).

The submarine services sector has experienced a surge of activity in recent years, with multiple new networks either built or under construction as the increasing consumption of data and video services has stimulated demand for international transport capacity. (See Huawei Wins Subsea Deal, AT&T Touts Subsea Capacity, Gulf Gets Subsea Link to India, Pipe, Tyco Complete Subsea Cable, NTT Splashes on Subsea Assets, Carriers Plan $500M Transpacific Link, and Carriers to Connect China With $500M Cable.)

— Ray Le Maistre, International News Editor, Light Reading

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