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RCom to buy ailing UK-based network operator Vanco

BS Reporter  |  New Delhi 

Virtual network operators lease infrastructure and bandwith from other firms and provide as well as manage the communication needs of clients.

Vanco, which was looking for a buyer, had asked potential suitors to put in their bids on Friday. Reliance had competition from around eleven leading telcom companies and private equity firms, which included British Telecom, Cable & Wireless, T-Systems (a part of Deutsche Telecom), NTT, Global Crossing, CPCnet and PE firm Oakley, among others.

According to sources close to the negotiations, most of the discussion points with Reliance have been agreed mutually and the process of signing the deal is on. The deal would be inked within 24 hours and Reliance will be buy a 100 per cent stake in the company. A Reliance Communications (RCom) spokesperson declined to comment on the subject.

While the final price of the deal is not known, at its peak, Vanco's market capitalisation stood at $800 million. However, trading of the company's shares was suspended after the company parted ways with founder chief Allen Timpany.

Sources said that lenders, lead by Lloyds TSB, that loaned more than pound 123 million to the company might not get their full money back.

Last year, RCom acquired US-based Yipes, an ethernet service provider. The company is rolling out the proprietary Yipes services in over 40 countries, doubling the coverage in the US in the process.

In April 2007, Rcom bought eWave World, a 4G operator focussed on Asia, Latin America, Western Europe and Africa.

Vanco, which has been in financial turmoil for some time now, operates in more than 230 countries across the world.

Vanco has about 200 clients primarily headquartered in the UK, France, Germany, the US and Singapore. Its client list includes top corporates, such as British Airways, Siemens, Ford Motor Company and Avis Europe.

Vanco has over $650 million worth of secure long-term contracts from its customers that will accrued over the next three to five years.

The acquisition of Vanco will also help Reliance Globalcom, which manages RCom's foreign, which has been looking at forging alliances with regional and domestic carriers. Vanco has alliances with 700 carriers across the world.

The acquisition is in line with RCom's strategy of becoming one of the world's top five data communications players. RCom is also constructing a 50,000-km undersea cable network, which would take its fully IP-enabled network to 70 countries.

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First Published: Mon, May 26 2008. 00:00 IST