India’s Reliance to acquire Flag Telecom

India’s Reliance Group announced Thursday that a group company is to acquire Flag Telecom Group Ltd., an international provider of bandwidth.

The Reliance Group, mainly into traditional industries like petrochemicals, diversified recently into telecommunications, including providing basic telephone services. The acquisition of Flag, if it meets all regulatory approvals and the approval of Flag’s shareholders, is the first major overseas acquisition by the Reliance Group, which has ambitious plans both in telecommunications and Internet bandwidth creation. Reliance Infocomm has set up a nationwide broadband fibre optic network covering over 60,000km and more than 600 cities and towns in India.

The acquisition will be done through Reliance Gateway Net Private Ltd., a wholly-owned subsidiary of Reliance Infocomm Ltd., a communications infrastructure and services company of the Mumbai-based Reliance Group, according to Anil Ambani, vice chairman of Reliance Industries, the Reliance Group flagship company. Under the terms of the deal, Reliance Gateway will acquire 100 percent of Flag’s common shares on a fully diluted basis for an aggregate purchase price of US$207 million.

Registered in Bermuda, with its executive office in London, Flag has a customer base of more than 180 operators. Flag owns and manages an optical fibber network spanning four continents and connecting business markets in Asia, Europe, the Middle East and the U.S., according to company sources. It also owns and operates a low latency global Multiprotocol Label Switching (MPLS) -based IP network, which connects most of the world’s principal international Internet exchanges. Flag offers a range of products, including global bandwidth, IP, Internet, Ethernet and co-location services.

Flag Telecom filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code in April last year, but emerged from proceedings the following October after putting through a reorganization plan.