Tata Comm to go shopping in managed services space

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Friday , March 07, 2008 at 2359 hrs Tata Communications, recently launched with the integration of Tata Group companies VSNL, VSNL International, Teleglobe and Tata Indicom Enterprise Business Unit, is eyeing acquisitions in the managed services space.

The company, a global provider of international telecommunications and Internet services, is planning to acquire small- and mid-size companies with annual revenues of $50-$200 million.

"We are in discussions with 2-3 companies at any given time, and some of these talks may materialise, some may not. One acquisition a year is a digestible number, but it could be more depending on what's happening in the market. We would like to clinch as many deals as possible, but that doesn't always happen," Vinod Kumar, president, global data and mobility services, Tata Communications, told FE.

Tata Communications is looking at acquisitions in geographies across the world, including India, the US, the UK, and parts of Asia. Kumar said the company would go for small companies that lack scale to go global, but could offer their technological capabilities to Tata Communications.

In 2005, VSNL had acquired US-based Teleglobe International Holdings for $239 million and submarine cable system Tyco Global Network for $130 million.

Kumar said that by 2011 the company was looking at cornering 6-7% of the $50-billion global telecom cross border business currently dominated by global companies like AT&T, British Telecom and Orange Business Services. VSNL had revenues of $2 billion in fiscal year 2006-07. The company has projected for itself a compounded annual growth rate (CAGR) of 20% in the next five years, whereas the global managed services market is growing at about 6% annually.

The company would invest over $2 billion over the next three years to further fuel its global expansion plans. Kumar said the investment would primarily go into national long distance, metropolitan area network, data centers in India, WiMax and submarine cables.

The company's revenue from the enterprise business in the international market has increased substantially in the last two years. Today, 20% of its total revenues come from the enterprise segment in other countries.