Tata Communications International Pte Ltd, a wholly owned subsidiary of Tata Communications Limited, has signed an equity joint venture agreement with the shareholders of China Enterprise Communications (CEC) Limited for the acquisition of 50% equity in CEC. CEC is a value-added telecommunications services and integrated IT solutions provider, headquartered in Beijing. CEC has a nationwide IP-VPN (internet protocol virtual private netowrk) service license. ?They also have licenses for other value added services, but don?t have enough products to make full use of it. Thus, it?ll enable us to provide the products and make use of the licenses,? commented Srinivasa Addepalli, senior vice president, corporate strategy, Tata Communications.
The joint venture will become effective after the necessary approvals from the government and regulatory bodies in China. CEC is majority owned by CITIC (China International Trust and Investment Corporation); other investors include SASAC and CE-SCM.
The emerging markets are the major area of focus for Tata Communications. And thus, the two fastest growing emerging markets, China and India becomes the area of interest. ?Though this JV does not involve a huge investment, it opens up a new market for us, a market where operators find difficulty in entering,? said Addepalli.
Tata Communications share on Wednesday were down 2.83% to close at Rs 421 on the Bombay Stock Exchange.
As the bilateral trade between India and China is expected to reach $40 billion by 2010, the company feels that it is the right time to enter the market and grow within the country.
CEC has an employee strength of around 120 and has a good customer base among China?s government sector, and among banking and logistic companies. ?Through this JV, we are expecting to gain strong local partners, and expecting to build a relationship with other domestic companies and thus to gain a strong foothold,? commented Addepalli.
The Chinese telecom market is larger than India for mobile and data services, thus Tata Communications expects that the market potential is greater than the Indian market.
Tata Communications, which has made announcements of investing $2 billion over a period of three years, will be making major investments in the emerging markets. The company will be investing $500 million for the cable projects, and another $500 million for broadband expansion which includes Wimax. They will also be investing in building up data centers in India, Singapore, UK and the US and in building up MPLS (multi protocol label switching) infrastructures in the emerging markets, as well as in structuring managed service capabilities.
The raising of funds will be through internal accruals, and through other forms of funding depending on the type of projects.
Tata Communications has its VPN presence in 20 countries, and it is planning to expand it to 40 countries in the next 12-18 months.
