Strategy of the new kid on the block - Tata Communications

Tata Group subsidiary Tata Communications is looking for a managed-services company, possibly one located in the United States. It is also putting a minority interest in its tower operation up for sale, with an asking price rumored to be as high as $6 billion. And, as frosting on the cake, it has expanded its global virtual private network (VPN) service to China.

According to reports of Telecomweb, Tata Communications wants to buy small- and mid-size managed-services outfits with annual revenues in the range of $50 million and $200 million. It's said to be looking for companies in the United States, the U.K., and Asia as well as in India itself. Tata Communications is the new kid on the block or rather a 5,000-pound gorilla in the global telecom marketplace - born just last month as the unified global brand for VSNL, VSNL International, Teleglobe (the former Bell Canada subsidiary VSNL bought for $239 million , Tata Indicom Enterprise Business Unit and CIPRIS. The combination created the Number One global international wholesale voice operator and the Number One provider of international long-distance, enterprise-data and Internet services in India.

What Tata's looking for next really is more technology than a book of business. At $50 million to $200 million in revenues as a criterion, it would be picking up companies that aren't of global scale and probably don't have the resources to go global by themselves. Tata's plan would be to integrate the technology it gets from such companies, eventually putting together a global powerhouse that could challenge such market leaders as AT&T, BT and France Telecom's Orange Business Services. Tata's goal is said to be a 6-percent- to-7-percent market share within three years, in what it estimates will be a $50 billion cross-border global market in which managed services will play a role.

Meanwhile, within India itself, Tata is attempting to monetize part of its huge cellular-tower infrastructure it set up as a separate company called Wireless Tata Telecom Infrastructure Ltd. It currently owns 13,500 towers, with a growth plan to add about 3,000 per year for the foreseeable future; it's now negotiating to sell a minority stake of between 26 percent and 49 percent in the tower operation. Tata says it's received indications of interest from 30 potential bidders, and the company currently is in negotiations with half of that group, with hopes of cutting a deal by the end of May. Potential investors were understood to include international investment entities as well as local Indian investors. Analysts are guessing as high as $6 billion if a full 49-percent stake is sold.

In a final piece of Tata news, the company says it's expanding its Global VPN service to China through a network-to-network interface (NNI) agreement with China Enterprise Netcom Corporation Limited (China Entercom/CEC). China Entercom is a value-added telecommunication services and integrated IT solutions provider, and a subsidiary of China International Trust and Investment Corporation (CITIC).

Under the NNI, Tata Communications and China Entercom have interconnected their respective Multi-Protocol Label Switching (MPLS) infrastructures, giving Tata Communications' multi-national corporate customers VPN connectivity to 347 cities throughout China. The Tata VPN service so far has reached 120 cities in India and 19 major business centers across North America, Asia and Europe. It runs over Tata's IP network, which touches 195 countries.

Tata Communications' agreement with China Entercom allows them to serve many global and India MNC customers who require a single scalable and reliable global VPN with deep reach into both India and China, and broad reach around the world. China and India are the engines driving the globalizing information economy, and it is critical for MNC's to establish reliable infrastructure in these markets.