Reliance Comm buys Yipes of US for $300 mn

The Anil Ambani-controlled Reliance Communications has acquired 100 per cent of US telecom data service provider Yipes Holdings for Rs 1,200 crore ($300 million), marking its entry into lucrative American enterprise data market.

Reliance Communications bought Yipes from a clutch of investors, including JP Morgan and venture capital firms Norwest Venture Partners, Sprout Group and Crosslink Capital.

Yipes is a provider of managed ethernet and application services with over 1,000 customers and controls over 40 per cent of the total US data and enterprise services market.

“The acquisition will enhance Reliance Communications’ profitability. We will accelerate the development of Yipes’ business in the US and take the Yipes franchise global by leveraging the FLAG network in 40 countries," company chairman Anil Ambani said. Reliance Communications had acquired Flag in 2003 for $209 million.

The Reliance Communications scrip closed at Rs 574.05, up 3.5 per cent, at the Bombay Stock Exchange on Monday.

Yipes has 22,000 km of optic fibre network and has an operating margin of 55 per cent and is cash positive. It is focused on ethernet, the fastest growing segment in the global data market. The ethernet market is valued at $10 billion and is expected to grow at a compounded annual rate of about 30 per cent to more than $25 billion by 2010.

“The acquisition will place Reliance Communications among the top three global ethernet service providers. We plan to leverage the significant headstart of Yipes in ethernet services, double the coverage in the US market, and roll out Yipes services over the FLAG network. We are fully committed to bringing ethernet services to nearly 40 new countries,” said Puneet Garg, president, global business, Reliance Communications.