Reliance acquires Yipes Holdings for $ 300 mn



Reliance Communications Ltd on July 16, 2007 has announced the signing of a definitive agreement to acquire US based Yipes Holdings, Inc. (“Yipes”) the leading provider of managed Ethernet services, in an all-cash deal valued at Rs 1,200 crore ($ 300 mn).

Anil D Ambani, Chairman of the Company said: “This is the largest acquisition that Reliance Communications has ever made. The acquisition of Yipes drives forward our strategy to offer the most sophisticated, cutting edge data communication products and services, specialising in application and content distribution, spanning developed and emerging markets. We see enormous potential to rapidly expand Yipes coverage in the US and to globalise Yipes service by leveraging our customer relationships and network reach around the globe. We confidently expect this acquisition to significantly enhance the growth rate, profitability and returns of our global data business.”

Yipes is the leading provider of managed Ethernet and application delivery services for the global enterprise. Established in 1999, Yipes has pioneered Metro Ethernet and has developed leading edge proprietary products to meet the exacting requirements of its customers. Ethernet is the fastest growing segment of the data communications market, driven by the migration of enterprise customers from older private network technologies. Infonetics Research forecasts the Ethernet services market will surge by over 30% CAGR from 2006 to 2010 when it will top $ 25 billion worldwide.

Yipes has nearly 1,000 enterprise customers; concentrated across 4 industry verticals – financial, legal, government and healthcare – which currently account for 50% of the Ethernet market. Yipes has developed communications platforms that act as the oxygen for entire industry communities. For example, Yipes Is the leading direct communications provider to the New York Stock Exchange, Chicago Mercantile Exchange and NASDAQ and interconnects with multiple market participants and intermediaries.< Page Break >

Yipes, headquartered in San Francisco, owns over 22,000 route kilometres of fibre across 14 US metros, which covers around 40% of the total US datacom market. In addition, Yipes is present in London, Hong Kong and Tokyo.

Strategic fit with Reliance Communications:

The Company’s vision for its Global Data business is to be a leading provider of sophisticated, cutting-edge data communication products and services, specializing in application and content distribution, which will span into developed and emerging markets, delivered over the FLAG Global Network.

The acquisition of Yipes is a key step in the Company’s plan to move up the value chain and closer to its customers in the Global Data business. It significantly increases the Company’s revenues from the enterprise segment internationally.

FLAG and Yipes are highly complimentary in terms of their products, services, and networks.

With the acquisition of Yipes, the Company will accelerate its penetration into the lucrative Rs 400,000 crore ($ 100 billion) global enterprise data market and will be better able to serve its international customers directly in the US.

With the backing of the Company, Yipes will rapidly double its coverage of the US market. At the same time, Yipes Ethernet services will be overlaid on FLAG’s global next generation network, allowing Yipes to expand its reach worldwide and enabling FLAG to create significantly more value from its network assets in the strongholds of India, the Middle East, and East Asia.

The Company, through an affiliate, is acquiring 100% of Yipes in an all-cash transaction. This constitutes the Company largest acquisition to date. Yipes will operate as a strategic business unit, fully integrated strategically and operationally within FLAG Telecom. The key senior management of Yipes has committed to remain with the business and will continue with their present responsibilities.

Punit Garg, President, Global Business, of the Company commented: “The acquisition of Yipes will place Reliance Communications among the top three Global Ethernet service providers in the world. Reliance Communications with FLAG has a strong foothold in India the Middle East and Asia, including China, Hong Kong and Taiwan. We plan to leverage the significant headstart of Yipes in Ethernet services, double the coverage in the US domestic market, and rollout Yipes services over the FLAG Global Network. We are fully committed to bringing Ethernet services to nearly 40 new countries.”