India's Tata Group acquires Tyco Network at bargain price

In a new indication that the sale of US-built telecommunications infrastructure to foreign interests at fire-sale prices is continuing, Tyco International announced this week that it is selling its Tyco Global Network to India's Tata Group.

Tyco and Tata said the world's most advanced and extensive submarine cable system will be transferred to Tata's Videsh Sanchar Nigam (VSNL) for US$130 million. Tyco positioned the network for sale last year by writing down the value of the network by US$1.2 billion. During the height of the telecom bubble, the network had a market valuation of more than US$3 billion.

"The agreement is a major step forward in our ongoing drive to offer our enterprise and carrier customers seamless, end to end telecommunications solutions that circle the globe," said VSNL's director of operations N. Srinath in a statement. "This agreement, coupled with the submarine cable we plan to launch shortly connecting India with Singapore, will give customers a new choice in global data services. Furthermore, the timing of this transaction is well suited to our international expansion plans."

Tyco, whose previous management has left the firm in disgrace over its troubled accounting practices, has a new management team in place. In a statement, Tyco said divestiture of the network "is part of the company's strategy to sharpen its focus on core businesses, simplify operations, and improve its cost structure."

A spokesman at the Organization for Economic Cooperation and Development said in August that some US$30 billion in US-owned international telecom infrastructure had been sold for about US$4 billion. Many telecom experts have noted the irony in the situation, in which US firms and stockholders have inadvertently financed the sale of telecom infrastructure for a small fraction of value and investment costs, while the infrastructure will be used for offshore outsourcing and the transfer of jobs out of the US.
Dave Ryan, chief operations officer of VSNL America said in a statement this week concerning the acquisition of the Tyco network: "The agreement will also give our multinational customers a local point of contact for their entire network."