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VSNL Spins Teleglobe Takeover

Videsh Sanchar Nigam Limited (VSNL) said it would buy Teleglobe International for $239 million in cash, a move that helps it compete with U.S.-based networking powerhouses AT&T and MCI.

It's the second major purchase for the Indian telecom and Internet services wholesaler, which added Tyco's undersea fiber-optic network in November for $130 million.

With Teleglobe, VSNL gains a network that serves 1,400 customers in 240 countries and territories. It also gains Voice over IP expertise, thanks to Teleglobe's purchase of ITXC Corp. last year.

There were a number of bidders for Teleglobe, which has its headquarters in Bermuda but has an operational hub in Canada. But at a 22 percent premium over the company's stock price, VSNL represented the best deal for shareholders.

It is too soon to say what organizational or staffing changes might take place after the deal.

"VSNL's vision is to become a leading global player in wholesale voice and bandwidth and enterprise data services," N. Srinath, a VSNL director, said in a statement. "This agreement, coupled with the TGN acquisition and recently announced plans to expand into new markets, will move us closer to the size and network breadth needed to achieve this goal."

In addition to Teleglobe's and Tyco's network assets, VSNL is also planning to deploy its own network between India and Singapore.

Also, last year, the Federal Communications Commission gave VSNL permission to provide international telecom service from the United States, and it already has operations in Europe and Sri Lanka.

The Teleglobe purchase is expected to close in six to eight months, pending shareholder and regulator approval. When it does, Teleglobe will become an international subsidiary of VSNL, which is part of the Tata Group, an Indian IT and outsourcing giant.