Indian carrier buys Teleglobe, keeps Canadian connection

Teleglobe International Holdings Inc.’s Canadian roots may well be fading, but that doesn’t mean the company’s ties to this country are gone. In fact, Teleglobe’s Canadian employees and facilities will play an important roll in the firm’s latest iteration: a division of Videsh Sanchar Nigam Ltd. (VSNL), an Indian communications service provider. VSNL acquired Teleglobe for US$239 million earlier this month, and the purchase comes with some Canadian know-how. According to Michel Guyot, former Teleglobe vice-president and now the president of global voice services at VSNL International, about 500 Canadians work for the company, located primarily in Montreal, but also in Toronto and on the East Coast. "Our plan is to keep the people," Guyot said during a February 14 conference call. "Montreal will remain a centre of excellence. In fact, our customer service…for the wholesale business will be managed out of Montreal." The VSNL acquisition is just the latest pause in the Teleglobe story. The former Canadian firm has experienced many ups and downs. Initially a Crown Corporation providing oversea communication services, Teleglobe was acquired by BCE Inc. in 2000 as the latter company eyed expansion. The Teleglobe purchase was part of former BCE chief executive Jean Monty’s grand plan to create a vertically integrated full-service communications service provider. Said Monty is a speech on September 11, 2000 (NL, Sept. 25/00): "For BCE, this acquisition is a crucially important step in enabling the world to be in touch with Canadians and enabling Canadians to connect to the entire planet. In this age of globalization and e-commerce, it would be unthinkable for BCE not to have this capacity. "BCE has the resources to make this transaction a success. It has the means; it has installed a first-class management team; and it has a steadfast determination to succeed. Within two or three years, Teleglobe will become a jewel in the BCE crown, making a substantial contribution to the group’s development and revenue and to the achievement of its goals." But the merger was not a success. Teleglobe struggled to survive a "capacity glut" – too many carriers, not enough customers – and BCE chopped the long-haul carrier’s workforce, eventually turning off the funding tap in 2002 (NL, May 7/02). At the time, BCE said that it would only provide short-term financing to the struggling provider. "BCE will provide only short-term periodic funding to Teleglobe, on terms and conditions satisfactory to BCE, up to a maximum aggregate amount of between US$100 million and US$125 million so that Teleglobe can provide continuing customer service and fund other operations-related needs while it reviews its options for the future, including possible business combinations and restructuring," BCE said in an April 2002 news release. In 2003 Teleglobe International Holdings acquired the BCE-Teleglobe assets. In 2004 the new Teleglobe merged with US wholesale provider ITXC Corp. In 2005 VSNL announced it would buy Teleglobe and merge it with VSNL International, a worldwide carrier. VSNL is itself part of the Tata Group, an Indian mega-company with interests in technology, energy, chemicals and other sectors. According to a VSNL press release, the combined Teleglobe-VSNL International has 1,400 wholesale customers and 650 enterprise customers, more than 200,000 km of terrestrial and under-sea cables, 275 PoPs in 25 countries, and access to five geo-stationary satellites. In the voice arena, VSNL has 17 billion minutes of international wholesale traffic each year. "We broadly want to chase three kinds of opportunities," said Narasimhan Srinath, VSNL’s executive director, during the conference call. "We want to be a significant player in the global wholesale voice market. Secondly, we want to be a key player in the global market for voice-carrier as well as enterprise-data services. And third, in some markets we want to establish a strong presence for a complete retail entity." He later said VSNL would start the retail operation in India and South Africa. Vinod Kumar, VSNL International’s president, said Teleglobe is key to his company’s expansion plans. "The underlying wholesale business will…provide a great building block for us to take the enterprise business, which is currently India-centric, to one that is more of a global operator, providing connectivity and managed services to enterprises on a worldwide basis." Synergy is VSNL’s lynchpin. "Network services and IP services will increasingly become integrated," Kumar said. "The lines that demarcate these categories will blur. This is what the network capabilities that both VSNL and Teleglobe bring. When combined with the software expertise and application capabilities and systems integration experience within our set of companies at the Tata Group, that makes a powerful combination." VSNL has split the branding duties between Teleglobe and VSNL International. Teleglobe will cover wholesale voice, IP and mobile services. VSNL International will be the name for wholesale data and enterprise services. In North America, VSNL will address multinational corporations through a direct sales force, and it will address smaller enterprises through a combination of partnerships and direct channels, executives said.

Indian carrier buys Teleglobe, keeps Canadian connection

News | February 15, 2006

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