Google - Reliance Communications tie-up

Internet major Google is in early stages of negotiations with Reliance Communications to take a part of the Flag Telecom’s trans-Pacific undersea communications cable on a long-term lease.

Google is believed to be in talks to take on lease 500 GB bandwidth and this, according to industry sources, puts the deal size at around $80-100 million (Rs 320-400 crore).

According to sources close to the development, the companies have initiated talks to set up a joint cable under a “cooperative arrangement”.

Under the broad contours of the discussions, Flag Telecom will sell dark fibre to Google. This will help Google save the cost of duplicating a fibre optic network, which would cost around $350-380 million (Rs 1,400-1,500 crore).

With the availability of dark fibre, Google will only need to invest in lighting up the cable, and it would give the company a self-managed, fully secure network.

While for Reliance Communications, with such a pre-sale deal, it would get a reasonable proportion of the capex that would be used for construction of the cable.

When contacted, a Reliance Communications spokesperson declined to comment.

Sources also said Reliance Communications would also look at selling lit-capacity on its global internet protocol networks to Google. Flag has lit-up capacity on its Falcon cable in Wes Asia and other cables on the Mediterranean and East African coasts.

Flag Telecom had recently announced its plan to set up trans-Pacific cable, under its Rs 6,000 crore next- generation network expansion plan. A cable on the trans-Pacific route would cost around Rs 1,400-1,500 crore. ($350-380 million).

Flag has recently awarded construction of its four submarine cables under the Flag NGN plan to Japanese giant Fujitsu.

The move also gains importance as Google was planning to set up its own sub-sea cable across Pacific, under a project called Unity. However, it could not be ascertained whether Google would go ahead with the project or shelve it by leasing a portion of Flag’s trans-Pacific system.

RCom begins FLAG Tele IPO process

Reliance Communications has shortlisted four merchant banks for the initial public offer of its overseas subsidiary FLAG Telecom, which operates a global fibre optic cable network.

RCom will select from among Goldman Sachs, Morgan Stanley, Deutsche Bank and UBS to lead manage the IPO, said sources.

RCom will offload around 10-15 per cent stake in FLAG, which will list again on London Stock Exchange.

Before it was fully acquired by RCom (then Reliance Infocomm) in 2004, FLAG was listed on both NASDAQ and LSE.

The IPO proceeds will part-fund a $1.5 billion expansion plan for FLAG that involves the addition of 50,000 kms of `Next Generation Network' over the next three years.

After RCom acquired FLAG, it augmented it with a new network called FALCON connecting 11 countries in West Asia.

RCom is also planning an additional landing station for FALCON in Thiruvananthapuram in Kerala that will connect the Maldives, said sources. This will be in addition to FALCON's landing station in Mumbai and FLAG's landing station, also in Mumbai.

Reliance had acquired FLAG — which had filed for bankruptcy — for $207 million in early 2004.