India's Reliance Communications has agreed to buy Yipes Holdings of the U.S. for US$300 million in cash, with plans to extend its managed Ethernet services into additional countries, the companies announced Monday.
Yipes provides managed Ethernet service to about 1,000 enterprises, mostly in the US. but also in London, Hong Kong and Tokyo. Its customers include the New York Stock Exchange, the Nasdaq and Chicago Mercantile Exchange.
Reliance is one of India's biggest telecommunications companies, selling wireless, fixed-line and data services to about 30 million consumer and business customers. It also operates a submarine cable network linking the Eastern U.S., Europe, the Middle East and Asia, which it leases to other carriers.
With the acquisition, Reliance plans to double Yipes' area of coverage in the U.S., which is currently about 14 metropolitan areas, and extend the services worldwide by carrying them on its submarine network.
Metro Ethernet is seen by proponents as a cheaper alternative to frame relay for connecting LANs in different geographic locations. Buying Yipes will allow Reliance to "move up the food chain" and sell more data services to business customers, it said. The acquisition will also bring it closer physically to its U.S. customers.
It hopes to tap into a fast-growing market for managed Ethernet, but it will have to compete with several big rivals including Verizon Communications, AT&T, Level 3 Communications and Cogent Communications.
The market for managed Ethernet services is expected to grow by 30 percent a year until 2010, when it will top US$25 billion worldwide, Reliance said, citing figures from Infonetics Research.