N. Srinath (left), CEO of Tata Communications, and Srinivas Addepalli, senior vice-president (corporate strategy), in Mumbai on Wednesday. (Fotocorp)

Mumbai, Feb 13: Tata Communications, formerly VSNL, plans to invest $2 billion over the next three years.

It will invest around $500 million in laying undersea cables, another $500 million in the expansion of WiMax services and $1 billion in expansion activities such as in the ethernet business and managed services.

“We are targeting a compounded annual growth rate of 15 per cent and EBITDA (earnings before interest, taxes, depreciation and amortisation) margins of 20 per cent,” said N. Srinath, chief executive officer and managing director of Tata Communications. The company’s current EBIDTA margins hover between 12 and 13 per cent.

Tata Communications currently provides WiMax service to enterprise customers in 30 cities and has just started the service for retail customers in Bangalore.

Over the next few months, the company will roll out the WiMax service in Delhi, Hyderabad and Chennai.

Like all companies using the Tata brand name, Tata Communications will have to pay Tata Sons a fee of 0.25 per cent of revenues or 5 per cent of profits before tax annually under a brand equity and a business promotion scheme.

“We’re confident of achieving a broadband market of 25 to 30 million by 2012,” said Srinivas Addepalli, senior vice-president, corporate strategy.

The investments will be funded through internal accruals and borrowings.

The Tatas today formally renamed VSNL as Tata Communications.