R-Com chairman Anil Ambani (left) with Yipes CEO John Scanlon (centre) and chairman Pramod Haque in Mumbai on Monday. (Fotocorp)

Mumbai, July 16: In the first international acquisition after the split of the Reliance empire, Reliance Communications (R-Com) is acquiring Yipes Holding in an all-cash deal for Rs 1,200 crore ($300 million). Yipes has a strong position in ethernet, a protocol connecting computers.

The acquisition is the largest that Reliance Communications has ever made. It will help R-Com move up the value chain and get closer to its customers in the global data business. R-Com’s global revenues from the enterprise segment are also forecast to go up significantly over the next few years following the acquisition.

Yipes, headquartered in San Francisco, is the leading provider of managed ethernet and application delivery services for the global enterprise. Experts say that ethernet is the fastest growing segment of the data communications market, driven by the migration of clients from older private network technologies.

Infonetics Research has forecast that the ethernet services market will surge by over 30 per cent compounded annual growth rate from 2006 to 2010 when it will top $25 billion worldwide.

The company has nearly 1,000 customers, in four industry verticals — financial, legal, government and healthcare — which account for 50 per cent of the ethernet market. It is also the leading direct communications provider to the New York Stock Exchange, Chicago Mercantile Exchange and Nasdaq and interconnects with multiple market participants and intermediaries.

It owns over 22,000 route kilometres of fibre across 14 US metros, which cover around 40 per cent of the total US datacom market. It is also present in London, Hong Kong and Tokyo. Yipes had annual sales of around $100 million.

Announcing the acquisition at the group’s headquarters here today, R-Com chairman Anil Ambani said, “We see enormous potential to rapidly expand Yipes coverage in the US and to globalise Yipes’ service by leveraging our network reach around the globe.”

Ambani said its coverage would be increased to cover other regions, including India and other parts of Asia. He added that margins in the business were high and that Yipes had operating margins of over 55 per cent.

R-Com expects to be a net gainer from the acquisition and that $50-100 million will be added to its margins on a consolidated basis in the period ahead. Norwest Venture, JP Morgan and Crossline Capital were major investors in Yipes and will now be exiting from the business.

Yipes chairman Promod Haque, who was present on the occasion, said the company was likely to grow at more than the forecast rate. As against the expected growth rate of over 30 per cent, Yipes could grow in excess of 50 per cent because of its strengths.

“We saw long ago the impact that ethernet services would have on the telecommunications industry. This acquisition of Yipes by India’s powerhouse, Reliance Communications, sets the stage for a major transformation within global telecommunications.” he added.