Flag to divest 15-20 % stake

Flag Telecom, a fully owned subsidiary of Reliance Communications, is divesting 15-20 per cent of its equity stake to strategic and financial investors.

Valued at around $1 billion, the company hopes to raise up to $200 million through an international convertible bond issue soon.

The move is yet another initiative from the Anil Dhirubhai Ambani Group to unlock shareholder value in group assets. A Reliance Communications spokesperson declined to comment.

Reliance had bought the assets of Flag Telecom for around $200 million.

The company, which started as a bandwidth seller, is now moving up the value chain to offer value-added services to leading telecom companies around the globe.

It has operations in over six continents and has landing stations in 28 countries. It has also commissioned a new submarine cable, "Falcon," connecting India to West Asia.

Flag has already broken even and will be able to make profits from next year. The company's $1 billion valuation is based on the fact that many other submarine cable companies have been able to rustle up large market caps despite having made losses.

US-based Level3 and Singapore-based Global Crossing have market capitalisation of over $8 billion and $2 billion, respectively.

Sources close to the development said that despite the fact that Flag controls a cable system of over 75,000 km across the globe, investors have not been ascribing much value to its assets.