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A key U.S. lawmaker is pressing federal regulators to expand their probe into India-based Videsh Sanchar Nigam Ltd.’s $130 million acquisition of undersea fiber-optic cable assets from Tyco International Ltd. of Princeton, N.J., citing national security issues. In a letter Thursday, to Treasury Secretary John Snow, Senate Commerce Committee Chairman Ted Stevens, R-Alaska, along with Sens. Jon Kyl, R-Ariz., and Jeff Sessions, R-Ala., called on the Committee on Foreign Investment in the U.S., a multi-agency panel that reviews acquisitions of U.S. businesses by foreign companies, to conduct a full 45-day review of the deal. CFIUS, headed by the Treasury Department, is in the middle of a routine 30-day review of the proposed acquisition, as required for any foreign purchase of U.S. assets. In cases involving significant national security issues, the agency can launch a formal 45-day investigation. “This transaction gives the Indian government control over a significant portion of the world’s submarine cable network and over key, strategic submarine cable landing stations in the United States and India,” the lawmakers said in the letter. Stevens’ panel poses a particular threat to the deal because it oversees communications issues. According to people familiar with the deal, CFIUS would need to complete its informal review of the deal by mid-April and decide at that time whether to launch a full investigation. At issue is the Indian government’s control of Tyco Global Network, the company that owns the assets being sold to VSNL. Stevens contends that the Indian government owns 26 percent of VSNL and plays an active role in the company’s management. People familiar with the situation said the U.S. Defense Department will be relying increasingly on these cable systems for communications among U.S. military personnel. Any foreign government’s ability to restrict these communications becomes a matter of increased security concern, they said. “India’s a friend now, but the DOD is working on scenario planning where India may not be such an ally down the road,” said Philip Malet, a partner at law firm Steptoe & Johnson in Washington. Malet represents Crest Communications Corp., a submarine-cable developer based in Hillsboro, Ore., that is urging the Federal Communications Commission to reject the VSNL-Tyco deal, contending that it poses a threat to national security. In the letter, the lawmakers pointed out that the U.S. Trade Representative, a member of CFIUS, recently noted that in the early 1990s, VSNL managed to block an attempt by a consortium, of which it was a member, to establish a cable landing point on Diego Garcia island in the Indian Ocean, site of a U.S. military base. “This relationship has led VSNL to act in a fashion demonstrably hostile to U.S. military and commercial interests,” the letter said. Of particular concern are military bases in Alaska — Stevens’ home state — that may become connected to the Tyco submarine cables for the purpose of developing the U.S. ballistic-missile defense network, sources familiar with the deal said. “The DOD is increasingly going to become dependent on a wired military that has real-time access to data, and they will increasingly be reliant on these undersea networks,” said a person familiar with the regulatory review. The Defense Department relies heavily on satellite networks for military communications. This will become problematic as its communications needs grow and it exhausts the finite bandwidth of these satellites. “If they are really upset about this deal, the U.S. government may have to build their own network at the cost of billions to taxpayers,” this person said. Copyright �2005 TDD, LLC. All rights reserved.

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