GENEVA -- FLAG Telecom Group Ltd., a leading provider of international wholesale network transport and communications services, has entered into an agreement and plan of amalgamation with Reliance Gateway Net Pvt. Ltd., a wholly owned subsidiary of Reliance Infocomm Ltd., pursuant to which Reliance Gateway will acquire 100 percent of the company's common shares on a fully diluted basis for an aggregate purchase price of $207 million, reflecting a per share price of $95.61. It represents a premium of more than 50 percent over yesterday's closing price of FLAG's shares.

The amalgamation agreement has been unanimously approved by the board of directors of both FLAG Telecom and Reliance Gateway.

Patrick Gallagher, co-chairman and CEO of FLAG Telecom, said: "We believe this premium offer by Reliance to acquire FLAG represents a strong endorsement of FLAG's operating strategy and is in the best interests of our shareholders. Reliance is already a key customer on the FLAG global network, one of the most extensive in the world today. We believe that this agreement with Reliance underscores the confidence they have in the future of FLAG and we look forward to the successful consummation of the transaction."

This agreement is an important first step towards concluding the acquisition of FLAG Telecom, which is subject to certain conditions, including the receipt of regulatory approvals and the approval of FLAG Telecom's shareholders. A meeting of FLAG Telecom's shareholders is expected to be held in December 2003 to approve the amalgamation.

Reliance, India's largest business group, is a major customer of FLAG. It holds 18 fixed licenses around the sub-continent, as well as running cdma2000 1x WLL (M) services.

FLAG was formed in 1997, the world's first non-club cable operator. However, it was hit by the waves of fresh long-haul capacity launched into the international market by companies such as Global Crossing, Asia Global Crossing and Level 3. It emerged from bankruptcy in October 2002. Although it signed $77 million of new business in the first two quarters this year, FLAG Telecom Group's second quarterly filing showed a loss of $25.8 million on revenue of $33.5 million.