A leading Indian telecoms group will announce today that it has bought Vanco Group, the financially troubled virtual telecoms operator, against competition from Cable & Wireless and BT.

Reliance Communications, controlled by Anil Ambani, the Indian tycoon, has agreed to buy the entire business except Vanco Direct USA, which is being sold separately.

The parent, Vanco Plc, goes into administration today. Trading in Vanco’s shares was suspended at the beginning of the month, when the company gave a serious profit warning. Allen Timpany, the company’s founder and chief executive, who bought the company for £1 in 1988, resigned on the same day.

Cable & Wireless had confirmed that it was talking to the company, and BT and T-Systems, a division of Deutsche Telekom, were also considered to be contenders.

At its peak two years ago Vanco was worth almost £400 million, but its shares have tumbled over the past year and by the beginning of the month it had run out of cash. Analysts estimated that the group had burnt through £60 million in five weeks.

Andrew Coppel, the restructuring expert, former chief executive of Jockey Club Racecourses and the man who restructured Queens Moat Houses, was brought in to try to restore credibility to the group and Vanco was effectively put up for sale. Yesterday’s deal was finally agreed 20 days after Mr Coppel arrived.

Lenders, led by Lloyds TSB, will recoup some of their money, but shareholders, including JO Hambro and Fidelity, are expected to get nothing.

Mr Coppel said that the company had been sold for a “substantial amount” but “less than the face value due to the secure creditors”. He said that speed was essential in the deal as “it was important to retain Vanco’s blue-chip customers”. Clients included British Airways, Ernst & Young, Siemens and Avis Europe, the car-hire company. He added: “The key thing is the business has been maintained intact and becomes part of a successful global group.”

Reliance, India’s second largest mobile company and the flagship of the Reliance Anil Dhirubhai Ambani Group, is a telecoms service provider with 50 million customers, including more than 1.5 million individual overseas retail customers. The company. which has a market value of $27.5 billion, has a pan-India digital network and a global fibre optic cable system. Yesterday the company was reported to be in talks about a tie-up with the South African mobile operator, MTN.

Vanco, by contrast, created its own virtual telecoms network by renting bandwidth from its rivals. Reliance intends to use Vanco’s experience in managing customer requirements.

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