Global Crossing Seals Asian Network Pact
Global Crossing Ltd. is expected to announce today the completion of its groundbreaking joint-venture agreement with Microsoft and Japan’s Softbank to build a fiber-optic network in Asia for high-speed Internet, voice and video communications.
The new venture, called Asia Global Crossing, would be based in Beverly Hills. Chief Executive Jack Scanlon said the deal secures a key link in Global Crossing’s expanding web of land and undersea fiber-optic cables.
The Asia Global Crossing pact, which was first announced in September, is the latest in a string of high-profile deals by Global Crossing, which is based in Hamilton, Bermuda, but has executive offices in Beverly Hills. In the last 18 months, Global Crossing forged deals to buy undersea cabling firm Global Marine for $870 million, phone company Frontier Corp. for $10.7 billion and Europe’s Racal Telecom for $1.65 billion.
Global Crossing’s expansion efforts have been spearheaded by founder and co-Chairman Gary Winnick, who has helped raise about $10 billion to fuel the company’s acquisitions and construction projects.
Asia Global Crossing’s first major project will be the construction of a network linking Japan, China, Singapore, Hong Kong, Taiwan, South Korea, Malaysia and the Philippines with high-capacity communications lines. That $1.28-billion land and undersea network, called East Asia Crossing, is aimed at tapping an expected surge in telecommunications use by both Asian consumers and multinational corporations with operations in Asia.
Already, Global Crossing has moved to speed up its network penetration by partnering with Hong Kong-based Hutchison Whampoa Ltd. in a $1.2-billion joint venture announced last month. That deal will give the Asia Global Crossing venture access to many corporate high-rises, a solid customer base in Hong Kong and almost instant credibility in a market that has been difficult for outside phone carriers to crack.
Scanlon said the company will be pushing to form similar ventures elsewhere to help close the gaps in what it hopes will be a worldwide network with unmatched land and underwater fiber capacity.
“We expect to do deals in more Asian countries because we want access to the key buildings, and there are still local-ownership rules in some regions,” Scanlon said. “If you want to get into these countries fast, you’ve got to use the venture structure--that’s just the pragmatics of the regulatory environment.”
Armed with solid financial backing, Global Crossing believes it has an advantage over powerhouses such as AT&T; that also want a piece of the global telecom market.
“International infrastructure building is not for the faint of heart--it’s hard work and it takes a lot of funding,” said Ken McGee, a telecommunications specialist at the research firm Gartner Group. “But Global Crossing’s in . . . the right place at the right time.”
The company already operates an Atlantic Crossing network that links the eastern United States with Europe. In a matter of days, the company will complete its purchase of Racal, adding a substantial European land network to its operations.
Next month, Global Crossing will “turn on” major fiber lines throughout Japan, the mid-Atlantic, Europe and those linking the western U.S. with Japan.
As part of the Asia Global Crossing deal, Softbank and Microsoft each contributed $175 million in cash and committed to purchase $200 million in network capacity from the firm over three years.
Global Crossing contributed its nearly 58% interest in the Pacific Crossing network and its development rights in East Asia Crossing to the joint venture.
On Tuesday, shares of Global Crossing closed up $2.63 to $42.38 on Nasdaq.
