Last Call For Global Crossing

The deadline passed Thursday for bidders looking for assets on the cheap at Global Crossing, a carrier knee deep in Chapter 11 bankruptcy trouble and looking for investors. The bids will be reviewed at an auction on July 24, 2002.

by Jim Wagner of internetnews.com [July 15, 2002]

The deadline is the second one for potential bidders; in June, company executives announced they would extend the original June 20 deadline for new bidders in the hopes the extra time would give Global Crossing more options.

According to David Willis, vice president of global networking strategies at the META Group, it's a strategy that won't likely produce more leads.

"Time is not on their side," he said. "Unlike a WorldCom, where there is a really attractive customer base, with Global Crossing that's really not the case. On a pure asset basis, there's so many other assets on the market today (to choose from)."

Independent auditors will now review and sort through the Global Crossing asset bids for the closed-door auction, which will be conducted on July 24. If creditors and Global Crossing executives come to agreement, the winning bids will be presented to the U.S. bankruptcy court judge. The winner's list is public and open for comment. It, along with comments, will then be presented to the judge on July 26.

According to a Global Crossing spokesperson, the judge is free to strike down any of the bids at his discretion, but "we would expect the Court ultimately to accept the selection made by Global Crossing, the unsecured creditors, and the banks."

It's a simple-sounding process that's taken much longer than executives at the troubled "carrier's carrier" expected when they started restructuring operations May 28. Since that time, the telcom industry has gone through a meltdown, thanks largely to the continuing scandal at WorldCom (as well as Global Crossing itself, which has generated Congressional and Securities and Exchange Commission probes) and financial troubles at Qwest Communications.

Willis said the state of the industry has made it nearly impossible for Global Crossing to get more than pennies on the dollar for its assets. What's more, the potential pool of bidders—namely incumbent telephone companies in the U.S. and abroad—is extremely shallow.

"It really comes down to in-country monopolies that want to make an international play," he said. "But buyers are very cautious to begin with these days, and the tendency is for them to re-trench into their own local monopolies—like Qwest, for example."

Overseas, it doesn't look much better for potential Global Crossing bidders. Many of the incumbent telephone companies already have an international network plan in place or don't have the money to buy one now, said Frank Barbetta, senior analyst for global carriers at Probe Research.

"Deutsche Telekom and France Telecom, I don't know if they really want to invest at this time because of their own indebtedness matters," he said. "But even without that, France Telecom already owns Equuant, so unless they need some particular routes, they won't want to get (into the bidding). Deutsche Telekom is building out its own worldwide network or has options to get into a network."

Barbetta said likely bidders overseas include Australian Telestra, Japan's Nippon Telegraph and Telephone Corp. (NTT), and British Telecom (BT).

— End