Hey Porker. I guess it's all over. Or will NCDR morph again?: "Global Crossing Unveils Asia Venture In Partnership With Microsoft, Softbank
By STEPHANIE N. MEHTA and STEVEN LIPIN
Global Crossing Ltd., an undersea-cable operator, unveiled Wednesday a venture with Microsoft Corp. and Japan's Softbank Corp. to build an advanced telecommunications network in Asia. The partnership, called Asia Global Crossing, initially will build a network linking Japan, China, Singapore, Hong Kong, Taiwan, South Korea,
Malaysia and the Philippines with fiber-optic cables capable of transmitting vast streams of voice, video and Internet traffic.
Despite the presence of several network operators that already have established businesses in Asia, the region still lags behind the U.S. in its telecommunications infrastructure. Asia Global Crossing has
the potential to deliver digital telephone and data services at high speeds to
customers eager for the latest technology. The presence of yet another
carrier in the region could help lower prices as well.
The venture comes as Global Crossing's once-highflying stock continues to
slide. Shares of Global Crossing fell $2.0625, or 9.2%, to $20.3125 in
Nasdaq Stock Market trading. Global Crossing last week renegotiated the
terms of its proposed acquisition of Frontier Corp., a local and
long-distance phone company in Rochester, N.Y., to reflect the stock's
fall.
It is unclear how the market will react to Global Crossing's partnership
with Microsoft, located in Redmond, Wash. and Softbank, based in
Tokyo, though both companies are widely viewed as savvy investors.
Global Crossing, based in Hamilton, Bermuda, is building undersea and
land-based networks linking countries worldwide. The company, founded
by investor Gary Winnick, is betting international growth of the Internet will
create demand for networks to transport such data around the globe.
The availability of such networks, meanwhile, could help fuel demand for
software and systems such as the products sold by software giant
Microsoft. But it may be nothing more than a savvy financial investment by
a company with billions to burn.
Microsoft and Softbank each will contribute $175 million in cash to the
venture for an initial stake of 3.5% apiece. The companies also have
agreed to buy at least $200 million in Global Crossing telecommunications
services over three years.
Global Crossing, which initially will own 93% of the venture, is contributing
its 57.7% share of Pacific Crossing, a network that connects the U.S. and
Japan. The network, which is expected to be operational in four months, is
jointly owned with Marubeni Corp., a Japanese trading company, and
KDD-SCS, a unit of Japanese telephone company KDD Corp. Global
Crossing also will contribute to the venture its development rights for
networks in other parts of Asia.
The deal is structured so that if the venture exceeds $5 billion in
fair-market value, the investors will own a greater share of the total
company. The stakes owned by Softbank and Microsoft will climb to a
maximum of 19% each if the value reaches $7.5 billion or higher.
Softbank, one of the leading investors in Internet start-ups, holds stakes in
Yahoo! Inc., E*Trade Group Inc. and others.
Microsoft, meanwhile, is investing heavily in telecommunications and cable
companies. Earlier this year, the software giant invested a breathtaking $5
billion in AT&T Corp., which aims to deliver high-speed Internet and
telephone services via cable-television lines.
In addition, Microsoft invested $200 million in Global Crossing rival
Qwest Communications International Inc. in exchange for a share of
revenue from Qwest's Internet-based services. The software company
may see the alliance with Global Crossing as a digital means of distributing
its products in Asia.
Salomon Smith Barney represented Global Crossing in the transaction.
Goldman Sachs & Co. represented Microsoft and Softbank." |
