CNBC- SQUAWK BOX
INTERVIEW WITH GLOBAL CROSSING CEO ROBERT ANNUNZIATA
JULY 19, 1999
SUMMARY: Annunziata expects to close the transaction in late September. Annunziata comments on the
importance of being global.
Mark: We talked with heads of Qwest and U.S. West earlier this morning about their plans to merge. There is
another part of this deal. Global Crossing still plans to buy Frontier for 11.1 billion dollars. The brain, who has
been on top of this has more on it.
David: We are joined by Robert Annunziata, the CEO of Global Crossing, and he will be, as well, the CEO of the
new combination when the deal is done. I guess I would like to start there.
This has been a deal in the works for sometime. Now we know, or at least we think it's going to happen. When
do you expect to close the transaction?
Actually, we think things will move a little quicker. We should be able to close the Frontier-Global Crossing
transaction probably late September.
David: Regulatory approvals not expected to pose any challenge?
We've already received a number of states, several states concurred. A little delay with linking Frontier-U.S. West
combination, but now since that's resolved, we expect that to move very quickly.
David: I earlier interviewed Mr. Trujillo and Mr. Nacchio, saying it pays to have access directly to the consumer,
to have that vertical integration, if you will. You're not going that route, although you might have. How do you
explain to shareholders the decision or fact you are going to buy Frontier, but nonetheless, not have that access
perhaps that a RBOC would have given you.
It fits perfectly into our plans, because as a business company, we have the global continents linked, building
networks within Europe, Japan. Frontier fits perfectly in the United States for business to business traffic. They
do bring with them 30 CLEC markets. Those were a resale opportunity and we already are doing their business
plan, direct links to businesses, something I'm familiar with.
David: Are you sorry the U.S. West deal didn't go the way you wanted it?
We thought it was good value at the time, the premium in that original bid was good, but now it's a little pricey for
our shareholders and now we have a win-win.
David: What about the financial picture? What kind of expectations are you telling analysts to think about with
regard to a combination in terms of revenues and EBITDA for the year 2000?
Actually it's a wonderful story when you look at what happens now. The combination of Global Crossing and
Frontier, 10,000 people, 77,000 cable miles, we've got four billion in revenue, 19 countries, 160 cities. We really
do have a global network and in today's world, I think every communications company has to look global.
David: This company even went public a year ago this time it was not a public entity, almost a year, in August
will be. Now you will have a 32 billion-dollar market value. What do you say to those who say it's not real, you're
on air, a lot of it. Global Crossing stock price floated on air for a long time.
I think you're in the area that shows that look at the future potential we have. We are addressing a one trillion
dollar marketplace by 2005. If you're in more markets, the odds to succeed are greater. We're not just confining
ourselves to a certain number of cities or states. The market knows, that's why they see the positive future. We
have real people, real networks, real services by putting the companies together.
David: An issue of float. There are some in the market who say there are not a lot of shares that trade for Global
Crossing. When that changes with the acquisition of Frontier and you're issuing many more shares that trade
publicly, some saying the supply-demand equation will change, and that will be detrimental to your stock price.
Well, it will change, we will have a greater float but I'm not sure it will be detrimental because we're a growth
company. As we keep performing and showing shareholders we can meet and beat analyst's expectations, I
think clearly they will see a better investment in Global Crossing.
David: Are you happy you didn't have to raise your price you? Were at 63, ultimately you didn't have to go up,
also got 420 million made up of cash and other things as well. I guess you're pleased, right, that you didn't have
to go up above 63.
Well, again, we had, we thought a very superior bid to Frontier to what Qwest was proposing. We had last look
so, we're smart to not to have to present any future bids until we saw if there was a final bid. The outcome of any
transaction, you plan to do the transaction. If it doesn't go as planned, we get break up fees, worked out nicely
for our shareholders, but that's what, you know, these breakup fees do.
David: What about your relationship perhaps with Qwest and what might be the combination there as well? Any
bad blood?
No bad blood, I got a nice new shareholder coming in when they close with U.S. West, and don't anticipate any
bad problems.
David: That is, it was an element of the last transaction that was interesting. Your original deal with U.S. West,
they bought 2.4 billion, a little bit of that is going back in this latest deal, but ultimately they own nine percent of
your company.
Yes, U.S. West today owns nine percent, and if they close, when they close with Qwest and the Qwest
combination will own nine percent and as I talked with Joe the other day, I treat my shareholders pretty good, and
he will see great gains.
David: They won't be on the board?
Part of the arrangement was they did relinquish their board seats.
David: Mr. Annunziata, thanks for being with us.
Thank you.
David: Rob Annunziata, CEO of Global Crossing, combination of Global Crossing and Frontier.
|
