UPSIDE.COM article - Very Bullish!
Undersea Cable Knockouts
DailyTish
September 09, 1999
by Tish Williams
You could just kiss Global Crossing's business model.
From afar it's a bandwidth-building fiber-optic network company. It lays transoceanic cable; no big deal. It sells off the capacity in that cable for a few million a pop. Yawn.
But up close it is a communications expert's sure-thing play.
Wednesday, Softbank and Microsoft announced a plan to get in some Global Crossing action. For a 3.5 percent stake apiece, the two would fund a new Asia Global Crossing venture. Each big boy slaps down $175 million to get the machinery running and receive a monogrammed hard hat.
Venture spearheader Global Crossing gets to sell bandwidth across Malaysia, China, Hong Kong, Japan and all the other tasty Asian markets crying out for high-speed access.
Sounds like a plan.
But wait, there's more! Softbank and Microsoft will also be the anchor tenants on those laid cables, committing to purchase $250 million (each!) of bandwidth services.
Perfect! It's just perfect! It's like having Nordstroms help fund the construction of a mall and pay rent. This is a nice business plan. Bob Annunziata had all those years at AT&T to find the perfect startup. He knew the money was out there, it was just a matter of the perfect framework--an agile, aggressive play to fill an escalating need.
Bandwidth.
Asia Global Crossing will lay 17,700 miles of cable, covering cities, underwater connections and long-distance land connections--the whole shebang. It'll hook up all of Asia's major cities with fiber, the ambrosia of bandwidth gods. It will sell off bandwidth partitions to hungry corporations and network operators.
With the ample leftovers, it will offer phone service, ISP services, Web-hosting services and sell items over the Internet.
Lay your lips upon this business plan!
Global Crossing is tossing in its investment in a 21,000-mile subsea fiber-optic cable between Japan and the United States. In turn, the Asia Global Crossing venture will fork over $1.3 billion over the next few years to build its network.
While construction continues, it could balloon in valuation and rack up profits for its owners--Microsoft and Softbank's stakes rise if the venture becomes more valuable, an incentive for long-term commitment--allowing it could go public as a separate venture.
And don't think Microsoft and Softbank are the ones doing Global Crossing a favor. They contributed to a similar deal with the Tokyo Electric Power Co. because Asia is starved for bandwidth. Who isn't? Once this network is up, running and sold out, Global Crossing can crank up the fiber-optic technologies to multiply the bandwidth it can get out of its cables through wave division multiplexing. Technology manufacturing money.
There's only one question that remains: Why didn't I think of that?
Tish Williams is senior writer/editor at UPSIDE.
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