trading above $37 in Munich...Monday October 11, 5:38 am Eastern Time
LONDON, Oct 11 (Reuters) - Telecoms group Global
Crossing
Ltd(NasdaqNM:GBLX - news), which announced a 1.0 billion pound ($1.65 billion)
takeover of Britain's Racal Telecom(quote from Yahoo! UK & Ireland: RCAL.L), said on
Monday the deal would marginally boost its earnings in 2000 and raise them by more than
10 percent the following year.
Speaking to Reuters after announcing the deal, Thomas Casey vice chairman of Global Crossing, said the transaction would be
financed with $500 million from its own reserves and from a $1.5 billion commitment from U.S. investment bank Goldman
Sachs.
Global Crossing beat UK telecom company Energis Plc(quote from Yahoo! UK & Ireland: EGS.L) which was holding talks with
Racal Electronics and was believed to be working on a deal untill last Friday.
Casey said Global Crossing has started talking to Racal three weeks ago.
''It is a very deep, very modern SDH (synchronous digital hierarchy) network that is entirely compatible with Global Crossing.
We will not only be able to offer products and services in the UK but will also accelerate the offering of products and services
in Europe,'' Casey said.
He said Racal's network, which covers 7,400 km of network connecting 2,000 cities and towns in the UK, would offer a
variety of services to customers with operations on both sides of the Atlantic.
He described Racal's network as the most IP-centric (Internet Protocol) and the deepest network in the UK.
''Ninety five percent of customers are within the cheapest interconnection charge from British Telecommunications and over 50
percent of businesses in the UK are within less than five km from this network,'' Casey said.
With the market for data transmission growing worldwide, most telephone companies are now keen to replace the old
circuit-switching technology with IP packet-switching technology, which makes more efficient use of transmission networks.
Circuit-switching is more expensive as it opens and maintains a line whenever a call is made, ignoring whether someone is
sending a huge amount of data or making a simple phone call.
IP networks divide the information into pieces, or electronic packets, and then fill the fibre-optic line with the packets, enabling
one pipeline to cater to several users and not wasting capacity.
Racal, which has several institutional customers including the government and transport networks, has invested over 400 million
pounds in the last three to four years and Casey said Global Crossing would invest another 130 million pounds next year.
The company would take over all 1,200 employees of Racal Telecom without any redundancies.
''We are impressed with the new management team that have come in the last six months,'' Casey said.
Earlier this year the company bought the undersea-cable operations of Cable & Wireless Plc (quote from Yahoo! UK & Ireland:
CW.L). Casey said his company would eventually like to build a network that would extend between east Asia and the United
States.
''We are within all the covenants on our bank lines and we don't think we will have difficulty in raising money for acquisitions in
the future,'' he added.
It is currently building Pan European Crossing, connecting nine European countries with an 11,000 km fibre optic network.
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