BancBoston's Nairne on Global Crossing and Frontier: Comment
Bloomberg News
March 17, 1999, 5:06 a.m. PT
London, March 17 (Bloomberg) -- The following are comments
by Christine Nairne, an analyst at BancBoston Robertson Stephens
International Ltd. in London, on Global Crossing Ltd.'s
agreement to purchase Frontier Corp. of the U.S. for about $11.2
billion in stock.
''The Global Crossing acquisition of Frontier is very
similar to what we saw with the Qwest acquisition of LCI and the
Global TeleSystems acquisition of Esprit.
''We are seeing a trend where infrastructure owners and
builders want to leverage their network and put as much traffic
as they can on the network.
''So I think for Global Crossing first of all they're
getting a tremendous amount of traffic on their network and
second of all Frontier has been making a big move in the past
year or so not to be just minutes providers but Internet, IP
type of service providers so Global Crossing is not just getting
minutes, they're getting value added services that potentially
they can offer to their customers down the line.
''So with this acquisition Global Crossing is making the
big move from its original positioning as a carrier's carrier
now clearly to being interested in offering end-user customers
the services directly so the corporate and the residential users
and not just other telecom carriers.''
Why does it make sense for a company that's smaller in
terms of sales and employees to buy a bigger company?
''In terms of market cap they're not smaller. In terms of
market cap even with the premium they're bigger. Global Crossing
is much newer and in that regard it's smaller, although their
valuation on certain metrics is higher. I think their scope and
their vision is to be a bigger company than Frontier, so now is
as good a time as any to go ahead and make that happen. And with
their currency as highly valued as it is right now it makes
sense.''
Global Crossing says it will have the first global network
based on Internet Protocol (IP) technology. Is this true and why
is this a benefit?
''I think it's true that they plan to be one of the first
global IP networks and they're certainly well positioned. The
routes that they're talking about building, for example the one
they announced last week to South America, and their already
existing plans -- Pacific Crossing and the Mediterranean and the
mid-Atlantic Crossing, the pan-European crossing -- and the one
they already have operational, the Atlantic crossing, makes
Global Crossing really one of the first brand new, truly global
networks.
''I think there are other companies, such as WorldCom, that
would argue they have global capabilities. And there are a
number of companies such as Qwest that are certainly planning to
be global and IP-based. Global TeleSystems here in Europe
certainly have IP capability. So the positioning is believable,
I wouldn't say it's exclusive by any means.
''The world becomes smaller, people and companies are
becoming more global, and the services of the future, the
transmission technology of Internet Protocol clearly enables the
services that people and companies will both want and need
increasingly in the future and increasingly on a global basis.''
Why is it important for them to enter the U.S.?
''The U.S. is about 30 percent of the telecom services
market of the entire world. The other large single market would
be Europe, which is also about 30 percent. So clearly the U.S.
is someplace that a global company needs to have a good
footprint and good traffic on their network. And in many
respects the U.S. is the most advanced in terms of development
and use of these new services.''
--Christine Harper in the London newsroom (44 171) 330-7982/js |
