Global Crossing vaults into telecom's top tier
NEW YORK, May 17 18:42 ET (Reuters) - It's not quite David versus Goliath
anymore.
As two-year-old telecom upstart Global Crossing Ltd. <GBLX.O> acquires
the larger Frontier Corp. <FRO.N> and the much larger U S West Inc.
<USW.N>, it is catapulting itself into the ranks of top global service
providers like AT&T Corp. <T.N> and MCI WorldCom Inc. <WCOM.O>.
Although Denver-based U S West, the smallest of the regional Baby Bell
phone service providers, will legally be the surviving entity in the $37 billion
deal, the companies will retain the Global Crossing name.
It is a sign of the direction the company will take in focusing on delivering
voice, data and video throughout the world.
Together, Global Crossing, Frontier and U S West had sales of more than
$15 billion in 1998, comparable to MCI WorldCom's $17.7 billion, and no
longer just a speck compared to AT&T's $53.2 billion in 1998 revenue.
But while AT&T is now making a huge bet, with acquisitions and
partnerships, on cable lines that go directly into the homes of consumers,
Global Crossing will likely find its short-term strength in serving business
customers.
AT&T, MCI WorldCom, Global Crossing and other will offer similar
packages of services to businesses, including high-speed data
transmissions, Web site hosting, conferencing and voice calling, analysts
said.
"All roads lead back to businesses wanting one network service provider
for local, national and global services," said Ken McGee, an analyst with
market research firm GartnerGroup.
Global Crossing began by building a trans-oceanic fiber optic network.
Since then, it agreed to buy Frontier for its U.S. network, forming a
technologically advanced, international network more inclusive than that of
MCI or AT&T.
The strength of the company, as it adds business accounts that fill the
network with traffic, is its ability to connect about 185 cities worldwide,
allowing it to carry traffic without handing it off to other networks.
"(Business) customers prefer to have everything on the same network
because if something goes wrong, there is a single source for solving the
problem," said Pete Dailey, a partner at consulting firm Frost and Sullivan.
AT&T and MCI, meanwhile, continue to hand off traffic to other providers.
But all three companies contain top-tier Internet service providers and
substantial international network assets, and all three will continue to
compete for business accounts based on the quality of service.
In gaining lucrative business accounts, companies like AT&T and MCI
WorldCom have the strength of their reputations. Despite its robust and
far-reaching network, Global Crossing is a newcomer, and U S West is
burdened by a reputation for poor service to business customers,
analysts said.
"The few business customers they have will be happy to have a legitimate
choice to rival MCI or AT&T," Dailey said.
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