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Technology Stocks : PCW - Pacific Century CyberWorks Limited -- Ignore unavailable to you. Want to Upgrade?

To: ms.smartest.person who wrote (2136)	2/3/2002 5:35:22 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 2248

COMPANIES & FINANCE INTERNATIONAL: Crossing the globe to save home interests: Hutchison and Singapore Technologies plan Global Crossing cash injection to control Asian undersea cable networks, says Joe Leahy Financial Times; Jan 30, 2002 By JOE LEAHY The planned takeover of Global Crossing, the US fibre-optic communications operator, by two Asian-based companies is another big step towards consolidation of the highly competitive undersea cable business in the region. But it is unlikely to provide any immediate solution to the industry's problems of chronic over-capacity and falling prices, analysts say. On Monday Hutchison Whampoa, the Hong Kong-based telecommunications and ports conglomerate, and Singapore Technologies Telemedia, Singapore's second-largest telecoms carrier, announced they planned to inject USDollars 750m in new equity into Global Crossing as part of a rescue package for the bankrupt US carrier. The deal was expected to leave the partners with a joint 70-80 per cent stake in Global Crossing, according to Hutchison yesterday. The takeover follows the departure from Asia of Level 3, another independent US wholesale provider of international voice and data telecoms capacity, on December 19. Level 3's Asian operations were taken over by Reach, a joint venture between Hong Kong's Pacific Century Cyberworks and Telstra, Australia's leading telecoms carrier. The two deals have left most of Asia's fibre-optic undersea cable networks under the control of regional carriers or international telecoms syndicates running "club cables". For Hutchison and Singapore Technologies, the Global Crossing takeover will have strategic benefits. The pair run fixed-line joint ventures that act as alternative carriers to the incumbent operators in their home markets - PCCW in Hong Kong and Singapore Telecommunications in Singapore. But unlike the incumbents, they have lacked their own international undersea cable networks. Customers prefer carriers who control their networks because they can provide a better guarantee of quality, says Richard Ferguson, analyst at Nomura in Hong Kong. "People pay for the seamless service," he says. For Hutchison, the acquisition of Global Crossing is also a rearguard action aimed at protecting its assets, analysts say. Hutchison's fixed-line operation in Hong Kong is a joint venture with Asia Global Crossing, a 58 per cent-owned subsidiary of Global Crossing. Hutchison still has USDollars 400m in convertible preference shares in Global Crossing, issued when the joint venture was formed. "It now appears a near certainty that this will have to be written off if the restructuring is approved by creditors," CLSA, a brokerage, says. If Global Crossing collapses, there will be pressure on the Hong Kong joint venture with Asia Global Crossing. "Hence, the high risk/ high return strategy that Hutchison is being forced to pursue," CLSA says, referring to the Global Crossing takeover. For the industry as a whole, the recent shake-out will do little to solve problems associated with over-capacity, which has caused wholesale prices to decline by up to 80 per cent over the past 12 months, according to Nomura. Total submarine cable capacity landing in Hong Kong alone is expected to rise from 60 gigabytes per second at end-2000 to 580gps by the end of 2002 - upgradeable by up to 30 times on demand. "Where does pricing power go with that?" asks Mr Ferguson. Copyright: The Financial Times Limited 1995-1998 Links referenced within this article Find this article at: globalarchive.ft.com