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Hutchison, Global Crossing Form $1.2 Billion Hong Kong Venture

Global Crossing and Hong Kong telco powerhouse Hutchison Whampoa Monday inked a deal for a 50/50 Internet venture in Hong Kong that the two companies expect to eventually use as a foothold into the mainland.

Hutchison Global Crossing (HGC) will receive a total injection of $1.2 million from Global Crossing. Global Crossing will offer Hutchison $400 million in stock, global network capacity and support worth $350 million, and $50 million in cash.

The venture will use Hutchison Whampoa's existing fiber optic network and Global Crossing's international cable infrastructure and Web services. The partners will bring the Hutchison network to greater China as soon as regulation changes allow the crossing.

Global Crossing (GBLX) will also add Hutchison to its roster of partners for the Asia Global Crossing venture, which includes such hefty names as Microsoft (MSFT) and Softbank.

The venture will build on Hutchison's position as the largest alternative telecom in Hong Kong, and will pursue the fixed-line telecom business in Hong Kong and China. The original network will be expanded and the companies will add low cost connectivity, telephony and Web hosting to the venture to target the corporate market.

Hutchison's ISP portal HutchCity will also serve as a focus of the venture's efforts.

"This is an important strategic step that immediately introduces the Greater China region to the Global Crossing Network, which by year end will link Asia across the Pacific to North America and onto Europe," said Jack Scanlon, Asia Global Crossing's CEO.

"We anticipate integrating our share of this new enterprise into the strategic mission of Asia Global Crossing, our recently established joint venture with Microsoft and Softbank, to bring world-class broadband services to Asia."

Microsoft and Softbank each contributed a $175 million investment and a $200 million capacity commitment to the Asia Global Crossing, announced in September. Global Crossing will operate the network and build a $1.3 billion broadband network dubbed the East Asia Crossing, which will be connected by Pacific Crossing 1 to the rest of the company's global network.

The HCG venture is charged with establishing a data center in Hong Kong which will connect to Global Crossing's other global centers, as well as with implementing a contract Hutchison recently won from the Hong Kong government to build and operate a public electronic services delivery system.

The deal is expected to be completed by January.