RealTime IT News

Global Crossing Sells Asian Assets For $138 Million

In a move to consolidate its Asian operations, Global Crossing "sold" two subsidiaries and Asian-Pacific territorial rights to Asia Global Crossing, a separately funded company, for approximately $138 million.

The announcement reflects the parent company's continued faith in its Asian venture, despite an almost terminal 90 percent drop in revenues and $60.7 million net loss in the first quarter of 2001. It's hoped by officials on both sides that continued consolidation in Asia's stingy market will drive up revenues for the troubled fiber provider.

In exchange for 26.8 million shares of Asia Global Crossing, Global Crossing gave up its territorial rights to Australia and New Zealand, as well as its ownership of two of its subsidiaries, Ixnet and IPC. Asia Global Crossing officials expect to increase its revenue base nearly $100 million a year as a result of the deal.

The deal gives the U.S. fiber giant a larger stake, at a bargain rate, in a company it helped create with the funding of Japan-based Softbank and Microsoft Corp. in 1999.

John Legere, Asia GC chief executive officer, said the consolidation is a logical move for the two companies.

"Upon closing, we will immediately expand our multinational customer base, more than double data services revenue and add a critical mass of sales and engineering talent," Legere said. "We are already building and offering data services over one of the most extensive networks in Asia. Adding Australia and New Zealand to our territory is a natural extension of our footprint and will allow us to better serve carrier and multinational corporate customers that need connectivity and data services throughout Asia."

Up until now, the Internet in Asia has received little worldwide attention because of its relatively small market share compared to Internet development in the U.S. and Europe. Market penetration that's reached 25-50 percent outside of the Asian continent has had a relatively minor impact within, according to the latest figures by market research firms.

One of the reasons that companies like Global Crossing and Level 3 have invested considerable time and resources to sponsor venture funds in the area is the untapped potential of the largest population base in the world.

South Korea and Japan are two notable distinctions and the countries many fiber-deploying companies look at when they try to extrapolate interest into justification for expansion into the entire Asian-Pacfic Rim. An aggressive rollout of fiber by U.S.-funded companies to the far-flung areas of Asia is expected to presage a broadband boom in the Pacific Rim theater.

Despite their geographically small size, Japan and South Korea are two of the four largest Internet markets in the world with the U.S. and Germany. Asia GC wants to tap into that market, as well as the rest of the Asian-Pacific rim, by building a pan-Asian network spanning 26,000 miles of fiber.