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.
