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The Cutting Edge

Global Crossing to Buy Undersea Cabling Business

April 26, 1999|ELIZABETH DOUGLASS | TIMES STAFF WRITER

Fast-moving Global Crossing is expected to announce today that it will buy the undersea cable services unit of Britain's Cable & Wireless in a deal worth an estimated $885 million, according to a source close to the companies.

Hamilton, Bermuda-based Global Crossing, which has executive offices in Beverly Hills, is expected to buy Cable & Wireless' Global Marine business in a deal that includes cash and assumed debt, the source said.

Global Marine is one of the world's largest firms in the installation and maintenance of undersea fiber-optic cables and has service contracts with more than 100 carriers, from AT&T to Singapore Telecom.

The purchase is considered a good fit for Global Crossing, which is building fiber-optic links--many of them under water--that will eventually serve four continents.

The acquisition is just the latest in a string of high-profile moves at Global Crossing, which had remained a largely unknown entity in telecommunications until recently.

Last month, the company struck a deal to buy Frontier, one of the largest independent U.S. telecommunications carriers remaining, for $11.2 billion in stock. The acquisition is expected to close in the third quarter.

Just weeks earlier, the company hired Robert Annunziata away from AT&T to be Global Crossing's chief executive. Annunziata, a longtime AT&T employee, founded Teleport Communications Group before rejoining AT&T as president of its business services group after the long-distance company bought TCG.

Last year, Global Crossing went public in an initial offering that raised about $400 million.

"There is a new breed of communications companies that are changing the rules, and it's a group of companies that didn't even exist a few years ago," said Jeffrey Kagan, a telecommunications analyst based near Atlanta. "Global Crossing is one of that group . . . all the sudden, they're a player."

With this latest purchase, Global Crossing is tapping into a niche market that is surging at the moment. As telecommunications companies stretch to offer worldwide service, many of them are expanding their fiber networks, that include transoceanic lines. Indeed on Sunday, AT&T and British Telecommunications announced that each will acquire a 15% stake in Japan Telecom in a deal that would allow the Western telecommunications giants to expand into Asia.

While many companies choose to split the costs with other carriers, the business of building undersea networks is nonetheless a market worth about $10 billion a year, according to one estimate.

In addition to installing the undersea cabling, Global Marine also maintains an estimated 35% of the existing inventory of undersea networks. The company has 1,200 employees and a fleet of 13 cable ships and more than 20 submersible vehicles, according to the source close to the deal.

Once the purchase is final, Global Marine would operate as a division of Global Crossing. William Carter, currently president of Global Crossing Development, would serve as chairman of the new division. Dave Foot, chief executive of Global Marine, is expected to remain in that post.

The deal is subject to certain regulatory and other approvals. Global Crossing shares closed Friday at $52.88, down $1.25 on Nasdaq.

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