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NXTV Draws Global Crossing Investment

Telecom: Deals continue for the Bermuda-based firm, which posts second-quarter results that beat expectations.


Telecommunications upstart Global Crossing Ltd. led a group of venture firms that recently invested $15.5 million in NXTV Inc., a Woodland Hills firm hoping to bring interactive entertainment and communications to hotels and new communities.

The investment, to be announced today by privately held NXTV, is the latest in a series of small strategic equity deals by Bermuda-based Global Crossing, which Tuesday announced second-quarter results that beat analysts expectations.

Although the company reported a recurring net loss of $504 million--or 61 cents a share--analysts had expected the net loss from ongoing operations to total about 63 cents a share. Results were announced after the markets closed, but the stock rose $1 to $25.31 in Tuesday trading.

Revenue from continuing operations totaled $1.2 billion, up 12% from the previous quarter. Adding in Global Crossing's local phone business, which is being sold to Citizens Communications Co. for $3.65 billion, the quarter's revenue totaled $1.4 billion.

Global Crossing, which has executive offices in Beverly Hills, did not provide figures for the second quarter of 1999, saying comparisons would be misleading, given the company's numerous acquisitions and operational changes since then.

Under its deal with NXTV, Global Crossing will provide 40% of the new funding and NXTV will use Global Crossing's fiber-optic network and data centers to manage and transport video and communications services for NXTV's hotel and residential customers.

NXTV is developing a broadband system capable of providing high-speed Internet access, digital video-on-demand, video and data conferencing, video games and advanced communications services such as unified messaging, which combines voicemail, fax and e-mail in one account.

The company's system uses a combination of fiber-optic cables and digital subscriber line (DSL) technology over copper phone lines with a special set-top box and the guest's in-room television. Guests can surf the Web via the TV--which comes with a browser and a wireless keypad--or by using a laptop computer, the company said.

NXTV is installing test systems in the Peninsula Beverly Hills, the Hotel Bel-Air, and three other unnamed Los Angeles-area hotels by the end of the year. The company also is installing another trial system in 200 homes under construction in Seattle. Hotel users would pay a daily fee for access to the system, while residential users would subscribe.

As other companies develop systems to deliver on-demand movies or in-room Internet access, NXTV wants to provide it all with a single system.

"We want to move the business center that's within the hotel into the guest room," said James Miles, NXTV's president and chief executive. "We provide the full hardware/software combination. . . . That's our capital cost. And then we split the revenue with the hotel."

For Global Crossing, the NXTV deal could open the way for more telecommunications business with high-end hotels. It might also yield substantial broadband traffic on Global Crossing's network if NXTV succeeds.

"We're not an investment company, so it has to be very complimentary to what we're doing for us to be interested," said Leo Hindery Jr., Global Crossing chief executive. "[NXTV's] got some nice technology and, if things go well, they'll be a bandwidth user of ours."

In addition to NXTV, Global Crossing has invested in Sonus Networks, Storage Networks and several other firms. The value of those equity positions has increased by more than $900 million as of July, Hindery said.

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