Global Crossing ... Literally

Company Launches Worldwide Gov't Unit

Cindie Henrichs

By Jennifer Freer, Staff Writer

Global Crossing Ltd., a provider of voice and data telecommunications, launched a Global Government Solutions Group in early July to provide its products and services to governments domestically and worldwide.

The new government group, which offers such services as local and long distance telephone services, data applications, Internet and conferencing, was established to target customers that could take advantage of a global network with large amounts of bandwidth capacity, said a top company official.

As an entry strategy into the government market, the company is aiming initially to sell "what's on the truck: circuits, virtual private networks, ATM services and other services we already offer," said Cindie Henrichs, vice president of the Global Government Solutions Group, which is based in Washington.

Over time, the company wants to use its heavy investment in fiber-optic cable to provide governments with integrated solutions, such as distance learning on a global scale. Global Crossing, based in Hamilton, Bermuda, with principal U.S. offices in Los Angeles, has built an Internet protocol-based, fiber-optic network that will have more than 101,000 route miles, serving 27 countries and more than 200 cities.

With more than 12,000 employees, Global Crossing had revenue of $1.7 billion and a net loss of $71 million in 1999. Its government group has offices in Washington and London, and more will be added as needed, Henrichs said.

"Global Crossing is betting that capacity will become tight rather than plentiful later on," said Jonathan Catherwood, a partner specializing in telecommunications at the investment banking firm Boles, Knop & Co. LLC of Middleburg, Va. "Setting up the government unit is a terrific way of getting to the international market to become the premier global bandwidth provider."

Having both the available capacity and new equipment will send a message to governments that their communication needs will be met, he said.

The company intends to use the relationships it already has internationally to address public-sector telecommunications needs abroad. Global Crossing, for example, was awarded a 10-year, $250 million contract in May by the Foreign and Commonwealth Office of Great Britain to provide a virtual private network linking 240 British embassies. The company will provide managed voice, data and messaging services over its network.

The company has also won two contracts, one in June and one in August, to provide international private telecommunications lines for Europe and South America through the State Department's Diplomatic Telecommunications Service Program Office in Washington. DTS is responsible for providing enhanced telecommunications support for the entire U.S. federal government's foreign affairs community. The specific terms of the contracts were not disclosed.

"Customers need Global Crossing to weave together their remote offices and outposts into integrated companies with convenience and reliability," said George Gilder of Gilder Technology of Housatonic, Mass., which produces reports for high-tech managers and investors.

Global Crossing is concentrating on the federal government in the United States, but said there are opportunities in the state and local space and plans to pursue that market, Henrichs said.

The company also is talking to systems integrators to see whether it can participate in federal government contracts, such as the National Security Agency's $5 billion Groundbreaker program to support the agency's networks, telephony and security management.

Global Crossing also plans to pursue the 10-year, $19 billion continuation of the Chief Information Officer Solutions and Partners contract, a National Institutes of Health program to acquire information technology and outsourcing support services.

Henrichs said what makes Global Crossing's Government Solutions Group unique among other competitors is "it can provide a consistent level of
service on a worldwide basis
and provide the end-to-end services."

Although Global Crossing is new to the government business, there are many established telecommunications companies scooping up government businesses. Verizon Communications, formerly Bell Atlantic Corp., has a government division that has been around for years. Qwest Communications International Inc. and Winstar Communications Inc. have formed new government divisions, and all offer local, long distance and data services.

Verizon, for example, provides integrated network solutions to the federal government on a local, regional, national and international basis. The New York-based company has the $1.4 billion Washington Interagency Telecommunications System contract under its belt. The company in June completed a merger with GTE Corp. of Irving, Texas, forming a company with expected revenue of $60 billion a year.

Qwest's Government Systems unit, which was founded in early 1999, has a $430 million contract to supply a virtual
private network to the Defense Department. It is a subcontractor to TRW Inc., Cleveland, on the $1 billion Treasury Communications Systems effort. The government unit in June added $130 million in revenue when Qwest acquired US West Inc.

Winstar Government Solutions LLC, a wholly owned subsidiary of Winstar Communications, was formed in 1998. The company has won 13 Metropolitan Area Acquisition contracts, which will boost its government revenue from $500,000 in 1999 to more than $1 billion over the next several years.

The government's willingness to outsource many of its telecommunications services makes it a good time for Global Crossing to get into the government market, Henrichs said.

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