Global Crossing targets U.S. market

Telecommunications firm looks to rebound from bankruptcy

Global Crossing

Headquarters: Hamilton, Bermuda; U.S. headquarters in Florham Park, N.J.

Leadership:John Legere, chief executive officer

Business: Supplies managed, voice, data, video and conferencing products to large and small enterprises, carriers and government agencies over an integrated, global, IP-based network

Employees: 4,000

2004 revenue: Projecting between $2.5 billion and $2.7 billion

2003 revenue: $2.9 billion

2003 net income: $24.7 billion, which included a net gain of $24.8 billion related to the company's reorganization. The income gain resulted solely from non-cash accounting charges related to the company's emergence from bankruptcy protection and its elimination of balance-sheet liabilities.

www.globalcrossing.com

Global Crossing Ltd., the financially battered telecommunications company that emerged from bankruptcy a little more than a year ago, has a challenging New Year's resolution: Grab more U.S. government business.

The company this year is targeting the federal market as part of a restructuring effort to strengthen its financial footing, company officials said. With an already substantial public-sector business in the United Kingdom -- its largest single customer worldwide -- Global Crossing now is turning its attention to opportunities in the U.S. federal market and European government markets.

"We have a plan. ... We're growing our business areas, and we're selling more IP and networks than ever before," said Edward Bursk, Global Crossing's vice president of government sales in the government business development office in Reston, Va.

In the United States, Global Crossing wants to use its global fiber-optic network to meet the government's demand for network interoperability between agencies, increased data sharing and secure networks, Bursk said.

Global Crossing has an advantage over other telecom providers, according to Bursk, because its integrated IP network can deliver voice, data and video services worldwide. The company's network consists of 100,000 miles of fiber-optic cable, including 15,000 miles of undersea fiber-optic lines.

During the next three to six years, Global Crossing expects its U.S. government business to be as substantial as its sales in the United Kingdom, Bursk said. He declined to reveal the size of the company's U.K. revenue.

Overall, the company had 2003 revenue of more than $2.9 billion, and is projecting 2004 revenue of between $2.55 billion and $2.7 billion.

GREAT BEGINNINGS

As one of the erstwhile Wall Street darlings of the telecom boom, Global Crossing, formed in 1997, fell hard in the subsequent bust. The company incurred about $12 billion in debt and filed for bankruptcy in January 2002.

In the government space, Global Crossing won the $400 million Defense Research Engineering Network, only to lose it to MCI Inc. after a bid protest.

Through it all, Global Crossing held on to its golden egg -- an integrated, global, IP-based network that delivers services to more than 500 cities in 50 countries. The company also managed to keep most of its client base.

Global Crossing was rescued by Singapore Technologies Telemedia PTE Ltd., which purchased a majority stake of the company, and it emerged from bankruptcy Dec. 9, 2003, with about $200 million in debt.

During its restructuring, Global Crossing did not pursue U.S. business because it was concerned it might not be able to fulfill contract obligations, Bursk said.

Gradually, the company took small steps into the federal marketplace by serving as a subcontractor on some government contracts. For example, Global Crossing is a subcontractor under Northrop Grumman Corp. on the Air Force's Distributed Mission Training contract, providing a high-performance network to simulate combat missions.

"Down the road in the long-term, we expect this to be one of the big parts of our business," Bursk said of the U.S. federal market.

He added that Global Crossing is "in a hiring and growth mode," but declined to specify how many new employees would be hired. Registered in Bermuda with its headquarters in Laurel Park, N.J., the company has more than 4,000 employees, compared to a peak of 17,000 during its heyday.

The company has established partnerships with large contractors, such as Northrop Grumman and Computer Sciences Corp., as well as with midsize and small companies. It will pursue federal awards through direct sales, prime contracting work and subcontracts with systems integrators and small business partners.

Bursk would not specify which upcoming federal contracts Global Crossing will chase, except for the huge governmentwide FTS Networx telecommunications contract.

Networx will be awarded in April 2006 and is estimated to be worth up to $20 billion. Global Crossing is interested as both a prime and a subcontractor on the Universal and Enterprise portions of the contract, Bursk said.

 

FOR ITS OWN GOOD

Because Global Crossing is foreign owned by STT, it is required to have a network security agreement with the U.S. government, which includes an independent board of directors.

The board includes former U.S. government VIPs, such as former Undersecretary of Defense Pete Aldridge Jr., Adm. Archie Clemins, the retired commander of the Pacific Fleet, and Lt. Gen. Donald Cromer, the retired Air Force general who was the Commander of the Space and Missile Center. Cromer was part of a committee that ensures the company's compliance with the network security agreement.

With the network security agreement, "we are held to a higher standard of security, architecture and implementation, I believe, than any other carrier," Bursk said.

But the security network agreement doesn't give Global Crossing an advantage to garner more U.S. federal work, said Igor Volshteyn, a telecommunications analyst at Tejas Securities Group in Austin, Texas. However, the political connections of some of its board members might pay off, Volshteyn said.

Global Crossing has "the right people in the right place to achieve some access to the government market," but will not displace major carriers, which are financially stable and have long track records with the government, Volshteyn said.

The board of directors will help Global Crossing "get its feet in the door with government contracts, and the ability to bid for contracts is now crucial," he said.

The company's ongoing financial hurdles could derail its comeback plans, Volshteyn said, despite a $404 million debt financing that the company secured on Dec. 23 from its Global Crossing Finance plc subsidiary in the United Kingdom.

In mid-November, the company said its revenue in the third quarter dropped to $617 million from $696 million in the third quarter of 2003, while its net loss grew to $102 million from $80 million in the same period a year earlier, when it was still in bankruptcy.

Global Crossing "bought themselves time in 2005, and if they don't get the business turned around, they will find themselves back in bankruptcy," Volshteyn said.

Staff Writer Roseanne Gerin can be reached at rgerin@postnewsweektech.com.

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