Global Crossing may amend Government deal

TLELCOMS: Global Crossing, the telecoms firm which supplies one-third of the State's international connectivity, may change some of the terms contained in its €126 million contract with the Government to make it more attractive for firms here.

The company, whose parent has filed for chapter 11 bankruptcy protection in the US, is discussing with the State's advisers a range of amendments such as providing more services or lowering its bandwidth charges to compensate for the global fall in bandwidth costs.

In an interview with The Irish Times, Mr Phil Metcalfe, managing director, Global Crossing Europe, said the firm had had a number of discussions with the Government about how it could maximise its existing relationship.

"We are about trying to do an overall package which is compettive and more attractive," he said. "We will look at different terms of leases, adding additional services and more connectivity. Pricing is only one element."

The Government's €126 million public private partnership deal with Global Crossing was signed in 1999 and enabled the State to purchase international bandwidth in bulk. The Government was then able to sell this bandwidth on to companies at low prices to encourage e-commerce.

In return for payments worth some €62 million to date, Global Crossing extended its transatlantic cable to link Ireland with its global network. A further €15 million payment is due to be made in June and December.

The deal was originally heralded as an innovative project that would establish Ireland as a viable hub for e-commerce. But following the recent severe slump in the telecommunications sector, it has been criticised by its anchor tenant Eircom, for locking it into paying high prices for bandwidth.

Mr Metcalfe confirmed yesterday that just 30 to 50 per cent of the capacity sold to the Government was being used by three firms at present; Eircom, Chorus and HEAnet. But he said he was hopeful that more firms would emerge to lease greater capacity.

But despite the low take up rate, Global Crossing's country manager for Ireland, Mr Bernard Keogh, said the Government should be given a pat on the back for its 25-year deal.

"It [Global Crossing] is a big deal and a quantum leap forward from the point of view of Ireland Inc," said Mr Keogh. "If you go back to 1999, prices for the Government were 20-30 per cent lower than previously. It was an extremely good deal."

But he said market conditions had moved and the firm was working to make sure the deal worked now. Mr Keogh also confirmed the firm had already tweaked its deal with the Government following the State's decision to make a scheduled payment ahead of schedule last year, on request from Global Crossing.

In return for this early payment, Global Crossing extended the number of cities and States available to firms who purchased bandwidth from the Government and also cut some maintenance charges which firms had to pay, he said.

The recent strong criticism of the deal by Eircom, which was reported last week in The Irish Times, follows concerns over the future of the deal due to Global Crossing's current financial predicament. Earlier this year the Government appointed two law firms, Skadden Alps and A&L Goodbody to monitor the US company's chapter 11 restructuring, and likely sale process.

Global Crossing, which became the fourth-largest insolvency case when it filed for protection from creditors earlier this year is expected to leave about $10 billion (€11 billion) to $12 billion of claims in its wake.

Next week a $750 million bid offer made by Hutchison Wampoa and Singapore Technologies for Global Crossing is expected to become irrevocable, sparking a bidding war for its fibre network.

"Thirty days after that [May 21st]is when all the interested bids will need to be lodged with the US court. This court will then make a determination on July 11th," says Mr Metcalf.

More than 60 firms have sought details from Global Crossing in anticipation of the auction but it is not expected that all these will submit bids.