Government pays telecoms carrier €7.7m

The Government made a €7.7 million payment to the Irish subsidiary of US firm Global Crossing yesterday despite continuing uncertainty surrounding the parent firm's future ownership or viability.

The payment, sanctioned by Minister for Communications, Marine and Natural Resources, Mr Dermot Ahern, was made as part of the State's existing €126 million contract with Global Crossing to supply international telecoms capacity to Irish companies.

It is understood the Government renegotiated elements of the contract, reducing its annual operating costs, and getting a Global Crossing commitment to invest further cash in the Republic.

Under the deal, which was signed in 1999, Global Crossing laid an undersea cable connecting Dublin to its global telecommunications network, which connects 200 cities in 27 countries.

This enabled the Government to purchase cheap telecoms capacity in bundles from Global Crossing, and resell it to telecommunications firms such as Eircom.

But a huge drop in the cost of international telecoms capacity and financial troubles at Global Crossing raised Government concerns that the deal might fall apart.

Earlier this year, the State appointed two law firms to monitor its deal with Global Crossing, following the firm's descent into Chapter 11 bankruptcy in January.

Telecoms consultant Mr Enda Hardiman said yesterday the Government had little choice but to make the payment to Global Crossing or the firm would not be bound to continue a service here.

He said a bidder could probably be found for the Global Crossing's Irish network even if the firm was liquidated. But the firm, which supplies a third of the State's international telecoms connectivity, also faces several major legal problems and is being investigated by the Securities and Exchange Commission (SEC), the FBI and the US Congress for alleged accounting irregularities.

Just last week, Global Crossing denied allegations that the company shredded documents contrary to orders that it retain them while securities regulators investigated potential wrong-doing. The allegations made by a receptionist at the firm's New Jersey offices were contained in a sworn affidavit to a US bankruptcy court.

"Having now completed our investigation, we have concluded that there is no merit to the allegations and that they remain largely unsubstantiated," said Global Crossing in a statement.Facing debts of more than $12 million, the firm also extended to July 11th a deadline for bids from potential investors to help get itself out of bankruptcy recently.