Humility helps Metcalf survive his crash course in restructuring

Since joining the US telecoms firm Global Crossing in 1999, Mr Phil Metcalf has been on a hectic rollercoaster ride which shows no sign of slowing down.

Catapulted to international prominence during the internet boom, Global Crossing - which operates a global fibre network linking 200 cities worldwide - was worth $47 billion (€40 billion) at one time. Now, just three years after becoming the darling of the New York Stock Exchange, Global Crossing languishes in Chapter 11 bankruptcy protection and is the subject of an SEC investigation.

The fall from grace has been dramatic and Global Crossing's European managing director, Mr Metcalf, has had to take a crash course in corporate restructuring to keep the firm afloat in Europe.

"We've only seen a 1 per cent attrition rate among our customers in Europe," says Mr Metcalf, an industry veteran with more than 20 years' experience.

Global Crossing's flagship deal with the Government, which raised $80 million revenue for the firm, was not affected and the firm, which has linked Ireland to its global network, is seeking new customers in the Republic.

"We signed up $450 million worth of [European\] business in 2002... customers stayed loyal because we were able to provide them with the quality of service that they had received before the filing," Mr Metcalf says. Many of Global Crossing's European subsidiaries did not have to file for bankruptcy protection and have been kept afloat by complex funding plans devised by Global Crossing.

But in any case Chapter 11 bankruptcy protection has not dissuaded European firms from signing deals, says Mr Metcalf.

"We've done an awful lot of work keeping customers up to date... Being open, frank and acting with some humility has helped us too. We've operated an open book policy to answer any questions that customers have."

Under the rules of the bankruptcy court, Global Crossing has to file monthly updates that give a financial insight into its global operating performance. The figures show it made $228 million revenue in April but reported $11 million negative EBITDA (earnings before interest, tax, depreciation and amortisation). Total cash at hand was $584 million.

With a cash burn rate running at $25 million per month, Mr Metcalf believes Global Crossing can keep going for a very long time while it reorganises its finances. The company has made contingency plans to raise extra cash during the bankruptcy process if required, he says.

Global Crossing's reorganisation plan - which began in January 2002 when the firm first filed for Chapter 11 protection - has dragged on for more than a year due to complex regulatory negotiations by US authorities.

Two Asian firms, Singapore Technologies and Hutchison Telecommunications, signed a deal to invest $250 million in Global Crossing for a 61.5 per cent stake in the firm. But last month Hutchison withdrew from the deal after suggestions that US regulators were concerned its Chinese links could threaten US security.

Singapore Technologies has agreed to supply the whole $250 million in cash but several US firms including IDT and XO Communications are considering rival bids if the deal falls through.

"We've signed an exclusivity clause with Singapore Technologies so we can't consider other options," says Mr Metcalf, who is confident that the proposed deal with the Asian firm will get the green light from US regulators.

Singapore recently signed a world trade pact with President Bush, is fully open to multinationals and there is military co- operation with the US. "We feel it will be passed shortly," he says.

Global Crossing's network is of national strategic importance because it carries a large proportion of US government and military communications traffic. But Mr Metcalf believes the fear of foreign ownership is overstated.

"We do substantial work with the British government and this is all encrypted anyway. There is no way to tell what states traffic will be routed through," he says.

Global Crossing is hopeful of clearing its reorganisation plans with US regulators in months to enable it to re-emerge from Chapter 11 bankruptcy. But if it does successfully restructure, Global Crossing is likely to face the same cut-throat competition from rivals that caused its financial demise in the first place.

Just last month a new competitor called Hibernia Atlantic emerged in the Irish market after purchasing 360networks' transatlantic cable for a fraction of the $800 million construction costs.

Mr Metcalf agrees that some firms that have been through the Chapter 11 process will probably go out of business. But Global Crossing should be able to weather the storm because of its ubiquitous network, low-cost base and focus on new services.

In Dublin to review a new telecoms point at Data Electronics internet facility, Mr Metcalf points to the firm's cable end, which links the US, Britain and Ireland: "The difference is that our network is built and paid for. We are now looking to the future."