Value of State's Global Crossing deal falls €21m

The value of a Government initiative to buy telecoms capacity in bulk from the troubled US company Global Crossing fell by €21 million in 2002, just three years after the original deal was signed.

IDA Ireland's 2002 annual report shows the agency is also owed €10.2 million from firms that have not honoured contracts to buy some telecoms capacity. A note in the IDA accounts shows it has made a provision for doubtful debts of €10.2 million, the vast majority of which refers to its Global Crossing initiative.

IDA officials are talking to at least three firms about the debts, including Princes Holdings, a subsidiary of Independent News & Media; Metromedia Fibre Networks; and Worldport.

An IDA spokesman said it would go to the full length of the legal process to recover debts.

Meanwhile, the IDA wrote down the value of the telecommunications capacity it bought from Global Crossing by €21 million in 2002 to reflect the downturn in the value of fibre optic networks.

This provision for impairment amounts to a quarter of the total value of the €80 million telecoms contract which was negotiated by IDA Ireland and the Department of Public Enterprise in 1999.

The annual report shows the IDA paid €38.5 million to Global Crossing in 2002 for the right to use a portion of its global fibre optic network, which connects 200 cities in 27 countries. In the previous 12 months, the IDA paid Global Crossing €41.9 million.

The Government has found it difficult to sell on the capacity which it purchased from Global Crossing due to a glut in international telecoms bandwidth. But its decision to sign a deal with the US firm has caused the price of global bandwidth to slump, creating the conditions for firms such as Google and Overture to invest in the Republic this year.

The Government's €80 million deal with Global Crossing has proved controversial following the US firm's decision to file for bankruptcy protection in the US. Global Crossing, which has been the subject of separate Congressional and SEC inquiries, is planning to emerge from Chapter 11 bankruptcy protection within the next few months. An Asian firm, Singapore Technologies, plans to invest $250 million in the US firm to help it restructure.