Profile: Global Crossing in 2009 – Part I

March 10th, 2009 by · Leave a Comment

In what I hope will be a regular new feature on Telecom Ramblings, I will be talking with companies in the sector – large and small – and assembling a profile of where they stand this year, where they hope to go, and what they may face in this challenging economic environment.  The first company I will look at is glbc, whom I had the opportunity to speak with recently. 

glbc_logoGlobal Crossing, of course, was a poster child of the tech bubble.  It flew higher than most and landed harder too, and even after emerging from bankruptcy in December 2003 it faced what I saw then as very difficult odds.   For telecom, 2003 was still the darkest part of the nuclear winter.  Pricing pressure was still brutal, and demand had not yet caught up to the glut, and they were burning far too much cash.  I must admit I gave them little chance to survive, but they pulled it off and began to accelerate in 2008 with some solid growth, apparently crossing the line to positive free cash flow at long last.  Now they enter this new economic crisis from what must be an unfamiliar position of strength.  The following are what I see as the key items to watch for in 2009:

  • Capital Expenditures – Not how much, but where.  The company has long held its capex tightly under control, with positive free cash flow in hand their freedom to invest in their network is increasing.  Will they seek new markets in Asia or eastern Europe?  Or will they develop the ones they have further?  My sense is that while the former might be tempting, they will quite rightly look to complete the job by focusing their resources on existing markets that need it, which brings us to:
  • Metro Access – In the last few years, Global Crossing has taken action to boost its last mile capabilities in both the UK and South America via M&A, and those two divisions generate most of their EBITDA.  That they would probably like to do the same in the larger US market is no big secret, access costs are and have always been their biggest challenge here.  However, the collapse of the financial sector has obviously made M&A difficult this year to say the least.  Creativity will be required to overcome that hurdle and of course they aren’t going to say much publicly, but I strongly suspect they will try.
  • The CDN market – Global Crossing began reselling CDN services from Edgecast and Limelight early this year.  Many carriers are entering the CDN space, and each has taken its own path.  What all share is a belief that content delivery services are something that is no longer optional in their portfolio.  Global Crossing’s move seems a preliminary one, to gain experience with the products and to be ready to jump should the need or opportunity arise.  There are many, many eyes watching the CDN market, and everyone expects action this year.  That action may very well prompt the company to move earlier than many expect.  But if it is up to them, I suspect they’d rather wait for the dust to clear.

The company is already quite lean due to its longstanding fight against cash burn, I do not look for substantial layoffs like we are seeing elsewhere in the sector.  Of course, a bad enough recession will eventually take down everyone.  But who would ever have thought that one could even conceivably call Global Crossing stock a safe haven, especially for those folks who invested in risky places like  Citigroup and Bank of America and all that?  Up is now Down, what a world.

In Part II of this article, Telecom Ramblings interviews Gary Breauninger, Chief Administrative Officer of Global Crossing.

Categories: Industry Spotlight · Internet Backbones

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