The Times Online is reporting that Global Crossing is considering a sale of its UK operations. A sale of GCUK cannot exist in a vacuum, it sounds like a strategy to maximize the sale value for Singapore Technologies Telemedia (STT) by breaking it up into pieces. GCUK is the most valuable piece of GLBC and its financial lynchpin, and without it the company looks rather non-viable. Impsat is another separable piece, but the rest consists of US and continental European networks that have basically no metro assets that still have alot of revenue and nothing to show for it.
GLBC has struggled since exiting bankruptcy. Of late they have been doing better, however the fact that reaching positive ebitda was so hard after all this time and on all that revenue just shows how deep the structural problems were (and are) – the lack of metro assets anywhere outside the UK means they keep too few cents on every dollar they make. If you don’t have scale at the $2.5B in revenue, it just isn’t coming. Their improvement has always been under the shadow of the question ‘What next?’ Positive ebitda is not positive earnings, and they have been able to coast without major investment in their network for a long time now. Their transatlantic cables AC-1 and AC-2 are basically full, they will have to pay for transatlantic traffic growth from here.
So I wouldn’t be surprised if GLBC is the next big M&A in telecom, tomorrow I’ll consider who might be doing the acquiring…
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