Global Crossing hangs tough
Office in Phoenix plays key role for downsized telecom
Cheryl Evans/The Arizona Republic
Global Crossing's Paul Benjes (left), director of engineering, and Bill Habib, vice president of global data services, are framed by equipment they call the on-ramp to the Internet.
By Jane Larson
The Arizona Republic
Nov. 18, 2002
The company name stands for one of the telecommunications industry's most spectacular busts, and its top executives were hauled before Congress to defend their accounting practices.
Yet Global Crossing Ltd. is still in business. It is reorganizing in Bankruptcy Court and building up its Phoenix network operations center as the hub of data transmission services for big businesses and government agencies.
The center is one of three the Bermuda-based company has worldwide. The others are a London center that monitors its transoceanic network and a Detroit center that manages the North American and global voice networks.
Global Crossing moved into the 65,000-square-foot center near Interstate 10 and Ray Road in December from a downtown Phoenix location. It has about 150 employees, most of them engineers, and plans to begin expanding its sales staff this month. The center has enough room for 350 employees.
Employment is down from its peak of more than 250 in Phoenix, but executives say the cuts have left Global Crossing with less bureaucracy and stronger players who have recommitted to the company.
"People are here to fight the fight," said Tyler Hemmen, senior director of global service activation.
The Phoenix location is also benefiting from Global Crossing's massive downsizing and plans to close 107 offices by mid-2003. Data services have been centralized in Phoenix, which had been limited to the service activation and Internet protocol teams.
The center has picked up technicians from Detroit and customers from New York, and it has built up three labs with equipment from vacated locations.
The moves have cut duplication and allowed more cross-training, said Hemmen and Bill Habib, vice president of global data services.
Habib's area includes Internet services ranging from domain name registration to e-mail setup and news feeds. Once a customer signs up, the center's staff plans its network, activates and monitors the service and handles technical problems. The center processes about 8,000 customer requests a month.
The three labs are used to test equipment and products before a customer goes live on the network, said Paul Benjes, director of engineering.
The Phoenix center connects to the rest of Global Crossing's fiber-optic network of more than 100,000 miles in 27 countries on four continents.
The company, founded in 1997, quickly built its network on the premise that the Internet was going to fuel an unimaginable demand for bandwidth. Others jumped into the market, too, creating huge overcapacity that remains today.
Norm Bogen, an analyst with communications research firm In-Stat/MDR, thinks Global Crossing still faces that problem.
"They're a long-haul carrier, and the capacity for long haul was way overbuilt," he said. Prices for such services have stopped dropping, but as bandwidth becomes a commodity, companies can't charge or sell enough to make a profit, he said.
The bankruptcy reorganization, which would wipe out debt, might give Global Crossing a leg up on competitors that still must cover that expense, he said. But competitors such as Level 3 Communications Inc. are trying to sell more than raw bandwidth.
"But if you have a network and can deliver services on top of it, that is where the opportunity lies," Bogen said.
When Global Crossing filed for bankruptcy protection in January, it was one of the largest corporate bankruptcies ever. Within weeks of the filing, it confirmed that the Securities and Exchange Commission was examining allegations that it had artificially inflated financial results by swapping fiber capacity with other telecoms and counting it as revenue. Its stock has fallen from $60 to about 2 cents a share.
In headier times, in 1999, the company made Arizona headlines for its attempt to acquire US West Communications.
Creditors have until the end of this week to vote on the bankruptcy plan.
Habib concedes the company made some bad decisions and grew too fast, but he doesn't think it did anything crooked. "It's frustrating to me to be grouped with WorldCom and Enron," he said.
In the meantime, Global Crossing cut its workforce from 15,000 at the start of 2001 to fewer than 6,000 in March.
It has refocused its business on readily available products and services to existing customers, a strategy that generated $1.7 billion in revenue for the first seven months of 2002.
The company agreed in August to sell a majority interest to Singapore Technologies Telemedia Pte. Ltd. and Hutchison Telecommunications Ltd. for $250 million in cash. Benjes and others call the purchase encouraging, saying the Asian companies are not competitors and simply want to add the company to their portfolios.
The deal is expected to close in the first half of next year, pending regulatory approval.
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