Founded in March 1997, Global Crossing had already raised $4
billion by the end of 1998. Global Crossing announced its
mission of developing, owning and operating the world's first
independent integrated international network. The company is
rapidly building major fibre-optic undersea cable systems and
In May 1998 the operator launched the first of its undersea
cable systems, Atlantic Crossing (AC-1), which links the US,
the UK, the Netherlands and Germany. Pacific Crossing, a
21,000km, four fibre pair self-healing ring, connecting the US
to Japan, should be ready for service in March 2000. Its South
American Crossing is scheduled for service in early 2001. In
September 1999 it announced plans to build an advance network
in Asia, Asia Global Crossing, through a joint venture with
Microsoft and Softbank.
Global Crossing aims to exploit increasing demand for
high-speed broadband connections. The explosive growth of the
Internet and the potential for E-commerce have intensified the
need for an advanced global communications infrastructure that
can support increasing capacity demands. Global Crossing aims
to be the carrier's carrier for wholesale service. It is also
entering the retail space on a world-wide basis.
In February 1999 Global Crossing attracted attention, when it
appointed Bob Annunziata as the new CEO. Annunziata had earlier
risen to prominence when he was the CEO of Teleport, one of the
largest competitive local exchange carriers, which was acquired
by AT&T for $12 billion in 1998. Annunziata, who had spent
17 years at AT&T prior to joining Teleport, had returned to
AT&T to head the company's $22 billion business services
Annunziata quickly built on the carrier's global plans. In
March 1999 Global Crossing announced a $11.2 billion merger
with Frontier Corporation, a leading provider of
facilities-based integrated communications and Internet
services. The aim was to combine Global Crossing's IP-based
fibre network, which is being built out in Europe, Japan,
Mexico and central and south America, with Frontier's extensive
Global Crossing subsequently announced a bid for US WEST in a
bid to build a seamless end-to-end, local-global broadband
network. However, the proposed merger fell through, when Qwest
Communications International filed a counter-bid for both
Frontier and US WEST. Eventually, Global Crossing relinquished
its bid for US WEST, but retained its offer for Frontier.
Global Crossing expects to close its merger with Frontier later
By the end of 2000, the operator expects to have a fully
integrated network that will reach 160 of the world's most
important business centres and include access to 80% of world's
major traffic routes. In an exclusive interview with Global
Telecoms Business, the CEO of Global Crossing Bob Annunziata
talks about the operator's unique vision and explains how it
aims to be one of the top global providers of telecoms
How big a setback was the loss of US WEST to
Annunziata: As you know, everything we do is based on
what is in the best interests of our shareholders. Our strategy
is fairly simple - to build a global network and add more
products and services to that network over time. We saw US WEST
as a positive opportunity to jump start that.
However, at the end of the day, we must look at what we pay
for a business compared to the value that the business will
bring us in executing our strategy. We thought that to match or
exceed the increased premium that was offered by Qwest for US
West was not in the best interests of Global Crossing
shareholders. Secondly, we felt that Frontier clearly was the
top priority to make our global network complete and, with
Qwest withdrawing their bid, we did not have to increase our
price for Frontier. So we thought that it was a win-win
situation for our shareholders.
So you didn't see this as a setback?
Annunziata: No, I don't think that there was any
setback. Our shareholders participated in the US WEST tender
offer at a price of $62.75 a share, a big premium over our
stock market price at the time. We received $420 million in
break-up fees over a two-month period. Now we will continue to
stick to our original plan. So there was no setback.
You said recently when discussing the rival bids: "The
pieces simply fit together better. Our international network,
Frontier's national network and US WEST's regional network
provide a much stronger global footprint than what Qwest can
offer." How will you now put the pieces back together?
Annunziata: Frontier was always the key piece of the
puzzle. Global Crossing and Frontier are a perfect fit, as
there is no overlap between our two companies. We were missing
the US footprint and now we will have it. That is going to fit
nicely. In addition, the US WEST regional network is in 14
Western states. We will have a presence that runs through those
states with Frontier. We will just have to expand that a lot
more quickly than we had initially planned. So Frontier's US
national network is still a good fit with Global Crossing's
international network. We will continue to build in the most
attractive markets within US WEST territories.
If your bid for US WEST had been successful, you and
Sol Trujillo would have become joint CEOs of the new company.
Surely, having two CEOs would have created problems? Would you
adopt the same approach again?
Annunziata: Quite frankly, if you saw the great
synergy and relationship between Sol Trujillo and me, you could
see why I didn't anticipate that we would have had any
problems. We were acting as partners. We believed in doing this
thing as a partnership. I believe that we would have
complemented each other well going forward. The co-CEO role is
controversial. But you know, as we told everyone, if we had run
into any problems and it hadn't worked, then we would have
changed things. And one thing you have to learn in this world
is that you have to be ready to change, because the world is
definitely changing rapidly.
Could you tell us about the purchase of Global Marine?
How has this accelerated your competitive position?
Annunziata: Our purchase of Global Marine - the
world's largest and most experienced submarine cable
maintenance and installation company - from Cable &
Wireless was an outstanding acquisition for Global Crossing.
Not only does it give us control over the installation and
maintenance of our own cables, but we will also participate in
the huge market for the maintenance and construction of new
cables world-wide, which is a billion dollar business. I see
this business growing to about $10 billion a year. So I think
that it is a great acquisition and fits nicely with Global
Following the recent acquisitions of Frontier and
Global Marine, will you need to have recourse to more debt
funding or potential share issues?
Annunziata: Currently we will not need to do this, as
we just undertook a new $3 billion corporate credit facility
that was led by Chase Manhattan and Goldman Sachs. All the
networks that we have talked about building are already
financed. We are in a good position today, with a substantial
source of funds to rapidly complete our core network and fund
future growth flexibly and efficiently.
What are the specific terms of that deal?
Annunziata: The senior secured credit facility
consists of a $1 billion five-year revolving credit facility, a
$1 billion five-year multi-draw term loan, and a $1 billion
eight-year term loan. Again it was put together and
over-subscribed by many of the banks.
How much is your global network costing to build?
Where are you in the network build?
Annunziata: I am very excited about where we are in
the build of our global network. Atlantic Crossing (AC-1) is
already up and running across the Atlantic Ocean. Pacific
Crossing (PC-1), connecting the US with Japan, will be up by
the end of this year, as will Mid-Atlantic Crossing (MAC). Also
by the end of 1999, 13 cities in Europe will be connected to
our network through our terrestrial Pan-European Crossing
(PEC), rising to 24 cities by mid-2000. Next year we will light
up our terrestrial network in Japan, segments of our South
American Crossing (SAC), Pan-American Crossing (PAC), the Irish
Ring and backhaul systems in the US and Mexico. When our
announced network is complete, connecting about 160 cities in
19 countries by the year 2001, we will have invested about $5
billion. So these are real assets that are no longer just
sub-sea to sub-sea, but city to city, and soon building to
building as we continue to reach out.
Which suppliers have been working on the project? How
many cities do you currently connect to?
Annunziata: Well we use multiple suppliers, Lucent,
Nortel, Cisco and Alcatel. So we have a multi-vendor
environment, linking up the 160 cities world-wide in 19
What benefits do you derive from the recent technology
agreement signed with Lucent Technologies?
Annunziata: We think that it is good to be close to
our suppliers. In the case of Lucent, we gain access to Bell
Labs and their latest optical technology. We get preferred
access to new technology and support in rolling out new
products. We will also work with them to plan the technology
for the global network of the future, which is what we are
Do you think that suppliers are falling behind
operator demands in terms of management capabilities?
Annunziata: It has taken us quite some time in this
industry to get these bandwidth managers and equipment
management systems up to speed. The suppliers have listened.
They have come up with some new capabilities. That is why it is
a give-and-take operation, where they tell us what they design
and we tell them what we need. Together we devise solutions to
cater for market requirements, in other words, the needs of our
In March, you announced plans for the development of
South American Crossing. What do you perceive to be the
opportunity for Global Crossing in Latin America?
Annunziata: It is a phenomenal opportunity. When you
look at international traffic, Latin America is growing
rapidly. We have our South America Crossing and Mid-Atlantic
Crossing, all linking up to serve Latin America. So we can
offer any of our clients a link from, say, Rio or any South
American city to Europe, Japan and the US. South American
Crossing alone brings a ten-fold capacity increase to South
America-North America connectivity. So it is very supportive.
How many cities will you be connected to in Latin
Annunziata: Initially we will connect a dozen or so
cities in Latin America to our global network.
Can you explain why you opted for Africa ONE? How do
they fit in with your global ambitions?
Annunziata: We believe our move with Africa ONE was
strategically smart. We were hired as a contractor by a
consortium to build the cable there. We do not own the cable.
So we get two benefits. Firstly, we will derive a profit from
installing and maintaining that cable. Secondly, we will
receive capacity to all the different markets that it
terminates in. So we will earn fees without investing our own
capital and have a presence in the African market as it
Global Crossing's first quarter revenues were $178
million. What are your projected second quarter revenues?
Annunziata: We have just released figures for the
second quarter. Revenues were $190 million, reflecting
continuing strong sales and circuit activation on our Atlantic
Crossing cable. We were very pleased with these results, which
exceeded analyst expectations. Global Crossing has established
a great track record of meeting and beating expectations, as we
continue to grow our sales and customer base world-wide.
What do you see as Global Crossing's main revenue
drivers over the next two years?
Annunziata: When we were strictly a sub-sea to
sub-sea business, our revenue drivers were primarily in the
wholesale carrier's carrier market. Now we are evolving to
serve not only the carrier's carrier market, but also corporate
customers on a retail basis. With the acquisition of Frontier,
we are looking at a company with $4 billion in revenue. About
25% of that will come from the traditional sub-sea systems. The
rest will come from the retail business. As we go forward, we
will be looking to expand many of Frontier's existing products,
such as the GlobalCenter web hosting business, onto the
world-wide stage through our network. We will also develop new
products and services that take advantage of our network's
Do you believe that Global Crossing's success is
dependent on its ability to break into the retail market? Do
you believe that Global Crossing has to become more than just a
Annunziata: As I just mentioned, and as everyone
recognizes in this business, you have to grow from a wholesale
business to a carrier's carrier and up the value chain into the
retail market. Since we have a fixed cost network, this makes
it very important, and very easy, for us to put more products
and services on that network.
How do you view companies such as Qwest and Level 3?
Who do you view as your main competitors?
Annunziata: Qwest, Level 3 and other emerging
companies are participating in what I view as a trillion dollar
market world-wide. So it is a very big market, which offers a
lot of opportunity for everybody. The only difference is that
our focus at Global Crossing is clearly global in nature. The
other companies are really more US-centric in their approach.
Our real competitors are the world-wide companies that aim to
provide wholesale, as well as retail services. We can offer a
global approach instead of a US-centric approach in addressing
the global market. I think that makes us different.
What do you perceive to be your competitive advantages
over other operators which aim to have world-wide reach?
Annunziata: Again we are building our own network. As
we own our network, with links to all parts of the world, we
will have more capacity than other networks. We will be able to
control quality and service end-to-end for our customers - and
that is what they demand in the new world of data products.
Why do you think that Europe has failed to spawn
operators such as Global Crossing, Level 3 and Qwest? Would you
ascribe this development to a lack of entrepreneurs?
Annunziata: I really think that the delay in Europe -
and it is only a delay - is due to the fact that the telecoms
market has not opened up in Europe as rapidly as in the US. As
we deregulated in the US, Europe started to address those kinds
of issues, breaking down the borders. This is clearly creating
a great opportunity in Europe. We are excited about being one
of the early participants in the European market. Right now
one-third of all world traffic is in Europe, while another
one-third is in north America. So our goal is to own and
operate those networks.
How do you view the regulatory differences between
Europe and the US?
Annunziata: Well I think that they are evolving, as
the US has more experience. There are different types of
companies. We have RBOCs and long-distance carriers, while you
had national companies in Europe. As the boundaries come down,
we have to deal with these regulatory cross-border issues,
which are unique in Europe. But we are encouraged, as the more
we talk to the different regulatory agencies, the more they
recognize the need for competition. Competition has certainly
proved to be best for our society. So it takes some time and
doesn't happen overnight. But the world will become very
competitive in the future and Global Crossing is very well
positioned to capitalize on that.
Do you think that there is room for a Global Crossing
mark two? Or do you believe that the window of opportunity for
new start-ups is now closing?
Annunziata: We do have a two to three year advantage
on new entrants, given the time that it takes to build, obtain
your operating rights and rights of way. There has been some
talk from other companies about building competitive global
submarine systems world-wide. For example, there was a company
out there called Project Oxygen that still hasn't received its
funding. I believe, if I am not mistaken, that they have been
talking about doing this for four years now.
I think that our approach is a little bit more pragmatic. You
get one link in, you sell it, you go to another link and sell
it. It shows people that you are a real company, as you move
forward. So we have a definite advantage in the market. One
thing you can count on: we are never going to stop growing. So
that advantage will always be in our favour.
What is your EBITDA target for 1999?
Annunziata: We reported about $114 million in EBITDA
for the second quarter - so you can extrapolate that figure out
for 1999. We are doing very well. In fact we are beating
analyst expectations. When we put Global Crossing and Frontier
together, we will have $4 billion of annualized revenues and
over $1 billion in EBITDA. And we expect EBITDA to grow by over
30% a year.
What is your projected capital expenditure for
Annunziata: All our announced cables are fully
financed. As I mentioned, once our announced network is
complete, it will represent a $5 billion investment. You also
have to consider Frontier - as we will be combined with
Frontier before the end of the year - they are spending about
$800 million a year. I would expect this figure to rise this
year, as we want to build out more CLEC opportunities and
webhosting opportunities. So their capex will probably amount
to over $900 million in 1999.
You took over as CEO of Global Crossing in February.
In such a short space of time you tried to cut two of the
biggest deals at lightning speed. Will you continue to build
Global Crossing at such a pace?
Annunziata: I guess you could say that the only way
we know how to move is fast. So the answer is yes. As we
continue to build organically, we will also look at other
companies that fit our needs and that we can integrate at the
right price. At Global Crossing we are blessed with a very
experienced management team to make that happen. Gary Winnick,
the founder, and the other executives here are very talented.
So we can move rapidly to achieve our goals.
How do you view the era of consolidation in the US? Do
you believe that the creation of these big global service
providers benefits customers?
Annunziata: We have been talking about the global
mega-merger service providers for quite some time. I think that
it is starting to materialize. When you look at the RBOCs,
which need to expand beyond their borders, and the PTTs
implying that they plan to expand beyond their borders, I think
that there is nothing like Global Crossing sitting there with
the infrastructure in place to help them reach the four corners
of the world. So it is starting to happen. I think that it is
going to happen and it is accelerating faster than we ever
anticipated in our history. The good news is that you are going
to find Global Crossing right in the middle.
In a recent interview we conducted with James Crowe of
Level 3, he spoke about the problems that traditional telcos,
such as a RBOC based on old telephony models, would have in
competing in a new IP, borderless world. What are your views on
Annunziata: I agree with Jim that the established
companies today are using the old technology and have to
quickly roll out the new technology. Many of them are trying to
do that. But again it is very hard for them to go forward and
accomplish this. I think that the newer companies have an
advantage of competing more rapidly. But they also need to
build. And it is very important to build out to reach the
customers. So there is somewhat of a balance there. But it
gives us an opportunity to have the best cost structure as we
go forward. And there is a lot of opportunity, as it is a big
market. I think that we will do nothing but bring benefit to
users through the new technologies. And the new companies can
do that, as they can provide the responsiveness that customers
How do you view the prospects for IP voice
Annunziata: That actually blends in with your last
question. To be more cost effective, we all aim to reduce
network costs. The way to do that is of course voice over IP.
So we are very aggressive with the Frontier unit that has
looked at this and is beginning to deploy it next year and will
probably have the whole network done by the year 2002. Every
company needs to go that way, especially to take out the
expense. As long as the quality is there and the features are
there, everyone will deploy this technology. And you can count
on Global Crossing to embrace this technology as well.
In a recent interview in Global Telecoms Business,
Robert Knowling the CEO of Covad Communications noted that
voice over ATM "is going to be a huge play". He also added that
voice over IP also had good potential. What do you think about
voice over ATM and over IP?
Annunziata: It is the same issue. Voice over ATM, as
well as voice over IP, is all about taking out the cost. I
think that any company which is forward thinking, deploys an IP
network, ATM network and TDMA network, because you are always
in a state of evolution - meeting the needs of your customers
today and evolving to a lower cost structure. So you have to be
expert and proficient in each one of those technologies going
forward. Global Crossing is employing all three.
As the company grows, how will the structure change?
Will you place more emphasis on marketing? How are you
benchmarking progress for investors?
Annunziata: Clearly I think you have seen that Global
Crossing has constructed the infrastructure that allows us to
go from no longer just sub-sea to sub-sea, but city to city and
soon building to building. But as that is going up - and it
will be up by the end of the year in different parts of the
world - we are aggressively unleashing our sales people,
products and services, so that we can fill this fixed cost
Benchmarking relates to success in meeting that plan and
bringing more customers on the network. That is what the
business is about: bringing more products and services on the
network, as a carrier's carrier in the wholesale market and
then through the business-to-business service that we have
brought on with Frontier. Frontier brings us that quality
In terms of data, which applications will prove most
essential to businesses in the future?
Annunziata: Data is growing rapidly. The key issue on
the data market is that we are digitizing a lot of the voice,
so that it becomes a data application, as well as the IP
telephony and IP services. Data is growing rapidly, as all the
ISPs require so much more capacity than anyone ever thought
they would in our industry. And that is where we need the
capacity to be built world-wide.
Global Crossing has a premier position because of our
state-of-the-art global network. No one in the past would ever
have thought that customers would ask for a transmission speed
of OC-12, 48 and now 192. It is a dynamic market. The world
needs more capacity as we need more graphics, and we need them
faster. Soon video will start becoming commonplace on desktop
to desktop or PC to PC transmissions. That requires quite a bit
more bandwidth. So I think that we are very well positioned to
In terms of overall revenues, how much will data
account for in a couple of year's time?
Annunziata: Today most revenues come from voice in
the industry, but data traffic and revenues are growing much
faster. But as you begin to digitize voice, it becomes data
traffic as well. We are probably very high in the data space
today, where it is very difficult to identify how much of it is
voice, as we are today a carrier's carrier. As we go forward,
all the plans are leading towards putting more focus on ATM,
Frame Relay and IP data services. We will derive most of our
revenues from these areas.
If we look at the business market in the US, what
percentage share do you expect to obtain in 1999-2000?
Annunziata: Clearly in the 1999 time frame we have
very little market share in the business market, as we are a
carrier's carrier and are just now converting into the retail
side. People used to ask me: "How much market share do you
want?" I would say that I didn't want it all, just half.
Obviously that is a joke. But we know how to grow the business
and we will continue to grow the business as we build out our
Frontier clearly gives us a jump start in the medium to small
business sector, as that is what they serve. So working
together with Frontier, you will see us growing revenues and
market share very aggressively, as that is all we know how to
do. As the market keeps growing, it is difficult to put a
market percentage. Ask me again in a year's time.
How important is a wireless base in today's telecoms
Annunziata: It is all a matter of the life cycle of a
company here, if you are talking about a wireless acquisition
in the future. I assume that you are not talking about fixed
wireless, which is a way to access customer premises into the
network, but rather mobile. It is not as necessary to grow the
business as rapidly as you want. But once you reach a certain
level, all companies start thinking: do we need wireless to
provide the total package of products and services for our
customers? It is not as though you need it when you start out.
But as companies grow, it doesn't hurt to have the full breadth
Who are your main competitors globally? Which
companies pose the biggest threat?
Annunziata: When it comes down to addressing the
global market, we have very little competition. No single
company is building all the fibre sub-sea systems and
terrestrial networks that are being linked world-wide by Global
Crossing. So I think that we do occupy a unique position.
When you are vying for businesses in each continent, you need
to address the PTTs, the RBOCs, as well as the international
carriers that are offering service as your competitors. But you
need to look at what we bring differently.
Clearly the bandwidth that we have available to offer
customers, not only to certain parts of the world, but also
world-wide, will give us that unique position. Not to mention
the responsiveness in providing services and employing the
latest technologies. We think that we will have a jump start
here, as we go forward. One day your competitor is your
supplier, the next day they are competitors. So I think that
our formula will be a win-win proposition: as a carrier's
carrier for wholesale service, as well as a new entrant in the
retail space on a world-wide basis.
How has your experience at Teleport and AT&T
shaped your vision? Why did you take up the challenge of
becoming the CEO at Global Crossing?
Annunziata: Everyone asks me this question. I saw
Global Crossing as a significant opportunity and, quite
frankly, as a world-wide Teleport. Teleport filled a niche in
the US market. And that was fairly visionary, as people didn't
think that it could be done at the time. Similarly, I think
that Gary Winnick and his team identified another niche in the
global market, which they were addressing through Global
Crossing. So when they asked me to join them, I was just
excited. I see Global Crossing becoming a global player owing
to our acquisitions and organic growth. So I perceived a
tremendous opportunity to address the world, and not just the
What trends do you see emerging in telecommunications
over the next three years?
Annunziata: I think the trend will be for more
businesses to want to deal with a single company that can
provide them with a broad reach around the world, without
having to rely on third party providers to actually turn up
those services. We will already have the city-city network, but
we will soon be building out the local network as well, so that
we can get away from third party provisioning. This will ensure
better responsiveness and better quality for customers. Again,
Global Crossing will be well positioned to do that.
Finally, what are your hopes and ambitions for Global
Crossing over the next two-three years?
Annunziata: One thing is certain. We are going to
grow and grow and grow. As we build our culture, products and
services and networks around the world, you will see Global
Crossing continually perform as one of the highest growth
companies in the telecoms sector. Our people here know how to
do that. I know how to do that. And that is reflected in the
modification of our strategy to go from sub-sea to sub-sea,
city to city and now building to building. So clearly I think
that makes us a breed apart from all other companies