COMPANY PRESS RELEASE: Global Crossing Ltd.which provides the most secure telecommunications solutions to 200 major business centers worldwide over the first global, private, integrated IP-based fiber optic network, has reported results for the third quarter ended September 30, 2001.
Due to the pending sales of Global Crossing’s installation and maintenance business, Global Marine Systems, and its equipment manufacturing business, IPC Trading Systems, the Company now treats these segments, along with the previously sold ILEC business, as discontinued operations and reports financial results for continuing operations and discontinued operations for all periods presented.
For its continuing operations, the Company reported third quarter Cash Revenue of $999 million, a Recurring Adjusted EBITDA Loss of $16 million, and a Recurring Net Loss of $550 million, or $0.62 per share. Net Loss Applicable to Common Shareholders totaled $3,407 million, or $3.84 per share, for the third quarter, including a restructuring charge of $294 million related to the Company’s previously announced operational streamlining, $545 million related to the goodwill impairment of Global Marine and $2,084 million due to the write-down of the Company’s equity investment in Exodus Communications and other strategic investments. Had Global Marine and IPC Trading Systems been included as part of continuing operations, the Company would have reported Cash Revenue of $1,243 million, Recurring Adjusted EBITDA of $47 million, and a Recurring Net Loss of $499 million, or $0.56 per share for the third quarter.
John Legere, chief executive officer of Global Crossing, said, Over the past several weeks, the Global Crossing management team has reviewed every aspect of our business, from capital and operating expenses to our corporate culture, and to establish a position as one of the world’s leading telecommunications service providers, we have defined an initial ‘inter-city’ focus as part of an integrated strategy and business plan. Clearly, the downturn in the macro-economic environment had an impact on our business during the quarter, particularly within the IRU market. However, certain segments continue to demonstrate strong growth, which is in line with our new inter-city business focus. In fact, due to continued penetration of enterprise customers by our worldwide sales force, record Commercial Data Revenue results were posted in the quarter, up 43% over third quarter 2000.
With the cost reduction initiatives we have announced, we expect to reduce our operating expenses by more than a third in 2002 and improve our operating profitability. Capital expenditures will drop dramatically as network expansion ends in early 2002, and most of our capital spending becomes linked to carrying additional volumes on the network, Legere said.
Unless otherwise noted, period-to-period comparisons for Continuing Operations throughout this section are discussed giving pro forma effect to all dispositions as if each had occurred on January 1, 2000. Detailed pro forma comparisons are shown in the attached schedules.
The Telecommunications Services segment, which is comprised of commercial, consumer and carrier businesses for bandwidth, data, voice, audio/video conferencing and other value-added services, recorded Cash Revenue of $999 million, a 12% decline from third quarter 2000 results primarily due to a weak IRU carrier market as many network providers deferred purchases of wholesale capacity during the quarter. Service Revenue for the segment, which excludes the effects of the sale of capacity as IRU’s, was $757 million, a modest increase of 6% over third quarter of 2000 results partly due to continued declines in the consumer voice business as a result of the Company’s continuing de-emphasis of this business. Data Revenue grew 13% annually.
Within Telecommunications Services, the Commercial sector recorded $360 million in revenues during the quarter, up 12% over third quarter 2000 results and relatively flat sequentially due to a 5% sequential decline in commercial voice. This modest decline is mainly attributable to reduced network usage among business customers following the events of September 11. Despite the softening economic environment, Commercial Data Revenue increased 43% over third quarter 2000 results and 3% sequentially, consistent with the Company’s increased focus on providing managed services to global enterprises and further demonstrating Global Crossing’s increasing market share in a world becoming more data centric.
Since January 1, 2001, the Company has entered into new commercial service contracts which are expected to result in a total of approximately $1.8 billion in additional revenue to the Company over the life of the contracts, including new contracts totaling $208 million signed during the third quarter. Sales in commercial markets experienced continued growth, with revenue from customers in large enterprise segments up 35% annually. During the quarter, the Company signed agreements with notable customers such as Merck & Co, TRW, Akamai, Actuant, Merrill Lynch, JP Morgan Chase and Bloomberg.
Carrier Revenue was $416 million in the third quarter of 2001, unchanged from third quarter 2000 and down 2% sequentially. The relatively flat performance is partly due to certain carrier data customers maximizing their own network utilization rates and thereby delaying the need to renew or extend leases for data services, such as IP Transit, Frame Relay, ATM, and Private Line. Carrier voice revenue was $279 million in the third quarter, up 16% from third quarter of 2000 results. The domestic carrier voice business declined slightly sequentially due to a more price competitive environment; however this shortfall was partially offset by the healthy international carrier voice business performance, which increased 6% sequentially.
Cash Revenue from the sale of capacity in the form of IRU’s was $242 million for the quarter. Included in this amount, as well as in Recurring Adjusted EBITDA, was $152 million received from significant carrier customers who signed contracts during the quarter to purchase $177 million of capacity on the Global Crossing Network, and to whom Global Crossing made $190 million in cash commitments for the purchase or lease of capacity and co-location space. These transactions were implemented in order to acquire cost-effective local network expansions; to provide for cost-effective alternatives to new construction in certain markets in which Global Crossing anticipates shortages of capacity; and to provide additional levels of physical diversity in the network as the Company implements its global mesh architecture.