The Government is clearly worried about events surrounding US telecoms group Global Crossing, hence its decision to appoint two legal firms to monitor the bankruptcy proceedings and federal inquiries currently under way.
The firm provides one-third of the State's international telecoms and internet connectivity and is the lynchpin of the Government's plans to develop the Republic as an e-commerce hub.
It has already paid €62 million (£49 million) to Global Crossing for managed capacity and infrastructure which enables Irish companies to buy telecoms capacity at extremely low prices to spur on new economy projects. A further €15 million in payments are due in June and December and the Government will be monitoring Global Crossing's restructuring plan closely to ensure the firm's European operations will still be solvent.
Despite assurances from Global Crossing's Irish subsidiary that it is "business as usual", most industry observers believe the financial difficulties faced by the US telecoms group may be only beginning. Three separate federal bodies in the US are investigating Global Crossing following allegations by a former employee that it used improper accounting methods artificially to inflate revenues. And telecoms experts said yesterday these hearings could delay a proposed debt restructuring plan by Asian firms, Hutchison Whampoa and Singapore Technologies.
Mr Enda Hardiman, director of Hardiman Communications, said yesterday the fallout from Enron and federal investigations into Global Crossing would slow down due diligence by the firms.
But even if Global Crossing's European operations get into financial trouble, it would not necessarily mean the Government's public-private partnership would become redundant. Global Crossing Ireland has already laid the undersea cable connecting the Republic to the UK and its global network. As it is supplying one-third of the Republic's international connectivity, it is generating revenue. Therefore, even if the company went bankrupt, another firm would probably emerge to manage and operate the services. However, the detail of the Government contract has not been revealed and it is understood the legal advisers will investigate how the potential bankruptcy of Global Crossing Ireland would affect the existing agreement.
It is unclear whether the advisers will look into the prudence of the Government's decision to advance a payment to Global Crossing last year before it was due. Although the Government said it negotiated a better deal it is unclear if this would apply if there was a change of ownership.
Ironically, ensuring the Government's deal with Global Crossing survives in its present form or under different owners is probably now more vital than ever. The fallout in the international telecoms business is reducing competition and could result in the Republic being cut off from international networks. 360networks, the only other international carrier to land a transatlantic cable in the Republic, filed for bankruptcy last year.
Jamie Smyth
