Vultures circle over telecoms startups

The vultures are circling over failed telecoms startups, mirroring a similar sweep up when dotcoms hit the wall, according to analysts.

The warning comes as Global Crossing, the fibre-optic networking company that filed for Chapter 11 bankruptcy protection on Monday, appeared to be about to receive bids for parts of its network.

According to the New York Times, Newark-based telco IDT Corporation is considering an offer for Global Crossing's assets.

Global Crossing, which spent $15bn (£10.6bn) constructing an international IP network, has piled up $12bn (£8.5bn) of debt on assets currently valued at $22.4bn (£15.8bn), and confirmed that it had been in talks with IDT.

Mish Desmidt, Global Crossing's European corporate communications manager, told vnunet.com that the company intends to continue providing services over a wholly-owned network infrastructure.

"This network is integral to our business and we plan to keep it intact," he said.

Analysts have indicated that the trend could mirror the dotcom collapse. Last year, close to $40bn was spent by big name vendors such as IBM, PeopleSoft, Siebel, Microsoft and SAP in snapping up dead or dying dotcoms.

Half of that went on 575 firms that provide ebusiness software and infrastructure technology.

Last year, telecoms startup Viatel put itself up for auction after being declared bankrupt, but could not find a buyer.

A report from analyst group Ovum, released in the summer of 1999, foresaw the current situation. "New network operators [will not be] able to pay back their investors and [will be] taken over by existing players," it said.

Ovum's Steve Young told vnunet.com in an exclusive interview: "We wrote the report before European governments charged masses for third-generation mobile licences, which snuffed out incumbent investment.

"Once balance sheets have been balanced, as both BT and KPN are doing, then we will start to see investor confidence pick up. As demand for traffic increases in the long term, someone will have to provide the connectivity."

Further reading

• Telecoms

Global Crossing bullish despite adversity

• 10 May 2002

• Management

Global Crossing deal hits stormy waters

• 04 Feb 2002

• Telecoms

Global Crossing hits the wall

• 29 Jan 2002

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