Global Crossing continues to refocus on enterprise customers.
Nearly six months after announcing its shift to more squarely focus on enterprise business customers, international service provider Global Crossing is still waiting for all the clouds to clear.
Global Crossing emerged from bankruptcy 16 months ago with a new majority owner, Singapore Technologies Telemedia, and a new lease on life. Although analysts say the revamped company has made progress, challenges remain.
Global Crossing, once known primarily as a carrier’s carrier, now focuses on providing services to multinational business users, says Anthony Christie, chief marketing officer and executive vice president. Enterprise accounts today represent 44% of Global Crossing’s total revenue, a figure that is up slightly from 40% in 2003.
New Global Crossing customers announced in the first quarter include the British Council, Dorel Industries and Sun.
The carrier offers Multi-protocol Label Switching (MPLS) and IP-based services, including managed VPN and conferencing services, in 300 cities in 30 countries around the world. Through partnerships, it reaches a total of 500 cities in 50 countries.
Company ‘shows promise’
“Global Crossing shows promise, but it’s a small company,” says Brownlee Thomas, a principal analyst at Forrester Research. “Global Crossing is worth looking at for back-up services or as a secondary provider. There is considerably higher risk if considering Global Crossing as a primary service provider.”
Because users typically spend about 80% of their telecom budget with their primary carrier, customers are looking for long-term staying power, Thomas says. And while she says she likes that Global Crossing’s business plan is funded through 2006, it’s far from long term. Thomas also is concerned that users could see some services ditched if new financial problems arise. The carrier “has shown it will sell off parts of its business when push comes to shove,” she says.
In fact, that is part of the current plan.
Global Crossing’s change in strategy not only includes a keen focus on providing businesses with managed and unmanaged IP services, but also selling off assets and eliminating low-margin contracts.
“We went through a screening process and looked at all of our customer contracts and services,” Christie says. “We identified accounts that only used manual-intensive products, were bad credit risks and those where the chances of moving to VoIP were slim to none. We then went through and surgically raised prices.”
Global Crossing essentially tries to get its low-margin customers to leave or pay higher rates. Christie points out that these were all wholesale customer contracts.
“There has been a shift in wholesale voice, where there are so many products out there it has become an unsustainable business,” she says.
The company has seen some attrition based on these actions, which is one of the reasons its revenue is down.
Last month, the service provider announced 2004 revenue of $2.5 billion, which is down 10% from year-end 2003.
Sell-offs another factor
The de-emphasis of certain business units in preparation for exiting them is another reason why the carrier’s revenue fell. The company announced last month the sale of its Trader Voice service and its small-business group. The carrier is selling Trader Voice, a voice communication tool used on stock trading floors, to WestCom for $25 million. It also is selling its small business group, which includes 30,000 voice and data service customers, to Matrix Telecom for $40.5 million.
The company says ditching these business units will let it focus on core offerings for enterprise users including MPLS VPN, VoIP and collaboration services.
While it tries to beef up business sales, the company is not entirely forgetting its wholesale business, but it is instead pushing its “white label” MPLS and VoIP services, Christie says. Yet, competing directly with Equant, BT Infonet, AT&T and MCI for multinational business user contracts, is top of mind for the carrier.
“Global Crossing has been changing its strategy by targeting global enterprise users, but its model is different than that of AT&T, MCI or Equant,” says Rena Bhattacharyya, a program manager at IDC. “Global Crossing is developing partnerships with international providers, and the others are more focused on building out their own international assets.
“Considering the capital constraints that all of the telecom carriers are working through, partnerships may become increasingly popular,” Bhattacharyya says. “The service providers that do it well will be at a significant advantage.”
Doing it well would include maintaining high network performance levels, resolving trouble tickets quickly and eliminating finger-pointing, which can be problematic in partnership relationships, she says.
“We still have a way to go,” Christie says. The carrier is trying to build revenue while exiting certain businesses. And it’s also fighting a perception issue.
“For those that think of us still as a sub-sea cable wholesale provider and not an enterprise service provider, that’s a little risky” for Global Crossing going forward, he says. “It will take some time to clarify to the industry that this is what we are and to map our growth based on that. It won’t happen tomorrow, but we didn’t kill ourselves to hang on to this asset the last two and a half years to let it go.”
