LEGERE NOTES

Just what did Global Crossing CEO John Legere mean when he told Telephony two weeks ago that the company had been subject to a “competitive bidding process”? What did he mean when he said bidders felt “secure” and were only interested in “certain parts”? The Global Crossing bankruptcy auction, often postponed, is now scheduled for this Wednesday. Assuming Legere's comments had hidden meaning, here's one guess how the auction might turn out:

News reports last week suggested that Hutchison Whampoa and STT, which withdrew a joint $750 million bid for 79% of Global Crossing last spring, were close to filing another bid — but at roughly half the previous offer's value. The news drew shortsighted observation that telecom's continuing market woes, along with the perception that other bidders were uninterested, had caused Global Crossing to become further devalued.

However, at least one news report suggested the new bid covers a smaller piece of the company — about 62%. If that's true, the original bid looks less like a stalking horse and more like a first draft that's since been re-plotted — perhaps as a bid for Asia Global Crossing and other assets.

Meanwhile, other parties are interested in Global Crossing, such as Level 3 Communications, which has a fresh allowance from Warren Buffet to spend on acquisitions. Level 3 wouldn't want all of Global Crossing but probably wants some of its 100,000-mile fiber-based IP network, especially after Level 3's recent bid for Williams Communications was rebuffed.

Level 3 also is a likely suitor for Global Crossing's U.K. assets, since it already has strong market presence in the U.K. and stands to be the main beneficiary if Global Crossing is eliminated as a competitor.

That leaves Global Crossing's voice assets, a conferencing business and assets in Latin America.

Gores Technology and Platinum Equity have been rumored to be joint bidders for Global Crossing. As turnaround firms, they would seem to be more closely aligned toward promising businesses such as conferencing rather than the stormy fiber capacity business.

We can't figure out where Latin America would come into play, but can anyone?

It's unlikely that Global Crossing will emerge from bankruptcy independently. Global Crossing, like most bankrupt firms, will leave existing shareholders out of the picture while it methodically divides the company in a piecemeal sale. WorldCom should take note; it will probably have to undertake a similar plan in the coming months.

Either that, or maybe Legere meant something else entirely.