In $11-Billion Deal, Global Crossing to Buy Frontier

Making a move toward becoming a world player in telecommunications, industry upstart Global Crossing Ltd. of Bermuda said Wednesday that it will buy phone company Frontier Corp. for about $11.2 billion in stock.

The deal, the latest in a string of telecom mergers, would create a substantial international competitor with a worldwide fiber-optic network spanning 71,000 miles and the ability to deliver voice and data, including Internet access, and long-distance and local phone service. Together the two companies have $30 billion in assets and annual sales of more than $4 billion.

Rochester, N.Y.-based Frontier is a major phone service provider in the United States, where it competes against AT&T; Corp., MCI WorldCom, Sprint Corp. and others. In addition to offering long-distance and data services, Frontier sells local phone service in its home state and 31 others.

Frontier and Global Crossing executives said the combination would strengthen both firms by expanding their reach.

Frontier, the better-known of the two companies, has made a name for itself as a second-tier player in the industry, with a strong Internet business. Industry analysts have long considered the company a takeover target.

Global Crossing, which has executive offices in Beverly Hills, entered the telecom spotlight a few weeks ago, when the company hired Robert Annunziata as its chief executive. Annunziata founded Teleport Communications Group, a fast-growing phone company that was eventually bought by AT&T.; Until switching to Global Crossing last month, Annunziata was running AT&T;’s business operations.

To date, Global Crossing has been busy building an ambitious undersea fiber-optic network and selling capacity to other telecommunications carriers. The company had no operations in the United States.

“The big missing piece for us was the United States,” said Lodwrick Cook, a co-chairman at Global Crossing. “And you’re not going to be a big player in the telecom business without the U.S. being a big part of it.”

In addition to its domestic presence, Frontier would give Global Crossing the critical back-office systems--such as billing and customer service--that become important for phone companies serving retail customers.

“This is definitely a good deal for Global Crossing,” said Sajai Krishnan, a principal in Booz Allen & Hamilton’s communications, media and technology practice. “Four months back, no one had ever heard of Global Crossing, and now they are a player that is to be considered seriously.”

Global Crossing shares sank $4.38 to close at $47.13 on Nasdaq while Frontier shares rose $5.88 to $50.50 on the New York Stock Exchange.

Under terms of the deal, Frontier shareholders would get $62 for each of their shares if Global Crossing trades between $34.56 and $56.78 before the transaction is completed. The price represents a nearly 40% premium over Frontier’s trading price before the deal was announced.

In addition to the $11.2-billion stock exchange, Global Crossing would assume $1.3 billion in debt. The acquisition is subject to shareholder approvals and antitrust review, but the companies expect the deal to close in the third quarter.