Job 1 at Global Crossing: Hanging On to Customers

By KAREN KAPLAN

March 14, 2002 12 AM PT

TIMES STAFF WRITER

Creditors, shareholders and employees of Global Crossing Ltd. all have suffered since the company filed the fourth-largest bankruptcy in U.S. history. But customers of the struggling telecommunications provider say it has been business as usual since the financial meltdown in January.

“Everything’s running the same as it was,” said Paul Pitts, senior vice president of operations, planning and engineering for Nuvox Inc., a Missouri company that buys communications services from Global Crossing and other vendors and resells them to small and medium-sized businesses.

KB Toys hired Global Crossing last year to build a frame relay network so that 1,250 of its stores could authorize credit card purchases and communicate with the company’s headquarters in Pittsfield, Mass. The network went live before the holiday shopping season and has operated smoothly ever since.

“It has not missed a beat since they filed” for bankruptcy, said Steve Raimer, KB’s director of network services and emerging technologies.

Keeping customers such as Nuvox and KB Toys satisfied is more crucial than ever for Global Crossing.

Angry creditors, who are owed about $12 billion, and disgruntled shareholders, whose stock now is essentially worthless, can’t inflict much harm on Global Crossing, because it is operating under the protection of the U.S. Bankruptcy Court in New York while it attempts to restructure.

But customers could complicate that task if they abandon the company now, when it needs to cling to all the revenue it can.

“They don’t want to create a self-fulfilling prophesy by having visible cases of customers defecting,” said Roger Wery, director of the communications group at PRTM, a technology consulting firm in Mountain View, Calif.

The loss of high-profile customers--even just a handful of them--could encourage others to abandon Global Crossing, triggering the telecom equivalent of a run on the bank.

Steep staffing cuts also could spook customers, because it takes a small cadre of engineers and technicians to tend the network and keep it running. Analysts and customers say that so far, the company has protected the ranks of its technical employees even as it slashes jobs in sales and administration.

Last week, Global Crossing said it would eliminate an additional 1,600 positions and close 71 offices in an attempt to reduce its operating expenses by 40%.

Global Crossing Chief Executive John Legere said the cuts were targeted to preserve its relationships with current customers and encourage them to stay on board.

“We’re going to focus much more on retention and growth of our existing customers,” he said.

Company executives also are lobbying customers to keep them on board. Legere himself has made as many as 20 calls a day to reassure worried customers.

“Just the mere communicating constantly with your customers, taking away the uncertainty, has given us a retention rate that is in line with our business plan,” he said.

Robert Gregor, manager of voice communications in the information services division at the University of Pittsburgh Medical Center, said Global Crossing called within 30 minutes of the bankruptcy filing Jan. 28 to make sure the hospital’s network backbone and long- distance service were working properly.

“They offered to set up a call with John Legere and our chief information officer,” Gregor said. “Their regional V.P. came out and met with our people. I was totally shocked about how open they were.”

Global Crossing executives also called NBC News Channel President Bob Horner to assure him that the company’s digital transport network would be capable of transmitting daily video programming of the Winter Olympics from Salt Lake City to stations around the country.

“It was absolutely business as usual,” Horner said. “Everything went exactly as planned.”

The ease with which Global Crossing’s infrastructure has operated during bankruptcy comes as little surprise to those who understand how networks work.

The difficult part is getting them built. But once all the thin strands of glass that make up Global Crossing’s worldwide fiber-optic network are in the ground or underneath the ocean floor, the expense of keeping it running is comparatively minor.

“Other than them shutting off the electricity, it’ll run,” Gregor said. The University of Pittsburgh Medical Center has boosted the amount of services it buys from Global Crossing since the bankruptcy filing, Gregor said.

At the same time, the hospital is drafting a plan in case the company is unable to provide service in the future. Gregor has stepped up talks with other vendors to make sure they could quickly fill any gap created by a potential Global Crossing meltdown.

Should the network fail, KB Toys would revert to the analog dial-up network it just replaced. That would mean credit card approvals would take 18 to 20 seconds each, three to five times longer than they now take, Raimer said.

Several members of the Associated Communications Cos. of America, which buy services from Global Crossing at wholesale rates and resell them to their customers, are thinking about switching to other, less risky suppliers, said President Mike Newkirk.

“We have a responsibility to not wait until the last minute and cause disruption to our customers,” he said.

Switching providers is more of a hassle than a technical challenge and could tie up half a dozen people for two or more weeks.

“They have to redo something that’s already been done,” said Newkirk, who also is president of BTI Telecom Corp. in Raleigh, N.C. “It’s an administrative burden on our part to absorb that time-consuming task of writing orders and testing and accepting circuits.”

Such hassles may be less likely now that financiers are expressing interest in Global Crossing. A bidding war could reassure customers that the company’s network will remain intact. Indeed, two Los Angeles-based buyout firms--Gores Technology Group and Platinum Equity--said last week that they planned to make offers.

An additional 40 potential suitors also have been examining the company’s books, Legere said.

“If there’s a robust infusion of capital, that will probably reassure the customers,” analyst Wery said. Otherwise, he said, “you may have another Excite@Home,” a reference to the high-speed Internet service provider that shut down this year. “The signals sent to the market will be critical.”

Times staff writer Elizabeth Douglass contributed to this report.

(BEGIN TEXT OF INFOBOX)

Global Customers

Global Crossing has nearly 100,000 customers, and most of them have been unaffected by the company’s massive bankruptcy filing. Here are Global Crossing’s largest contracts, by dollar value:

Amount

Customer Contract (in millions)

British Virtual private network $250

government for more than

embassies and consulates 200

Computer Hosting network on

Sciences optical-fiber backbone 150

Cable & Capacity connecting

Wireless 18 European cities 100

Level 3 Capacity on

Communications transatlantic fiber network 100

Ireland’s Link to Global’s