NTT Com buys Pacific Crossing for $105m

25 May 2009

NTT Communications is to buy 100% of trans-Pacific cable-owner Pacific Crossing for more than $105 million, the company announced today.

A spokesperson said for the Japanese carrier said the firm would pay "more than 10 billion yen" ($105.5 million) for the asset, which has been on the sale block since March.

Pacific Crossing is owned by a group of 20 funds, led by Connecticut-based Strategic Value Partners, who bought in at a valuation of $400 million three years ago.

They are now unwinding their investments because of the sharp fall in valuation, having bet unsuccessfully on a likely shortage of cross-Pacific capacity.

Pacific Crossing was founded in 1999 as part of the bandwidth ramp-up in the late 1990s. It collapsed when the tech bubble burst in 2001.

It owns the 21,000-kilometer, 3.2 Tbps PC-1 network, a ring configuration between the US West Coast and Japan.

"The acquisition of PCL will enable NTT Com to strengthen its trans-Pacific cable capacity and reliability," NTT Com said in a statement.

Alan Mauldin, a senior analyst at research firm Telegeography, said NTT Com\'s acquisition of PC-1 could affect the future of the second phase of TPE cable, now being built.

TPE, invested by all three Chinese carriers as well as NTT Com, KT, Chunghwa Telecom and Verizon, has been planning to construct a Japan-US cable to complement the initial phase that was completed last September.

Mauldin said the acquisition of Pacific Crossing was unusual for an incumbent.

"We\'ve not seen many of the traditional carriers opting to become the sole owner of submarine cables," he said. "NTT clearly expects its capacity demand to rise rapidly and felt this was the most cost-effective way to meet its needs."

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