The company will sell off its hosting and IP solutions businesses for US$125 million. However, the UK giant -- which laid the first cable connecting Australia to the rest of the world back in 1871 -- says it's business as usual down under. Because Cable & Wireless primarily services the "undersea" fibre optic requirements of multinational companies, and the portions of the business being sold off in the U.S. aren't related to those services, there will be no impact on customers locally, according to Cable & Wireless Australia business development manager, James Walker.
"We have a good strong business in Australia," he said. "That is really exclusively global multinationals -- servicing their requirements in Australia... We [will] still retain the CitiGroups and the Reuters of the world."
Until recently Cable & Wireless owned a 54 percent stake in Optus until it was taken over by Singapore's SingTel for AU$14 billion in 2001. It currently owns cables which provide around 5 percent of international voice traffic and an estimated 15 to 20 percent of IP traffic in and out of Australia. The company's annual turnover in Australia is around US$100 million.
"The contracts that we have with [our] customers are global ones that we've held for a long time," Walker explained. "We don't really see that as affecting our business materially in Australia. We're actually very happy with how things have been going."
In fact, according to Walker, the filing of chapter 11 petitions is simply a formality.
"Chapter 11 is only a construct to allow a company to pass its assets through to another company... the issue for us in the U.S. is when we bought Exodus [Communications] there was a lot of contingent liability in all the data centres," he said.
The contingent liabilities were present in contracts such as long-term leases signed by Exodus on data centre sites.
As for why the company chose to sell off its U.S. business? "We were losing a million U.S. a day at the time [of the decision to restructure]... we just wanted to get the cash drain out of the company," Walker said.
