UPDATE: France Télécom Details International Plans

PARIS (01/27/2000) - With just one shareholder to report to, network operator Global One Communications Inc. will become a more agile, more profitable operation, said Michel Bon, chairman and chief executive officer of the company's new owner, France Télécom SA, at a press conference this morning.

For Global One, he said, "Having three owners introduced a certain number of costs, and decisions took a long time. We think having one owner will speed things up." And for France Télécom itself, the acquisition will remove "a fairly large question mark" over the group's international strategy.

France Télécom will acquire outstanding shares in Global One from Sprint Corp. and Deutsche Telekom AG, its two former partners in the joint venture, for $3.88 billion, and assume $464 million of debt. Added to its historical investment in the company, said Bon, this meant that Global One's value to France Télécom was some $5.39 billion.

Publicly quoted competitors such as Infonet trade for 20 times their turnover, said Bon, while France Télécom had paid just 4.9 times turnover for Global One.

Conceding that the businesses were not strictly comparable because Global One was not publicly quoted, Bon said this nevertheless indicated that France Télécom had "bought Global One at a reasonable price -- otherwise we wouldn't have bought it."

For the money, France Télécom will gain a global network with ATM (Asynchronous Transfer Mode)and Frame Relay nodes in 44 countries, and IP (Internet Protocol) nodes in 40, serving some 30,000 business customers, according to Bon.

He said that bringing the networks of the two companies together would save money, and that a combination of these savings, and revenue growth, would result in the Global One breaking even in EBIT (earnings before interest and tax) terms in 2002.

Historically, Global One has for years been a money-losing venture for all three partners.

"We know Global One is losing money, it has shown up in our accounts after all," said Bon.

Despite the losses, France Télécom plans to retain all of Global One's existing 3,800 employees, said Bon. "We have no plans for redundancies," he added.

And the losses may not necessarily be a bad thing, quipped Bon.

"In the new economy, it seems the more money you lose, the more people give you," he said. "But that's not our ambition for Global One. We belong to the old school of thought that expenses should be less than revenues."

Despite coming from such a well-to-do background, Global One wasn't exactly spoiled in its early years. "One of the problems of Global One was that its parents didn't bring it many customers," said Bon. Some 12.5 percent of the company's turnover came from customers of Sprint, with another 5 percent each from customers of France Télécom and Deutsche Telekom.

While Deutsche Telekom would be bringing the company no new customers, neither will it be poaching existing ones -- for the time being, at least. Sprint and Deutsche Telekom have agreed to continue to support Global One's customers in their own territories for the next two years.

By then, France Télécom must have another solution in place for serving these countries. "If it seems the best strategy is to buy another network then that's what we will do," said Bon.

In an attempt to put France Télécom's position in the German market into perspective, he made a jab at former partner Deutsche Telekom. Global One's revenue in Germany, he said, was greater than that in France of Siris, a French network operator recently acquired by Deutsche Telekom.

Closing the press conference, Bon introduced Daniel Caclin, currently executive director of France Télécom's data transmission division. Bon said that Caclin would be named CEO of Global One at France Télécom's next board meeting.

France Télécom, in Paris, can be reached at +33-1-4444-2222, or on the Web at http://www.francetelecom.fr/

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