Fujitsu Scores Massive FLAG Deal

Fujitsu wins FLAG Telecom's $1.5B subsea NGN deployment and a capacity upgrade at Pacific Crossing

September 3, 2007

3 Min Read
Fujitsu Scores Massive FLAG Deal

Fujitsu Ltd. (Tokyo: 6702; London: FUJ; OTC: FJTSY) has landed a monster $1.5 billion next-generation subsea network buildout deal from FLAG Telecom Ltd. , the two companies announced Monday. (See Fujitsu Wins $1.5B FLAG Deal.)

That's not Fujitsu's only new subsea deal, as it has also won a capacity upgrade contract from transpacific network operator Pacific Crossing Ltd. .

But it's the FLAG deal that's making the headlines, as Fujitsu has snapped up the entire rollout against fierce competition.

FLAG, part of India's Reliance Communications Ltd. (RCom) , announced its plans in December to lay an IP network over an additional 50,000 kilometers of submarine cable in four systems around the world. (See FLAG Announces NGN.)

The buildout will nearly double the length of FLAG’s global network from 65,000 km to 115,000 km, and extend its reach to 60 countries.

Construction on the network is expected to be completed by early 2010 and will allow Reliance to compete for a larger share of the enterprise data market. The carrier last month acquired U.S.-based Ethernet service provider Yipes Enterprise Services Inc. , which will extend its international reach using FLAG Telecom's network. (See Reliance Bags Yipes for $300M.)

According to the statement released by FLAG today, Fujitsu has been awarded supply contracts for the networks connecting India to Hong Kong and Egypt to France, with possible interconnection to other countries in those regions. It has also received a so-called "letter of intent" for the systems in East Africa and the Pacific and will receive the supply contracts at a later date.

Fujitsu’s win is a blow to rival Alcatel-Lucent (NYSE: ALU), which deployed FLAG’s Falcon cable system connecting India with the Middle East, as well as its cables in the Atlantic and North Asia. (See FLAG Picks Alcatel for Subsea Cable.)

Fujitsu also beat out Tyco Electronics Ltd. (NYSE: TEL) and NEC Corp. (Tokyo: 6701). The equipment vendor's share price closed 1.26 percent higher at 801 yen on the Tokyo exchange.

The Japanese firm has also signed a deal to help Pacific Crossing cope with the continuing rapid growth in data traffic volumes across the Asia/Pacific region. (See Fujitsu Wins PC-1 Deal.)

Under the agreement, Fujitsu will add 200 Gbit/s of capacity on each of the four segments of Pacific Crossing's PC-1 cable connecting Japan and the U.S. That will boost the lit capacity of PC-1 to at least 390 Gbit/s on each segment by the first quarter of 2008. The deal includes an option for an additional 100 Gbit/s by the second quarter. Pacific Crossing raised $50 million in January to help finance the upgrade. (See PCL Raises $50M.)

The Asia/Pacific region has seen plenty of subsea activity in recent months: Alcatel-Lucent won a deal to upgrade Southern Cross Cables Ltd. 's network linking Australia, New Zealand, and the U.S.; Fujitsu was awarded a contract to upgrade the Japan-US Cable Network; a group of 17 carriers and government bodies has announced plans to build a $500 million Asia-America Gateway; and Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) selected Alcatel-Lucent to lay a new submarine cable network directly linking Sydney to Hawaii. (See Southern Cross Picks AlcaLu, Fujitsu Wins Japan-US Cable Deal, Carriers Plan $500M Transpacific Link, Telstra Picks ALU for Subsea.)

— Nicole Willing, Reporter, Light Reading

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