The paltry price netted by TGN's assets probably won't be as great as the revenues such assets could realize in a few years, when more bandwidth-hogging applications are introduced. Tyco spent some $3.4 billion on network construction for the TGN between 2000 and 2002, according to Tyco's annual reports. And the company says the TGN had a pre-tax operating loss of $117 million last year, while the combination of all the other businesses it is exiting had an operating profit of about $55 million. But while Tyco expects to generate "at least $400 million" in proceeds from selling its other businesses, it's not saying what it is asking for TGN. And it didn't return calls for this article. Other recently disposed bandwidth assets give some idea of what TGN might be worth. Global Crossing Holdings Ltd., pending government approval, will sell its network for about 6.25 percent of what it spent to build it. Genuity Inc. (Nasdaq: GENU), however, only got about 2 percent of its investment back.
|Date||Acquirer||Seller||Amount of Transaction||Est. Cost of Building Asset|
|June 2003||CII Communications LLC (controlled by Corvis Corp.)||Cincinnati Bell||$91M||$2.1B|
|Dec. 2001||Cable & Wireless PLC||Exodus||$850M||$2.3B|
|Oct. 2003||Reliance Infocomm Ltd.||FLAG||$207M||$1.2B to $1.6B|
|Feb. 2003||Level 3 Communications Inc.||Genuity||$60M||$3.2B|
|Source: Light Reading Insider's October 2003 report, "Bandwidth Price Revolution"|
— Phil Harvey, Senior Editor, Light Reading