As Global Crossing rumbles ahead with financial restructuring and plans for new ownership, the way seems dotted with potholes.

The beleaguered carrier's spiral into Chapter 11 was nothing short of spectacular (see GlobalX: The Burst Bubble and Winnick: I'll Cough Up $25M). As it pursues its reorganization plan, introduced last year (see Court OKs GlobalX Reorg Plan), the carrier continues to attract government and media attention.

In the latest development, Global Crossing's plan to get a buyer once it emerges from bankruptcy (a plan the court already has approved) has tongues wagging again.

Originally, Global Crossing had two potential acquirers willing to take the company over once it's back on its feet: Singapore Technologies Telemedia Pte. Ltd. (STT) and Hutchison Whampoa Ltd. (Hong Kong: 0013). But a flap over Hutchison Whampoa's ties to China's government seemed to threaten the requisite approval of the U.S. Treasury's Committee on Foreign Investments in the United States (CFIUS).

Apparently, some in the U.S. government didn't want the sale to go forward, since Whampoa is run by Hong Kong business mogul Li Ka-shing. Various news sources reported the company and Ka-shing are closely associated with China's Communist government. Putting U.S. network assets in Whampoa's hands would therefore be a putative security threat.

Global Crossing sought help with getting the necessary approvals by enlisting defense advisor Richard Perle, but that led to a kerfuffle in its own right (see Global Crossing's Pal Perle Backs Off and Pentagon Pal Perle Gets GX Paycheck).

Now, STT has gone solo as the proposed acquirer of the carrier's assets (see STT Grabs Hutch's GlobalX Stake). Under terms of the contract between STT and Whampoa, the latter pulled out and STT upped its investment in Global Crossing on April 30, 2003, from $125 million to $250 million. That means that STT will own 61.5 percent of the international carrier.

Global Crossing expects no other bids for the network. The CFIUS procedure is confidential, but it typically takes 30 days, with 45 more days tacked on for deeper investigation and another week or so beyond that if presidential approval is needed.

It's tough to tell if all that will be necessary in this case. After all, Singapore is one of the leading trade partners of the U.S., and a free-trade agreement between the two countries was signed this week by President Bush and Singapore Prime Minister Goh Chok.

But yesterday, Democratic Rep. Edward Markey of Massachusetts told Reuters the sale to STT would cross U.S. interests because STT's ownership includes the government of Singapore. STT is owned by Singapore Technologies, which in turn is owned by Temasek Holdings, which manages the Singapore government's direct investments. Markey's position, confirmed by his office today, is that the U.S. shouldn't be put in a position to compete with Singapore's government interests.

Spokeswomen for Global Crossing and STT say they don't anticipate any problems, despite Markey's objection. The proposed transaction is in the public interest and supported by U.S. policies and precedents, they say. STT acts autonomously from Temasek, which is removed from its day-to-day functioning.

Some analysts are puzzled by the politics. "I've often found these matters of international affairs and national security to be rather elusive and somewhat mysterious," says Frank Barbetta, global carriers research director at Probe Research Inc. If there are issues with corporations based in Hong Kong and China, he says, it's not apparent to all the U.S. companies seeking business and investing there. He's puzzled by Markey's position.

At least one other source thinks the latest installment in Global Crossing's drama may be much ado about very little. "If there are no other bids, the strategic value of the network is questionable," says Tom Nolle, president of CIMI Corp. The fiber assets of Global Crossing are probably useful, but not compellingly useful, he says. The equipment's probably leverageable. But given that it hasn't been profitable, Nolle has doubts that Global Crossing will be big threat to competition, let alone national security.

Still, Global Crossing's prospects are being watched by quite a few analysts, who predict that its reemergence on the telecom scene could generate pricing pressure for other carriers, at the very least (a view not shared by Cable & Wireless -- see C&W: Chapter 11 is Good for Business).

Despite the setbacks, Global Crossing seems bent on its comeback. According to its latest financial report, the carrier has shown progress (see GlobalX Reports March Results). Consolidated revenues continue in the $200 million range per month, and net loss is down sequentially. But it's not clear yet when the company will get out of Chapter 11. What's more, Securities and Exchange Commission (SEC) investigations continue into various aspects of the company's financial reporting.

— Mary Jander, Senior Editor, Light Reading