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GCX lives again as 3i Infrastructure announces $512m acquisition

Carl Grivner NEW.jpg

UK investment company 3i Infrastructure has completed its US$512 million acquisition of 100% of the formerly bankrupt carrier Global Cloud Xchange (GCX).

3i Infrastructure, which is capitalised at just over £3 billion on the London Stock Exchange, first announced its intention to buy the business in November 2021. The price is unchanged since that announcement, thoughg 3i said acquisition debt it raised in March has reduced its actual spend to $377 million.

The deal was completed on Friday and announced in London at 07:00 UK time on Monday.

Carl Grivner, who has been CEO since July 2020, when he helped then bankrupt GCX to find a new owner, told Capacity: “3i wants to build a global platform. GCX’s subsea network is a key piece of the infrastructure that allows data to flow.”

At the same time the revived GCX wants to create a managed data platform for enterprise customers.

Grivner confirmed in an interview with Capacity hours before completion that he has dropped the plans formed by the old GCX management – back when it was owned by India’s Reliance Communications – to build a new cable, named Eagle, to run from China to India and then from India to the Middle East and Europe.

That would have stretched more than 16,000km, then CEO Bill Barney told Capacity in 2017. Barney stated at the time his aim that Eagle would be in operation by 2020, and he even got as far as asking for expressions of interest from the subsea industry in building the cable, saying he’d talked to European, Japanese and US suppliers.

“I definitely inherited the plans and I disinherited them quickly,” Grivner told Capacity. “Building independent capacity does not make a hell of a lot of sense.” He first told Capacity that the Eagle plan was dead in an earlier interview, in mid 2021.

His vision is now to build with partners, he said. “There’s already sufficient capacity being built.” And that is better than “spending $500 million” on GCX’s own cable.

Some of the roles that were intended for the Eagle cable have been taken over by the projected Europe Middle-East India Connect 1 (EMIC-1), announced by Digital 9 Infrastructure last year and due to be managed by Digital 9’s subsea operation, Aqua Comms.

GCX will focus on many of the same routes, Grivner indicated. “You’ve got to follow the data centres,” he told Capacity. “Where are the data centres being built?”

He answered his own question: “India, east and west, and Singapore has become one of the larger players. Australia is also going to be larger, and certainly Japan, Korea.” The US and Canada will continue to be important, he added.

The new GCX will be based in London, Grivner told Capacity. He was due to arrive in London from the US last Friday, he said. Grivner has lived in London before, when he was CEO of Colt Technology Services for five years until May 2020, before heading back to his homeland to work on GCX, which he formally joined two months later.

He’s inherited a company with a complex history. Its oldest infrastructure dates back to 1997, when what was then Nynex, now Verizon, built Flag Europe-Asia from the UK to China and Japan.

Flag is an abbreviation for “fibre optic link around the globe”, and the Europe-Asia section was followed in 2001 by Flag Atlantic-1, running from France and the UK to North America.

There’s also the 2006-era Falcon, a 10,000km cable that runs from Egypt to India via the Gulf. It can be seen partly as a predecessor of the aborted Eagle project.

In total, said 3i Infrastructure in this morning’s announcement, GCX has 66,000km of subsea cables linking 46 countries from North America to Asia, “with a particularly strong position on the Europe-Asia and intra-Asia routes”.

Grivner told Capacity that GCX believes there is still life in its older infrastructure, which can survive “beyond what it was designed for, with an economic life easily running five to seven years from now”.

But he and his colleagues in GCX are focused on new infrastructure, to be built in association with still unnamed partners. “I can’t tell you who they are,” he said. GCX expects that such information will start to emerge “by the end of this year or early next year”.

3i Infrastructure said it is “partnering with GCX’s management team to invest in a leading platform for the sector, with the goal to increase the utilized capacity on GCX’s existing routes as well as to add new routes,

services and customers”.

3i said that “global data traffic demand growth continues to exceed 25% per annum. At the same time, increasing demand for digital transformation is driving demand for global managed network services, with growth estimates approaching 10% per year.”

The new owners said: “3i’s acquisition of GCX will enable additional strategic investment in systems and services to create future value for customers.”

Even before the completion of the deal, 3i Infrastructure was listing GCX as part of its portfolio, saying it represented 9% of its investments.

Other investments include a number of energy companies – in areas such as offshore wind and electricity from waste – but a few digital infrastructure investments. One is DNS:NET, a fibre-to-the-cabinet (FTTC) and fibre-to-the-home (FTTH) network in Berlin, and another is Tampnet, a Norwegian operator of networks to the oil and gas industries in the North Sea and the Gulf of Mexico.

Grivner told Capacity in an interview from the US last week that he is “very excited to be working with the team” at 3i Infrastructure. “My new bosses are excited about this space. We share a vision of growing something on a global scale. They want to work with us on the vision.”

GCX and 3i Infrastructure “have looked at a couple of things” that they could do together, he said, without giving even a hint of detail. 3i wants “to use the experience of the entire management team” at GCX, including its software experience. “This is showing signs of a strong partnership. There is a lot of knowledge in the company,” – meaning knowledge within GCX that 3i Infrastructure wants to use.

Grivner named the 3i people behind the deal to buy GCX as Scott Moseley, managing partner and co-head of European infrastructure, “the visionary behind all this”, and Tim Short, an expert on the origination, execution and debt financing of infrastructure investments.

GCX and 3i Infrastructure first encountered each other “last year when we were both looking at similar investments”, said Grivner, refusing to identify the potential investments of interest that they were considering.

“Then they started discussions about working with us, as one of the few independent platforms in the world, and certainly the largest. The attraction was in looking for something to build. There was a shared vision.”

GCX’s former owner, Reliance Communications – the Indian group, nothing to do with similarly named companies in Australia, the US or elsewhere – has virtually faded from the scene.

It was once one of India’s big mobile operators in a crowded market as well as the owner of GCX and of a set of data centres, but its downfall came after the unrelated Reliance Industries started a super-efficient 4G-only network, Reliance Jio. Unrelated, that is, in the sense that each is run by a different son of the late Dhirubhai Ambani, who founded a polyester company called Reliance in the 1960s and grew it into a multinational conglomerate.

On his death in 2002, the group was split between brothers Mukesh and Anil Ambani, beginning one of the most destructive instances of sibling rivalry in business history.

Anil Ambani’s Reliance Communications (RCom) filed for bankruptcy in February 2019, when its CEO was Barney, also then CEO of GCX at the same time. Barney stepped down from RCom in August 2019 and from GCX in March 2020.

This is not the first time Grivner has taken a job previously held by Barney: back in 2012, when Barney left Hong Kong-based Pacnet, Grivner took over as CEO.

In the three years since RCom’s Indian bankruptcy filing, GCX has gone into Chapter 11 bankruptcy protection, using US law, and emerged again – today – with new, fresh owners.

Meanwhile, in India, Rakesh Gupta, company secretary of RCom, called the 34th meeting of the committee of creditors, to be held in Mumbai last Friday.

 

 

 

Capacity has a video interview with Jim Fagan, GCX chief strategy and revenue officer, conducted at ITW in May, in which he talks about the likely impact of the 3i takeover

 

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