Excerpts: Frontier Corporation Def 14A.

  • As you may know, on March 16, 1999, Frontier entered into a merger agreement, which was amended on May 16, 1999, with Global Crossing Ltd. and a subsidiary of Global Crossing pursuant to which Frontier will become a wholly owned subsidiary of Global Crossing. The purpose of this special meeting is to adopt the merger agreement and approve the merger transaction described in the merger agreement.
  • Sales revenue and deferred revenue. Customers may enter into CPAs to purchase an IRU in units of capacity on any of Global Crossing’s fiber optic cable systems. The purchase price for such capacity is non-refundable once the applicable segment purchased is RFS. The IRU purchased entitles the customer to all rights and obligations of ownership of the capacity for a period of 25 years after the system RFS date.
  • Where available on a specific system, Global Crossing’s CPAs generally provide that the system will have self-healing ring capability, which means that, in the event of interruption, capacity on any segment of a system will be instantaneously restored either on another system segment or within the same segment so that the same point-to-point connectivity is maintained.
  • Revenues from the sale of capacity are recognized in the period that the rights and obligations of ownership transfer to the purchaser, which occurs when (1) the purchaser obtains the right to use the capacity, which can only be suspended if the purchaser fails to pay the full purchase price or fulfill its contractual obligations, (2) the purchaser is obligated to pay OA&M costs and (3) the segment of the system related to the capacity purchased is available for service.
  • Customers who have entered into CPAs for capacity have paid deposits toward the purchase price, and such amounts have been included as deferred revenue in the consolidated financial statements. In some CPAs, customers who have purchased capacity on systems prior to the date the system has self-healing ring capacity have contractually required full self-healing ring capability as a legal condition which, if not satisfied, would enable them to terminate the CPA and requires Global Crossing to refund capacity payments.
  • During the year ended December 31, 1998, Global Crossing executed commitments with its customers to purchase capacity on its systems plus the sale of dark fiber on PEC totaling $911 million, bringing the total since inception to $1,052 million. Of this amount, Global Crossing recognized revenues of $418 million on sales of capacity relating to AC-1 for the year ended December 31, 1998, in addition to revenues from operations and maintenance services of $6 million. The remaining $634 million of capacity sales has not yet been reflected as revenue in the consolidated financial statements because either the segment has not reached RFS or the purchaser has not obtained the right to use the capacity. During the year ended December 31, 1998, Global Crossing entered into CPAs with 33 international telecommunications carriers and sold approximately 35% of the sales capacity of 512 circuits on the AC-1 system.

Source: Frontier Corporation