Hamilton, Bermuda, October 1, 1999 - In a letter to shareholders, dated 28 September, GlobeNet Chairman and Chief Executive Officer, Michael Kedar, made the following announcement.
"I am pleased to present to you the unaudited, interim financial statements for the six months ended June 30, 1999 for GlobeNet Communications Group Limited ("GlobeNet"). Revenue for the period increased to $13.1 million, about 14% higher than the comparable period a year ago, while GlobeNet's net loss improved to $0.30 per share from $1.07 per share, last year.
Revenue growth is due primarily to an increase in voice traffic at GlobeNet's wholly owned subsidiary, TeleBermuda International Limited ("TeleBermuda"). TeleBermuda has continued to build its subscriber base, both residential and commercial, and now has about 40% of the market for outbound voice services in Bermuda. Management intends to continue its aggressive pursuit of a larger share of the voice market while augmenting its revenues through increased sales of card products and private lines.
In January 1999, the Minister of Telecommunications ("Minister") mandated reductions in the local access charges paid by international carriers, including TeleBermuda. Historically, local access charges were set at $0.27 per minute for outbound traffic and $0.24 per minute for inbound traffic. Pursuant to the Minister's directive, both outbound and inbound access charges were reduced to $0.15 per minute, effective January 1, 1999 and $0.10 per minute, effective July 1, 1999. These reductions have allowed TeleBermuda to pass along substantial cost savings to its Bermuda customers while improving its own profitability.
Early this year, GlobeNet embarked on an ambitious effort to extend its undersea fiber optic network in the Atlantic region. The extended system, named Atlantica-1, will incorporate GlobeNet's existing BUS-1 system and will include landing points in Brazil, Venezuela, the United States, as well as Bermuda. The system, when complete, will be 22,500 kilometers in length and will be upgradeable to 1,280Gbps of total capacity. The total construction cost of the system is projected to be about $825 million. The first segment from New York through Bermuda to Brazil will be ready for service in September 2000.
GlobeNet, through its newly created subsidiary Atlantica Network (Bermuda) Ltd., intends to pursue a carriers' carrier strategy by selling capacity on the Atlantica-1 system to carriers and internet service providers in the Atlantic region. In addition to offering city-to-city connectivity between North and South American cities, GlobeNet will be able to provide its customers with seamless access to most major European cities through a joint marketing arrangement with an owner of a complementary system. GlobeNet will continue to seek other opportunities to increase the scope of its network and service offerings to carriers.
In June 1999, GlobeNet signed a turnkey, fixed price contract with Alcatel Network Systems ("Alcatel") for construction of the Atlantica-1 system. Financing for the system, totalling $970 million, was raised through a combination of private equity, senior notes and bank commitments. These funds should be sufficient to meet all of GlobeNet's contractual obligations to Alcatel as well as service GlobeNet's debt until construction of the system is complete.
The private equity component of the Atlantica-1 financing, totalling $240 million, was raised from a group of leading U.S. and Canadian telecom investors who bring a breadth of industry knowledge and strategic relationships to the benefit of GlobeNet. These new investors now hold, in aggregate, about 68% of the outstanding common shares of GlobeNet. Management looks forward to working closely with all of its shareholders in continuing to build long-term sustainable shareholder value.
The third significant business strategy that GlobeNet is pursuing, in addition to its carrier business in Bermuda and its Atlantic region carriers' carrier initiative, is the development of e-commerce opportunities in Bermuda. The Government of Bermuda has actively promoted the benefits of Bermuda as a business friendly, offshore location for e-commerce. GlobeNet is currently refurbishing some space in its network operating center in Bermuda to allow it to offer colocation facilities, as well as the required bandwidth, to facilitate e-commerce activities. Management believes that the favorable environment fostered by recently enacted legislation and government policies, combined with the quality telecommunications infrastructure that GlobeNet provides to Bermuda, represents an outstanding opportunity to participate in the global proliferation of e-commerce activity.
Last month, GlobeNet completed a $30 million offer to redeem up to 1.5 million of its common shares, at a price of $20.40 per share. The offer was intended to provide some liquidity to our shareholders who have supported GlobeNet through the early stages of its development. Management will continue its best efforts to create value for all GlobeNet shareholders.
In closing, I would like to acknowledge the significant efforts of the Government of Bermuda in continuing to develop a workable framework for sustained and fair competition in telecommunications services. We are well aware of the many challenges that have faced Government in introducing competition to Bermuda and look forward to an ongoing collaborative approach to resolution of difficult issues.
If you have any questions regarding the attached financial statements, please feel free to contact Greg Belbeck, GlobeNet's Chief Financial Officer, at (905) 470-0583. Thank you for your continued support of GlobeNet."