Janurary 2006 - The crunch came for the C2C submarine cable business in October 2005, when major shareholder SingTel announced that the network had been put up for sale by its receivers. Expressions of Interest (EoIs) had been called for the acquisition of all the issued shares of C2C.
SingTel held 59.5% of C2C. The business had been placed in receivership by its creditors as part of an effort to restructure its US$650 million debt. By December 2005, the receivers reported that they had identified a bid that was acceptable and were going through a process to close the transaction. The identity of the bidding party or parties was not made available.
The C2C cable, owned by SingTel subsidiary, C2C Pte Ltd, has presented a sorry tale of undersea infrastructure investment. SingTel had this fibre optic submarine cable network installed in 2001/2002 at a cost of around US$2 billion. The cable links Singapore to China, Hong Kong, Japan, South Korea, Taiwan and the Philippines. The network, with a design capacity of 7.68Tb/s, was launched with an initial capacity of 160Gb/s.
Entering the market after the global telecom market downturn, SingTel’s strategy with C2C was to introduce a modified service model. Unlike traditional submarine cable systems in Asia that provided shore-to-shore connectivity, C2C customers were to be offered the opportunity to purchase capacity on direct links to the various major business centres in Asia and the US from the company and its landing parties. (Hence the name C2C, or City to City.)
Apart from SingTel, C2C’s other investors included Globe Telecom of the Philippines, South Korea’s GNG Networks, Hong Kong’s iAdvantage, Japan’s KDDI-SCS, Taiwan’s New Century Infocomm Co and US-based Tycom Asia Networks, as well as US venture capitalist Norwest Venture Partners.
Following network launch in 2002, the operator struggled to sign a critical mass of service contracts. By early 2003, SingTel was reporting that the C2C business had failed to reach the revenue target required under its US$650 million secured financing facility. C2C subsequently entered into talks with its bankers to restructure the debt. In May 2003, SingTel reported that it had written off the cost of its investment in the C2C cable operation. By the start of 2004, SingTel was preparing to inject US$225 million into C2C as part of a plan to restructure the debt. Whilst the move was not expected to hurt SingTel’s balance sheet, the wisdom of injecting money into a business that had been hit hard by cut-throat competition and overcapacity was questionable.