is expected to provide Global Crossing with a strong US infrastructure to complement the fibre network it is building in Europe, Japan, Mexico and America. Ahmed ElAmin reports In nature the pending purchase by Bermuda-based Global Crossing Ltd. of Frontier Corp. would be the equivalent of the mouse swallowing the lion.

Global Crossing yesterday announced a deal to buy Frontier Corp., a much larger US telephone company for about $11.2 billion in stock.

The purchase gives Global Crossing a foothold in the US market where Frontier competes with long-distance phone service providers like AT&T Corp., MCI WorldCom Inc. and Sprint Corp.

Frontier, founded in 1899, also provides local phone service in its home market of Rochester, New York, as well in 31 other states and the District of Columbia.

The combined companies will have revenue of about $4 billion, a stock-market value of nearly $30 billion and more than 8,500 employees.

"The combination of the two companies will create the first owned and operated global Internet protocol-based fibre optic network able to provide customers with integrated worldwide Internet, data, long distance, local telephone and conferencing services,'' a Press release stated.

"It's a very good value for Frontier. It's hard to create a scenario under which a Frontier shareholder would be disappointed here,'' said Eric Strumingher, a telecommunications analyst with PaineWebber.

The merged companies will be two-thirds owned by Global Crossing shareholders with the rest owned by Frontier shareholders.

Global Crossing, with headquarters on Reid Street, Hamilton, has about 200 employees worldwide and is on track to achieve $1 billion in revenue this year.

Frontier had $2.6 billion in revenue last year and boasts over 8,000 employees.

"Merging with Frontier will enable us to greatly accelerate our aggressive growth strategy,'' Global Crossing chief executive officer Robert Annunziata said. "We will now have a strong US infrastructure to complement the IP-based fibre network we are building in Europe, Japan, Mexico, and Central and South America. These are two complementary companies with no overlap, and together we will be ideally positioned to meet the exploding demand for bandwidth to handle Internet, data, video and voice transmissions, and produce outstanding value for our customers, shareholders and employees.'' Mr. Todd Scott, an analyst with ING Baring in New York City, said of Global Crossing: "They're going to continue to have a big wholesale strategy as well as migrating more and more into retail, focusing on businesses, and primarily businesses that are multinational.

"By the time they're done building their network, they're going to be going into every major city in the world and certainly be big enough to be a global player,'' he said. "And Frontier's network in the US is as big as anyone else's.'' Global Crossing has been building a fibre-optic communications network to carry voice and data traffic worldwide. Together, the companies will connect 159 cities worldwide with more than 71,000 miles of fibre-optic cable.

The acquisition has been approved by the boards of both companies but is subject to approval by shareholders and regulatory clearance. The deal is expected to close before October.

Mr. Annunziata is a former top executive at AT&T who became its chief executive just a few weeks ago. Annunziata built Teleport Communications Group before selling the local-exchange carrier to AT&T for $12 billion in 1998.

Global Crossing takes over Frontier Frontier's chief executive, Joseph P. Clayton, will become a vice chairman of Global Crossing.

The takeover of Frontier, which began as Rochester Telephone, ends an 18 months restructuring as the company tried to distance itself from its heritage as a stodgy public utility to more closely resemble other fast-moving, modern communications companies.

Frontier sprouted beyond its roots as a local phone monopoly in Rochester, New York, by buying more than a half-dozen long-distance carriers in the 1990s and becoming one of the nation's top 10 long-distance providers.

Then, in 1996, it paid $500 million for part of a national fibre-optic network being built by Qwest Communications International -- a pittance by today's values.

Frontier competes with long-distance phone service providers like AT&T, MCI and Sprint by serving small and medium-sized businesses. It also provides local phone service in 32 states and the District of Columbia.

Frontier, long seen as a ripe acquisition target, has cut its workforce, sold non-core business and updated its billing system. The No. 5 US long distance company, it also built its data business through the acquisition of GlobalCenter Inc., which provides direct Internet connections, and built an advanced communications network.

Since Clayton first joined the company as president in June 1997 and began its reorganisation, Frontier's stock has soared 122 percent. Analysts said Clayton saved Frontier from extinction and readied it for an acquisition and now Annunziata will be able to grow the combined company more quickly both in the US and internationally.

"As you know, I do nothing but grow and that's where we're going,'' Annunziata said in a conference call with analysts.

Global Crossing has risen from relative obscurity when it launched its initial public offering in August to become a Wall Street darling with marquee talent.

Global Crossing was able to use its high-flying stock, which has risen more than 540 percent since its IPO, to fund the acquisition of the much larger Frontier.

The combined company's cash flow should grow by more than 30 percent annually, Global Crossing's Chief Financial Officer Dan Cohrs said.

Frontier's Clayton said he expects few, if any, job losses because the companies do not have overlapping operations.

Global Crossing is offering $62 a share in stock under certain conditions for each Frontier share, a 40 percent premium over Frontier's closing price on Tuesday of $44.62 1/2 on the New York Stock Exchange. Global Crossing shares fell $5.06 1/4 to $51.50 on Tuesday on the Nasdaq Stock Market.

The offered price depends on shares of Global Crossing trading between $34.56 and $56.78.

Gary Winnick, founder and co-chairman of Global Crossing.

Robert Annunziata, Global Crossing chief executive.

Joseph Clayton, Frontier Corp.'s Chief Executive Officer is shown in this undated photograph. He will become a vice chairman of Global Crossing.