1061322--3/4/2009--GLOBAL_CROSSING

related topics

{product, market, service}

{operation, international, foreign}

{debt, indebtedness, cash}

{system, service, information}

{regulation, government, change}

{regulation, change, law}

{stock, price, share}

{stock, price, operating}

{acquisition, growth, future}

{financial, litigation, operation}

{condition, economic, financial}

{operation, natural, condition}

{tax, income, asset}

{property, intellectual, protect}

{loan, real, estate}

{provision, law, control}

{control, financial, internal}

{investment, property, distribution}

Cautionary Factors That May Affect Future Results We face a number of risks related to current global economic conditions and the severe tightening in the global credit markets. We incurred substantial operating losses in 2008 and will continue to experience negative cash flows in the short term. We may not be able to achieve anticipated economies of scale. The sale of IRUs and similar prepayments for services are an important source of cash flows for us. Access vendors could force us to accelerate payments to them, which would adversely impact our working capital and liquidity. The covenants in our debt instruments limit our financial and operational flexibility. Our international corporate structure limits the availability of our consolidated cash resources for intercompany funding purposes and reduces our financial restructuring flexibility. We cannot predict our future tax liabilities. If we become subject to increased levels of taxation or if tax contingencies are resolved adversely, our results of operations could be adversely affected. Our revenue and operating results may vary significantly from quarter to quarter due to a number of factors, many of which are outside of our control. Our rights to the use of the fiber that make up our network may be affected by the financial health of our fiber providers. We may not be able to continue to connect our network to incumbent carriers networks or maintain Internet peering arrangements on favorable terms. The Network Security Agreement imposes significant requirements on us. A violation of the agreement could have severe consequences. It is expensive and difficult to switch new customers to our network, and lack of cooperation of incumbent carriers can slow the new customer connection process. The operation, administration, maintenance and repair of our systems require significant expenses and are subject to risks that could lead to disruptions in our services and the failure of our systems to operate as intended for their full design life. Recent capital expenditure levels may not be sustainable. Intellectual property and proprietary rights of others could prevent us from using necessary technology. We have substantial international operations and face political, legal, tax, regulatory and other risks from our operations in foreign jurisdictions. We are subject to the Foreign Corrupt Practices Act (the FCPA ), and our failure to comply with the laws and regulations thereunder could result in penalties which could harm our reputation and have a material adverse effect on our business, results of operations and financial condition. We are exposed to significant currency exchange rate risks and our net loss may suffer due to currency translations. Many of our most important government customers have the right to terminate their contracts with us if a change of control occurs or to reduce the services they purchase from us. The prices that we charge for our services have been decreasing, and we expect that such decreases will continue over time. Technological advances and regulatory changes are eroding traditional barriers between formerly distinct telecommunications markets, which could increase the competition we face and put downward pressure on prices. Many of our competitors have superior resources, which could place us at a cost and price disadvantage. Our selection of technology could prove to be incorrect, ineffective or unacceptably costly, which would limit our ability to compete effectively. Our operations are subject to regulation in each of the countries in which we operate and require us to obtain and maintain a number of governmental licenses and permits. If we fail to comply with those regulatory requirements or obtain and maintain those licenses and permits, including payment of related fees, if any, we may not be able to conduct our business. Moreover, those regulatory requirements could change in a manner that significantly increases our costs or otherwise adversely affects our operations. Terrorist attacks and other acts of violence or war may adversely affect the financial markets and our business and operations. We have a very substantial overhang of common stock and a majority shareholder that owns a substantial portion of common stock and securities convertible into our common stock. Future sales of our common stock could cause substantial dilution and future acquisitions by our majority shareholder will decrease the liquidity of our common stock, each of which may negatively affect the market price of our shares and impact our ability to raise capital. A large number of freely tradable shares of our common stock will be paid to employees in 2009 in connection with incentive compensation arrangements, and sales of such shares could significantly affect the market value of our common stock, particularly in the short term. Federal law generally prohibits more than 25% of our capital stock to be owned by foreign persons. ST Telemedia is our majority stockholder. Economic and political conditions in Latin America pose numerous risks to our operations. Inflation and certain government measures to curb inflation in some Latin American countries may have adverse effects on their economies, our business and our operations. We are exposed to significant contingent liabilities, including those related to Impsat, that could result in material losses that we have not reserved against. Our real estate restructuring reserve represents a material liability, the calculation of which involves significant estimation.

Full 10-K form ▸

1061322--3/4/2009--GLOBAL_CROSSING_LTD