3i Infrastructure completed its $512 million acquisition of insolvent former operator Global Cloud Exchange (GCX) in September. 3i Infrastructure, part of UK private equity firm 3i Group and with a market capitalization of just over £3 billion on the London Stock Exchange, announced plans to buy GCX in November 2021.

The price paid by 3i has not changed since its announcement, but it said acquisition debt raised in March reduced its actual spending to $377 million.

Carl Grivner has been GCX’s chief executive since July 2020, during which time he helped the carrier find a new owner. Now that the business is out of harm’s way, thanks to 3i’s investment, he is looking to the future. “3i wants to build a global platform,” says Grivner. “GCX’s underwater network is a key piece of infrastructure that keeps data flowing.”

Grivner says GCX also intends to build a managed data platform for enterprise customers and confirms that it has abandoned plans by former GCX management, Reliance Communications in India, to build a new cable between China and Europe. In 2017, Bill Barney, then CEO of GCX, told Capacity that the carrier needed to build a 16,000 km cable named “Eagle” between China, India, the Middle East and Europe, which would be operational. by 2020. But in mid-2021, Grivner said Eagle was dead, and now he confirms it. “I definitely inherited the blueprints, and I quickly disinherited them. Developing an independent ability doesn’t make much sense,” he says.

Eagle Replacement

Grivner says his vision for the relaunched GCX is to build with partners.

“There’s enough capacity already being built,” he says, explaining that it’s better for GCX to use those resources than to “spend $500 million” building its own cable.

Some of the roles Eagle was set to fill will be taken over by Europe Middle East India Connect 1 (EMIC-1), which was announced by Digital 9 Infrastructure last year and will be managed by Digital 9’s subsea operation Aqua. Coms. GCX will focus on many routes from EMIC-1, Grivner said. “You have to follow the data centers. Where are the data centers built? »

He answers his own question: “India, east and west. And Singapore has become one of the biggest players. Australia is also going to be bigger, and certainly Japan, Korea,” adding that the United States and Canada will continue to be important.

GCX will now be based in London, says Grivner. He lived in London as CEO of Colt Technology Services, before returning to his native US to work on GCX, which he officially joined two months later.

Grivner inherited a company with a complex history. GCX’s oldest infrastructure dates back to 1997, when Nynex (now Verizon) built Europe-Asia FLAG (“FLAG” being short for “fiber optic link around the globe”) between the UK , China and Japan. This cable was followed by Flag Atlantic-1 in 2001, running from France and the United Kingdom to North America. GCX also completed Falcon in 2006. Something of a predecessor to the aborted Eagle, it is a 10,000 km cable built in 2006, linking Egypt and India via the Gulf.

When confirming the acquisition of GCX, 3i Infrastructure said GCX had 66,000 km of submarine cables connecting 46 countries between North America and Asia, “with a particularly strong position on the routes Europe-Asia and intra-Asia”.

A new life for the old fiber

Grivner says this older infrastructure still has potential and can survive “beyond what it was designed to do”, and will maintain “an easily functioning economic life in five to seven years.” GCX will now focus on building new infrastructure with as yet unknown partners.

“I can’t tell you who they are,” he told me. But GCX expects that information to appear “by the end of this year or early next year.”

3i Infrastructure, which is registered in Jersey but is based 300 meters from Buckingham Palace, said it is “partnering with the management team of GCX to invest in an industry-leading platform, with the aim to increase the capacity used on existing GCX routes as well as to add new routes, services and customers”.

The investment firm said, “Global data traffic demand growth continues to exceed 25% per year. At the same time, growing demand for digital transformation is driving demand for global managed network services, with growth estimated at nearly 10% per year.”

The new owners of GCX said “the acquisition of GCX will enable additional strategic investments in systems and services to create future value for customers.”

Even before the deal closed, 3i Infrastructure listed GCX in its portfolio, saying the company represented 9% of its investments. 3i’s other investments include a number of energy companies in areas such as offshore wind and power from waste, but little in digital infrastructure.

One is DNS:NET, a fibre-to-the-office and fiber-to-the-home (FTTH) network in Berlin, and another is Tampnet, the Norwegian network operator for offshore oil and gas companies in North and in the Gulf of Mexico.

Shared vision

Grivner says he is “very happy to work with the team” at 3i Infrastructure. “My new bosses are excited about this space. We share a vision to grow something globally. They want to work with us on the vision.

GCX and 3i “looked at a few things” they could do together, he says. Grivner declines to give even a hint of detail, except that 3i wants to “use the experience of the entire management team” at GCX, including their software experience.

“It shows signs of a strong partnership,” says Grivner. “There is a lot of knowledge in [GCX].”

Grivner says the people at 3i behind the GCX acquisition were Scott Moseley, managing partner and co-head of European infrastructure, and Tim Short, an expert on investment origination, execution and debt financing. in infrastructure.

GCX and 3i first met “last year when we were both looking at similar investments,” says Grivner, declining to identify these potential investment targets. “So [3i] started discussions about working with us, as one of the few independent platforms in the world, and certainly the largest. The appeal was to look for something to build. There was a shared vision.

sibling rivalry

Meanwhile, GCX’s former owner, Reliance Communications, has almost entirely disappeared from the scene.

Formerly, Reliance Communications (RCom) was one of India’s leading mobile operators. Its downfall began when Reliance Industries launched Reliance Jio, a super-efficient 4G-only network.

RCom and Reliance Industries are unrelated except that each was headed by a son of the late Dhirubhai Ambani.

Ambani founded Reliance Industries in the 1960s and grew the polyester business into a multinational conglomerate. When he died in 2002, Reliance Industries was split between his sons, Mukesh and Anil Ambani.

It sparked one of the most destructive examples of sibling rivalry in business history. It culminated in the bankruptcy of RCom.

In May 2018, RCom ended up in Indian bankruptcy courts and was declared insolvent in February 2019. At the time, Bill Barney was CEO of RCom and GCX.

He resigned from RCom in August 2019. He then left GCX in March 2020, and Grivner, who was already a GCX board member at the time, after leaving Colt, stepped into the role of Barney.

Curiously, this wasn’t the first time Grivner had done this, as he replaced Barney as CEO of Hong Kong-based Pacnet in 2012.

After leaving Pacnet, Barney went on to create Turbidite, an Edge data center platform for the Asia-Pacific market, backed by New World Development, a Chinese real estate investor.

RCom has remained non-operational, bankrupt for three years now, waiting for Indian courts to approve its insolvency professionals’ resolution plans. Meanwhile, under Grivner, GCX took advantage of US laws and filed for Chapter 11 bankruptcy.

Now, in September 2022, it has reappeared with fresh new owners and a dynamic plan for its future.


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