Letter to the Chairman of the Committee
from Sir Michael Jay KCMG, Permanent Under-Secretary of State,
Foreign and Commonwealth Office, 7 January 2004
The Foreign Affairs Committee knows of the FCO's
contract with Global Crossing UK for the FCO Telecommunications
Network (FTN), and refers to it in its most recent report on the
FCO Annual Report (HC 859). I am writing now to draw your attention
to the news that on 9 December, Singapore Technologies Telemedia
(STT) and Global Crossing (the US parent of Global Crossing UK)
announced that they had consummated their purchase agreement.
This allowed Global Crossing to emerge from Chapter 11 proceedings
the same day.
The FCO now has six months to undertake a due
diligence process, during which we have the right to terminate
the FTN contract if we believe the change of control causes significant
security concerns. Together with the Office of Government Commerce,
who have the other largest HMG contract with Global Crossing for
the Whitehall telephone System (MTS), we have initiated a due
diligence exercise. Hitherto, we have not encountered any issues
that may bring into question the stability and security of the
new company, but will obviously await the outcome of the due diligence
review before taking a final decision.
We shall be replying shortly to the points raised
in the FAC's most recent Report. But I should stress that, throughout
the period Global Crossing have been in Chapter 11, the FCO has
actively managed the risks associated with this situation. Plans
were in place to ensure that FCO could retain control of the network
in the case of a commercial failure, and that the costs of this
should be met by Global Crossing. We had alternative plans at
each stage, and we worked hard and successfully to achieve the
best outcome. There has been no adverse effect on the service
we have obtained under FTN due to Global Crossing's financial
trouble. Indeed support from Global Crossing has been of significant
value in supporting the FCO's ability to provide facilities in
adverse conditions at short notice. This has included, for example,
adding Baghdad and Basra to the FTN network.
The experience has demonstrated the strength
of our partnership with the private sector supplier. They have
continued to provide a good quality, cost-effective service throughout
the past two years. With their stability and financial viability
now assured, we anticipate the partnership continuing to provide
a value for money service to the Government.
Sir Michael Jay KCMG
7 January 2004
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