The Financial Times reported yesterday that Bermuda-based telecommunications company Global Crossing has warned of a sharp fall in capacity sales for the third quarter, leading to results "substantially below current analysts' expectations."

Global Crossing, which has built a global internet protocol-based network, said the terms offered by potential customers for indefeasible rights of use (IRU) - the right use a certain amount of capacity over a pre-determined period of time - to its network were uneconomic.

Global Crossing said: "To use such terms would not have been in the long-term interest of shareholders."

The company now expects revenue of $1.2 billion in the third quarter - although that estimate is still higher than the $1.07 billion recorded in the second quarter. Estimates of earnings before interest, tax, depreciation and amortisation are below $100 million.

Last month, Global Crossing said it would cut 2,000 jobs, or 15 percent of its workforce, and close 100 of its 600 offices as the US economy slowed.

Also yesterday, Global Crossing Ltd. said it may merge with its Asian affiliate, Asia Global Crossing Ltd., in a move to expand its network reach and combat stiff competition, falling prices and weak sales.

Global Crossing also slashed its growth outlook for the second time in three months and named Asia Global Crossing's chief executive as its own the fifth CEO since Global Crossing launched its initial public offering in August 1998.

Shares of Global Crossing plunged 94 cents, or 45 percent, to $1.15 on the New York Stock Exchange. The stock has fallen 96 percent over the past year amid a broad sell-off in telecommunications and technology stocks. Shares of Asia Global Crossing - which is 59 percent-owned by Global Crossing - lost 79 cents, or 35.3 percent, to $1.45, also on the NYSE.

Global Crossing, which built a high-speed fibre-optic communications network linking 27 countries and more than 200 major cities, also will divest its undersea network building operation, Global Marine Systems, and IPC, which provides sophisticated desktop trading systems to the financial community.

The moves mark another attempt by Global Crossing to remake itself as increased competition has turned its once-rare undersea and land-based fibre-optic network services into a commodity vulnerable to the sharp decline in rates for voice and data transmission services.

Global Crossing "is under severe stress - top line, balance sheet and cash flow - and now, in effect, a reorganisation is going on that will likely dilute equity holders and not necessarily solve the problems given the severity of the revenue miss in the third quarter," Credit Suisse First Boston analyst Dan Reingold said in a research report.

In the past three years, Global Crossing has shuffled executives, cancelled plans for a tracking stock, made an unsuccessful bid to buy local telephone company U S West Inc., and sold its GlobalCenter Web hosting unit to Exodus Communications Inc. for $6.525 billion in stock that later became almost worthless when the value of Exodus stock plunged.

Global Crossing last month said it would take a third-quarter charge to reflect the decline in the value of its Exodus stake.

Trying to quell market rumours that it might file for bankruptcy, Global Crossing said it remains fully funded and it had $2.4 billion in cash at the end of the third quarter. Analysts, however, said that cash balance suggested it burned through its $1.7 billion revolving bank facility and it may run out of money in 2003.

Effective immediately, Asia Global Crossing CEO John Legere will become chief executive of Global Crossing, replacing Thomas Casey, who was named Global's CEO just 12 months ago. At that time, Gary Winnick, Global Crossing's founder and chairman of both Global Crossing and Asia Global Crossing, called Casey the "ideal executive" to lead the company. Winnick now said Legere was the "right executive to lead our global business."

"The global telecommunications industry is in a period of rapid transition. Competition is more intense. Customers are more demanding. But opportunity has never been greater," Winnick said.

Casey will remain vice chairman of Global Crossing and will oversee the disposition of non-core assets and financing activities.

The merger talks between Global Crossing and Asia Global Crossing were characterised as "preliminary," but the companies said their management teams support "the concept of a merger." The proposed financial terms were not disclosed.