Report: Global Crossing deal faces powerful opposition

Singapore Technologies Telemedia's (STT) attempt to take over Global Crossing faces powerful opposition from some officials inside the U.S. administration, who think the deal may pose a threat to U.S. national security, the Asian Wall Street Journal reported Friday.

Quoting unnamed sources familiar with the deal, the Journal said that the U.S. Defense Department opposes a deal that would see Global Crossing's 160,000-kilometer worldwide fiber-optic network -- which carries some U.S. military and government traffic -- fall into the hands of an overseas company, which might gain unwanted knowledge into U.S. intelligence activities through its control of the network.

But the U.S. Commerce Department is in favor of the deal, which will finally be judged by the multi-agency Committee for Foreign Investment in the U.S. (CFIUS). CFIUS will investigate the implications of the deal over the next 45 days after which President George Bush has a further 15 days to decide the fate of the deal, the Journal said.

STT is part of the Singapore Technologies Group, which is in turn owned by Temasek Holdings, the investment arm of the Singapore government.

Singapore Telecommunications (SingTel), also majority-owned by the Singapore government, faced a similar hurdle when it acquired Australian carrier Optus in 2001. Optus owned a satellite which was to carry a lot of military traffic, causing some in Australia to oppose the deal on security grounds. SingTel was eventually allowed to go ahead with the acquisition.

Several media sources have reported that Singapore Prime Minister Goh Chok Tong has written to U.S. Vice President Dick Cheney urging acceptance of the STT deal.

Hong Kong-based Hutchison Telecommunications was originally to have been a partner with STT in the deal but withdrew when it became clear that the company's links with China would rule out any chance of its involvement being accepted by U.S. officials.