By Zoe Moleshead
Following two years of mounting debts, plunging share prices and bankruptcy fears, Marconi has finally agreed to a potentially life-saving deal.
Facing the future|~||~||~|Following two years of mounting debts, plunging share prices and bankruptcy fears, Marconi has finally agreed to a potentially life-saving deal. However, the ‘debt-for-equity’ deal has proved an equally painful process, taking almost a year of negotiations between the networking vendor, banks and bondholders, before an agreement could be reached. Under the terms of the deal, Marconi is able to write off the majority of its crippling US$6 billion debts by relinquishing control and management of the company to the banks it owes money to. Shareholders will be left with just a 0.5% interest in the networking vendor, while debts will be marginalized to around US$400 million.“What we’ve decided to do is a debt-for-equity exchange that basically removes the debt that Marconi has and gives us a financially stable company, which allows us to move forward,” says John Marshall, sales director, Marconi Middle East LLC.Although, the debt-restructuring deal will not be finalised until January next year, Marconi believes the immediate impact of the deal will be to remove the uncertainty that has clouded the future of the company in recent times. “The deal removes the uncertainty for people. If anybody had any doubt about the financial stability of Marconi it [has been] removed. We can concentrate on the road ahead rather than the bricks coming in from the side,” states Marshall.The ‘bricks’ have included job cuts and the shedding of its non-core business units, such as its petrol pump manufacturing, medical systems and barcode scanning divisions. “When you are in a situation where you have to reduce and focus, Marconi — like a number of other companies — has simply [shed] its non-core assets. Marconi is a communications company, so assets that we sold were really assets that we’d already talked about selling previously,” says Marshall.Locally, however, Marshall claims that operations have been largely unaffected. For example, the last 12 months have seen the company move into new premises in Emirates Towers in Dubai and continue to secure deals and growth.“When there has been uncertainty we’ve taken people to our new offices and we’ve shown them the growth in [employees] that we have had and that’s made them comfortable,” he comments. “There has been a general air of uncertainty, which has been difficult for us and it may have caused people to hesitate, but it has not really stopped any business,” Marshall adds.Accordingly, Marconi’s Middle East operations grew by 25% in the annual period up to March 2002, reports Marshall. The vendor even managed to take on additional staff, bringing its regional employee base to over 700 people.Marshall attributes the vendor’s growth in the Middle East to a few key factors: the continuing construction and project opportunities in the region, the Middle East’s resilience to the economic downturn and Marconi’s focus on its core networking and communications business.“I don’t think the Middle East has been affected [by the dowturn] that much… You only need to look around Dubai, and look at the number of cranes operating to see how much growth there is going on. There is also a lot of activity going on in Saudi Arabia,” says Marshall.“We offer a good range of technology and services [for] the prime contract projects and turnkey projects we do. We find this type of offering is being better received,” he adds.According to Marshall, over 80% of Marconi’s business in the region is turnkey or prime contracted projects, such as the EMAAR Marina project in Dubai. However, the vendor’s local resellers are also securing business, with Marconi kit installed in The Fairmont Hotel, Emirates Towers and Etisalat’s local area network (LAN).“Marconi has a lot of technology and we supply that technology in a number of different ways. We sell technology to both carriers, like Q-Tel, Omantel and Jordan Telecom and we also sell a lot of our technology through resellers. We chose whichever is the best route to market,” Marshall comments.With business continuing to roll in from around the region and Marconi’s future seemingly assured, the vendor is planning to emerge from the shadows of its financial gloom and increase its profile and visibility in the Middle East.“The message is that we have always been here. We’ve kept our heads down a bit because of poor press, but people who actually look beyond the headlines have recognised that Marconi has just kept on going, we’re moving, we’re growing and our plans are aggressive,” affirms Marshall.||**||