Global Crossing (GBLXQ) 10-Q 2007 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-16201

GLOBAL CROSSING LIMITED

(Exact name of registrant as specified in its charter)

BERMUDA	98-0407042
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

WESSEX HOUSE

45 REID STREET

HAMILTON HM 12, BERMUDA

(Address Of Principal Executive Offices)

(441) 296-8600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  x    No  ¨

The number of shares of the Registrant’s common stock, par value $0.01 per share, outstanding as of November 1, 2007 was 54,511,023.

GLOBAL CROSSING LIMITED AND SUBSIDIARIES

INDEX

		Page
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4.	Controls and Procedures	41
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 6.	Exhibits	44

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

GLOBAL CROSSING LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share information)

	September 30, 2007			December 31, 2006
	(unaudited)
ASSETS:
Current assets:
Cash and cash equivalents	$	369		$	459
Restricted cash and cash equivalents—current portion		35			3
Accounts receivable, net of allowances of $58 and $43		334			262
Prepaid costs and other current assets		134			84
Total current assets		872			808
Restricted cash and cash equivalents—long term		27			3
Property and equipment, net of accumulated depreciation of $591 and $407		1,453			1,132
Intangible assets, net (including goodwill of $153 and $2)		190			26
Other assets		101			86
Total assets	$	2,643		$	2,055
LIABILITIES:
Current liabilities:
Short-term debt	$	—		$	6
Accounts payable		264			283
Accrued cost of access		123			107
Current portion of long term debt		12			6
Accrued restructuring costs—current portion		26			30
Deferred revenue—current portion		156			139
Other current liabilities		401			336
Total current liabilities		982			907
Debt with controlling shareholder		—			275
Long term debt		1,271			661
Obligations under capital leases		117			106
Deferred revenue		205			163
Accrued restructuring costs		45			61
Other deferred liabilities		97			77
Total liabilities		2,717			2,250
SHAREHOLDERS’ DEFICIT:
Common stock, 110,000,000 and 85,000,000 shares authorized, $.01 par value, 54,510,263 and 36,609,236 shares issued and outstanding as of September 30, 2007 and December 31, 2006, respectively		1			—
Preferred stock with controlling shareholder, 45,000,000 shares authorized, $.10 par value, 18,000,000 shares issued and outstanding		2			2
Additional paid-in capital		1,291			857
Accumulated other comprehensive loss		(35	)		(29	)
Accumulated deficit		(1,333	)		(1,025	)
Total shareholders’ deficit		(74	)		(195	)
Total liabilities and shareholders’ deficit	$	2,643		$	2,055

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GLOBAL CROSSING LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except share and per share information)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Revenue	$	594		$	466		$	1,645		$	1,383
Cost of revenue (excluding depreciation and amortization, shown separately below):
Cost of access		(288	)		(275	)		(853	)		(846	)
Real estate, network and operations		(103	)		(69	)		(292	)		(219	)
Third party maintenance		(26	)		(22	)		(75	)		(67	)
Cost of equipment sales		(18	)		(15	)		(66	)		(43	)
Total cost of revenue		(435	)		(381	)		(1,286	)		(1,175	)
Selling, general and administrative		(98	)		(78	)		(332	)		(263	)
Depreciation and amortization		(73	)		(41	)		(186	)		(114	)
Total operating expenses		(606	)		(500	)		(1,804	)		(1,552	)
Operating loss		(12	)		(34	)		(159	)		(169	)
Other income (expense):
Interest income		5			5			17			12
Interest expense		(51	)		(27	)		(133	)		(76	)
Other income (expense), net		(16	)		(2	)		2			(3	)
Loss from continuing operations before reorganization items and provision for income taxes		(74	)		(58	)		(273	)		(236	)
Net gain on preconfirmation contingencies		2			10			2			29
Loss from continuing operations before provision for income taxes		(72	)		(48	)		(271	)		(207	)
Provision for income taxes		(16	)		(2	)		(37	)		(27	)
Net loss		(88	)		(50	)		(308	)		(234	)
Preferred stock dividends		(1	)		(1	)		(3	)		(3	)
Loss applicable to common shareholders	$	(89	)	$	(51	)	$	(311	)	$	(237	)
Loss per common share, basic and diluted:
Loss applicable to common shareholders	$	(2.14	)	$	(1.40	)	$	(8.10	)	$	(8.07	)
Weighted average number of common shares		41,515,404			36,456,178			38,398,858			29,351,305

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GLOBAL CROSSING LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in millions)

	Nine Months Ended September 30,
	2007			2006
Cash flows provided by (used in) operating activities:
Net loss	$	(308	)	$	(234	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of marketable securities		—			(1	)
Gain on settlement of contracts due to Impsat acquisition		(27	)		—
Non-cash inducement charge for conversion of debt		30			—
Non-cash income tax provision		31			28
Non-cash stock compensation expense		47			18
Depreciation and amortization		186			114
Provision for doubtful accounts		5			2
Amortization of prior period IRUs		(8	)		(4	)
Gain on preconfirmation contingencies		(2	)		(29	)
Changes in assets and liabilities and other		(63	)		20
Net cash used in operating activities		(109	)		(86	)
Cash flows provided by (used in) investing activities:
Purchases of property and equipment		(154	)		(73	)
Purchases of marketable securities		—			(20	)
Proceeds from sale of marketable securities		4			1
Payment for Impsat, net of cash acquired		(76	)		—
Change in restricted cash and cash equivalents		(56	)		16
Net cash used in investing activities		(282	)		(76	)
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock		—			240
Proceeds from long term debt		597			144
Repayment of capital lease obligations		(30	)		(12	)
Repayment of long term debt		(249	)		(6	)
Proceeds from exercise of stock options		4			3
Finance costs incurred		(24	)		(17	)
Cash flows provided by financing activities		298			352
Effect of exchange rate changes on cash and cash equivalents		3			3
Net increase (decrease) in cash and cash equivalents		(90	)		193
Cash and cash equivalents, beginning of period		459			224
Cash and cash equivalents, end of period	$	369		$	417
Non cash investing and financing activities:
Capital lease and debt obligations incurred	$	59		$	46
Conversion of debt, accrued interest and accrued consent fees to equity	$	329		$	—
Accrued interest paid with the issuance of convertible notes	$	6		$	6
Business acquisitions:
Fair value of assets acquired	$	519		$	—
Less: liabilities assumed		388			—
Net assets acquired		131			—
Less: cash acquired		28			—
Less: non-cash gain associated with settlement of pre-existing relationships		27			—
Purchase price for Impsat, net of cash acquired	$	76		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GLOBAL CROSSING LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except countries, cities, employees, months, share and per share information)

(unaudited)

1. BACKGROUND AND ORGANIZATION

Global Crossing Limited (“GCL”) and its subsidiaries (collectively, the “Company”) are communications solutions providers, offering a suite of Internet Protocol (“IP”) and legacy telecommunications services in most major business centers in the world. The Company serves many of the world’s largest corporations and many other telecommunications carriers, providing a full range of managed data and voice products and services that support a migration path to a fully converged IP environment. The Company offers these services using a global IP-based network that directly connects more than 390 cities in more than 30 countries and delivers services to more than 600 cities in more than 60 countries around the world. The vast majority of the Company’s revenues are generated based on monthly services. As a result of the May 9, 2007 acquisition of Impsat Fiber Networks, Inc. and its subsidiaries (collectively, “Impsat”) (see Note 5) and the establishment of a business unit management structure, the Company reports financial results based on three separate operating segments: (i) Global Crossing (UK) Telecommunications Ltd (“GCUK”) and its subsidiaries (collectively, the “GCUK Segment”); (ii) GC Impsat Holdings I Plc (“GC Impsat”) and its subsidiaries (collectively, the “GC Impsat Segment”); and (iii) GCL and its other subsidiaries (collectively, the “Rest of World Segment” or “ROW Segment”) (see Note 13).

2. BASIS OF PRESENTATION

Basis of Presentation and Use of Estimates

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report for the year ended December 31, 2006 filed with the SEC on Form 10-K. These condensed consolidated financial statements include the accounts of the Company over which it exercises control. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of interim results for the Company. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements, the disclosure of contingent assets and liabilities in the condensed consolidated financial statements and the accompanying notes, and the reported amounts of revenue and expenses and cash flows during the periods presented. Actual amounts and results could differ from those estimates. The estimates the Company makes are based on historical factors, current circumstances and the experience and judgment of the Company’s management. The Company evaluates its assumptions and estimates on an ongoing basis and may employ third party experts to assist in the Company’s evaluations.

Reclassifications

Certain amounts in the prior period condensed consolidated financial statements have been reclassified to conform to current year presentation.

New Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”), in September 2006. SFAS 157 clarifies that the fair value is the amount that would be exchanged to sell an asset or transfer a liability in an orderly transaction between market participants. This statement also requires that a fair value measurement technique include an adjustment for

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risks inherent in a particular valuation technique and/or the risks inherent in the inputs to the model if market participants would also include such an adjustment. The provisions of SFAS 157 are effective for fiscal periods beginning after November 15, 2007 and are to be applied prospectively. The Company is currently evaluating the impact of adopting SFAS 157.

The FASB issued SFAS No.159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), in February 2007. SFAS 159 allows entities to voluntarily choose, at specified election dates, to measure many financial assets and financial liabilities (as well as certain non-financial instruments that are similar to financial instruments) at fair value (the “fair value option”). The election is made on an instrument-by-instrument basis and is irrevocable. If the fair value option is elected for an instrument, SFAS 159 specifies that all subsequent changes in fair value for that instrument shall be reported in earnings. The provisions of SFAS 159 are effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company is currently evaluating the impact of adopting SFAS 159.

In June 2006, the Emerging Issues Task Force (“EITF”) ratified the consensus on EITF Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement” (“EITF 06-3”). EITF 06-3 requires that companies disclose their accounting policy regarding the gross or net presentation of certain taxes. Taxes within the scope of EITF 06-3 are any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but are not limited to, sales, use, value-added and some excise taxes. In addition, if such taxes are significant, and are presented on a gross basis, the amounts of those taxes should be disclosed. EITF 06-3 was effective for our quarterly reporting period ending March 31, 2007. There was no impact on our financial position and results of operations. The Company’s policy is generally to record taxes within the scope of EITF 06-3 on a net basis.

3. FINANCING ACTIVITIES

GC Impsat Notes

On February 14, 2007, GC Impsat, a wholly owned subsidiary of the Company, issued $225 in aggregate principal amount of 9.875% senior notes due February 15, 2017 (the “GC Impsat Notes”). Interest on these notes is payable in cash semi-annually in arrears every February 15 and August 15, commencing August 15, 2007. The proceeds of this offering were used to finance a portion of the purchase price (including the repayment of indebtedness and payment of fees) of the Company’s acquisition of Impsat, which was consummated on May 9, 2007 (see Note 5). Pursuant to a pledge and security agreement, entered into on the date of the acquisition, GC Impsat maintains a debt service reserve account in the name of the collateral agent for the benefit of the note holders equal to two interest payments ($22) on the GC Impsat Notes until certain cash flow metrics have been met. The amounts included in the debt service reserve account are included in long-term restricted cash and cash equivalents.

The GC Impsat Notes are senior unsecured (other than with respect to the debt service reserve account) obligations of GC Impsat and rank equal in right of payment with all of its other senior unsecured debt. Upon consummation of the acquisition, the restricted subsidiaries of GC Impsat (including Impsat Fiber Networks Inc. and substantially all of its subsidiaries, other than its Colombian subsidiary) guaranteed the GC Impsat Notes on a senior unsecured basis, ranking equal in right of payment with all of their other senior unsecured debt.

The indenture for the GC Impsat Notes limits GC Impsat’s and its restricted subsidiaries’ ability to, among other things: (1) incur or guarantee additional indebtedness; (2) pay dividends or make other distributions; (3) make certain investments or other restricted payments; (4) enter into arrangements that restrict dividends or other payments to GC Impsat from its restricted subsidiaries; (5) create liens; (6) sell assets, including capital stock of subsidiaries; (7) engage in transactions with affiliates; and (8) merge or consolidate with other companies or sell substantially all of its assets. All of these limitations are subject to a number of important qualifications and exceptions set forth in the indenture.

After giving effect to the refinancing of approximately $216 of debt assumed in the acquisition of Impsat with use of the proceeds from the issuance of the GC Impsat Notes and other cash, at September 30, 2007 the primary debt of Impsat that remains outstanding in addition to the GC Impsat Notes is approximately $22 of bonds issued by Impsat’s subsidiary in Colombia. These bonds bear interest at the Colombian consumer price index plus 8% and are repayable 50% in December 2008 and 50% in December 2010.

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Our results of operations for the nine months ended September 30, 2007 include expenses of approximately $8 related to the write off of deferred financing fees for a bridge loan facility which was terminated upon issuance of the GC Impsat Notes; these expenses are included in other income (expense), net in the accompanying condensed consolidated statements of operations.

Senior Secured Term Loan Agreement

On May 9, 2007, the Company entered into a senior secured term loan agreement (the “Term Loan Agreement”) with Goldman Sachs Credit Partners L.P. and Credit Suisse Securities (USA) LLC pursuant to which it borrowed $250 on that date. The Term Loan Agreement was amended on June 1, 2007 to, among other things, provide for the borrowing of an additional $100 on that date. These term loans (i) mature on May 9, 2012, with amortization of 0.25% of principal repayable on a quarterly basis and the remaining principal due at maturity, (ii) bear interest at LIBOR plus 6.25% per annum payable semi-annually, (iii) have repayment premiums of 103% in the first year, 102% in the second year and 101% in the third year, and (iv) are guaranteed by all of the Company’s subsidiaries and secured by substantially all the assets of the Company and its subsidiaries, in each case other than those subsidiaries forming part of its Latin American operations or its GCUK Segment. The Term Loan Agreement limits the Company’s and the guarantor subsidiaries’ ability, among other things, to: (1) incur or guarantee additional indebtedness; (2) pay dividends or make other distributions; (3) make certain investments or other restricted payments; (4) enter into arrangements that restrict dividends or other payments to the Company from its restricted subsidiaries; (5) create liens; (6) sell assets, including capital stock of subsidiaries; (7) engage in transactions with affiliates; and (8) merge or consolidate with other companies or sell substantially all of its assets. All of these limitations are subject to a number of important qualifications and exceptions set forth in the Term Loan Agreement.

On September 12, 2007, the Company satisfied its initial obligations regarding the implementation of a collateral package securing its obligations under the Term Loan Agreement. In accordance with the terms of such agreement, the Company has an ongoing obligation to ensure that the facility is guaranteed by all its subsidiaries and secured by substantially all the assets of the Company and its subsidiaries, in each case other than those subsidiaries forming part of its Latin American operations or its GCUK Segment and excluding guarantees and assets as to which the Administrative Agent for the facility reasonably determines that the cost of obtaining such guarantee or security interest is excessive in relation to the benefit afforded to the facility’s lenders.

A portion of the proceeds of the Term Loan Agreement was used to repay in full the Company’s $55 working capital facility with Bank of America, N.A. (and other lenders), to cash collateralize $29 of letters of credit issued under the facility (or replacement thereof) and to fund a portion of the Impsat acquisition. The working capital facility has been terminated and no further extensions of credit will be made thereunder. Approximately $2 of unamortized deferred financing fees related to the working capital facility were expensed in other income (expense), net in the condensed consolidated statement of operations during the nine months ended September 30, 2007. The remaining net proceeds of the Term Loan Agreement are being used for working capital and general corporate purposes, which may include the acquisition of assets or businesses that are complimentary to the Company’s existing business.

In satisfaction of an obligation under the Term Loan Agreement, the Company entered into an agreement in July 2007 to mitigate the risk arising from the floating rate debt by hedging the term loans against interest rate risk volatility. The hedge consists of two types of instruments: interest rate swaps for approximately one year of floating (LIBOR + 6.25%) for fixed rate debt having a notional amount between $248 and $348, and interest rate caps for the ensuing two years having notional amounts between $340 and $344.

In conjunction with the recapitalization pursuant to which the Company entered into the Term Loan Agreement, on August 27, 2007, STT Crossing Ltd effectively converted $250 original principal amount of mandatorily convertible notes due December 2008 (the “Mandatorily Convertible Notes”) into approximately 16.58 million shares of common stock. Upon such conversion, the debt interests of STT Crossing Ltd. were terminated. As consideration for the subordination of the Mandatorily Convertible Notes to the Term Loan Agreement through the conversion date, the Company paid STT Crossing Ltd. a consent fee of $7.5 in cash shortly after closing in the second quarter 2007 and, at conversion of the Mandatorily Convertible Notes, an additional fee paid in shares of common stock valued at $10.5. The 16.58 million shares of common stock received by STT Crossing Ltd. included

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the shares representing the $10.5 consent fee as well as shares valued at $30 representing foregone interest through the original scheduled maturity date of the Mandatorily Convertible Notes. The $18 of consent fees was considered a debt modification and was recorded as a reduction in the carrying value of the Mandatorily Convertible Notes in the second quarter of 2007. The $30 of foregone interest is considered an inducement to convert and was recorded in other income (expense), net upon conversion of the Mandatorily Convertible Notes in the third quarter of 2007. At conversion, the carrying value of and all accrued interest on the notes, as well as the consent fee paid in common shares, all of which together totaled $329, were reclassified to common stock and additional paid in capital.

Other Financing Activities

During the nine months ended September 30, 2007, the Company entered into debt agreements to finance various equipment purchases and software licenses. The total debt obligation resulting from these agreements is $15. These agreements have terms that range from 24 to 36 months and annual interest rates that generally range from 2.8% to 12% and in certain instances, are variable based on a spread over the London Inter-bank Offered rate (“LIBOR”). In addition, the Company also entered into various capital leasing arrangements that amounted to $46. These agreements have terms that range from 24 to 48 months and implicit interest rates that range from 5.5% to 15.8%, and in certain instances, are variable over LIBOR.

Certain of the Company’s capital lease agreements contain non-financial covenants which require specific inventorying of leased assets. The failure to meet these covenants allows the lessor to accelerate payments under the lease agreements. At September 30, 2007, these non-financial covenants have not been met for lease agreements representing $64 of indebtedness. The Company has received a waiver for such non-compliance through January 1, 2009 assuming certain milestones are achieved. The Company expects to achieve these milestones and become compliant prior to the deadline.

GCUK Notes Tender Offer

As required by the indenture governing its senior secured notes due 2014 (the “GCUK Notes”), within 120 days after the end of each twelve month period ending December 31, GCUK must offer (the “Annual Repurchase Offer”) to purchase a portion of the GCUK Notes at a purchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, to the purchase date, with 50% of “Designated GCUK Cash Flow” from that period. “Designated GCUK Cash Flow” means GCUK’s consolidated net income plus non-cash charges minus capital expenditures, calculated in accordance with the terms of the indenture governing the GCUK Notes. With respect to the 2006 Annual Repurchase Offer, GCUK did not offer to purchase any of the GCUK Notes since the amount of “Designated GCUK Cash Flow” was less than zero.

As of September 30, 2007, the Company does not anticipate meeting the stipulated cash flow requirement for the twelve months ended December 31, 2007 and therefore does not anticipate making an Annual Repurchase Offer in respect of such period.

4. RESTRUCTURING ACTIVITIES

2007 Restructuring Plans

During the second quarter of 2007, the Company implemented initiatives to generate operational savings which included organizational realignment and functional consolidation resulting in the involuntary separation of approximately 220 employees. As a result of these initiatives, during the second quarter of 2007 the Company recorded a charge of $12 for one-time severance and related benefits which is included in selling, general and administrative expenses in the condensed consolidated statement of operations. On a segment basis, $3 and $9 was recorded to the GCUK and ROW Segments, respectively. As of September 30, 2007, the remaining liability related to these initiatives was $2, all related to the ROW Segment.

The table below reflects the activity associated with the restructuring reserve for the nine months ended September 30, 2007:

	Employee Separations
Balance at December 31, 2006	$	—
Additions		12
Deductions		(10	)
Balance at September 30, 2007	$	2

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The Company adopted a restructuring plan as a result of the Impsat acquisition (see Note 5) under which redundant Impsat employees were terminated. As a result the Company incurred cash restructuring costs of approximately $5 for severance and related benefits. The liabilities associated with this restructuring plan have been accounted for as part of the purchase price of Impsat.

2006 Restructuring Plan

The Company adopted a restructuring plan as a result of the Fibernet Group Plc. (“Fibernet”) acquisition (see Note 5) under which redundant Fibernet employees were terminated and certain Fibernet facility lease agreements will be terminated or restructured. As a result of these efforts the Company incurred cash restructuring costs of approximately $3 for severance and related benefits in connection with anticipated workforce reductions and will incur an additional $5 for real estate consolidation. The liabilities associated with the restructuring plan have been accounted for as part of the purchase price of Fibernet. It is anticipated that payments for the restructuring activities will continue through 2017 for real estate consolidation. During the first quarter of 2007, an adjustment to the facilities closure liability resulted in an increase of $4 to accrued restructuring costs, and a corresponding $4 increase to goodwill, as compared to our preliminary allocation of the acquisition costs of Fibernet.

The table below reflects the activity associated with the restructuring reserve for the nine months ended September 30, 2007:

	Employee Separations			Facility Closing		Total
Balance at December 31, 2006	$	1		$	1	$	2
Change in estimated liability		—			4		4
Deductions		(1	)		—		(1	)
Balance at September 30, 2007	$	—		$	5	$	5

2003 and Prior Restructuring Plans

Prior to the Company’s emergence from bankruptcy on December 9, 2003, the Company adopted certain restructuring plans as a result of the slow down of the economy and telecommunications industry, as well as its efforts to restructure while under Chapter 11 bankruptcy protection. As a result of these activities, the Company eliminated approximately 5,200 positions and vacated more than 250 facilities. All amounts incurred for employee separations were paid as of December 31, 2004 and it is anticipated that the remainder of the restructuring liability, all of which relates to facility closings, will be paid through 2025.

The undiscounted facilities closings reserve, which represents estimated future cash flows, is composed of continuing building lease obligations and broker commissions for the restructured sites (aggregating $254 as of September 30, 2007), offset by anticipated receipts from existing and future third-party subleases. As of September 30, 2007, anticipated third-party sublease receipts were $198, representing $69 from subleases already entered into and $129 from subleases projected to be entered into in the future. The discounted facilities closing reserve, shown in the table below, represents the current fair value of the restructuring reserve. The Company continues to review the anticipated costs and third-party sublease payments on a quarterly basis and records adjustments for changes in these estimates in the period such changes become known.

The table below reflects the activity associated with the restructuring reserve relating to the restructuring plans initiated during and prior to 2003 for the nine months ended September 30, 2007:

	Facility Closings
Balance at December 31, 2006	$	89
Accretion		1
Change in estimated liability		4
Deductions		(39	)
Foreign currency impact		4
Balance at September 30, 2007	$	59

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Included in the $39 of deductions is approximately $10 related to the settlement and termination of existing real estate lease agreements for technical facilities and $2 related to a change in the use of a restructured facility from an idle asset to a productive asset. Upon change in use the restructuring reserve for the facility has been released. If the Company changes the use of any other restructured facilities it will release the related restructuring reserve.

5. ACQUISITIONS

Impsat Acquisition

On May 9, 2007, the Company acquired Impsat for cash of $9.32 per share of Impsat common stock, representing a total equity value of approximately $95. The total purchase price including direct costs of acquisition was approximately $104. Impsat is a leading Latin American provider of IP, hosting and value-added data solutions. As a result of the acquisition, the Company is able to provide greater breadth of services and coverage in the Latin American region and enhance its competitive position as a global service provider. The results of Impsat’s operations are included in the condensed consolidated financial statements commencing May 9, 2007.

In connection with the Impsat acquisition, the Company recorded a $27 non-cash, non-taxable gain from the deemed settlement of existing telecom services agreements with Impsat. Under these agreements, the Company earned revenues or incurred expenses that, based on current market rates at the acquisition date, were favorable to the Company. EITF 04-1, “Accounting for Pre-Existing Relationships between the Parties to a Business Combination” (“EITF 04-1”) stipulates that business relationships between an acquirer and acquiree pre-existing a business combination must be analyzed as a separate element of accounting. The gain or loss on the effective termination of these pre-existing business relationships should be recorded at the date of acquisition as an adjustment to goodwill. The gain recorded as goodwill, represents the net present value of the favorable portion of the fees over the remaining life of the agreements. This gain is included in other income (expense), net in the condensed consolidated statement of operations.

The following table summarizes the preliminary allocation of the acquisition cost, including direct costs of the acquisition, to the assets acquired and liabilities assumed at the date of acquisition, based on their preliminary estimated fair values:

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	At May 9, 2007
Cash and cash equivalents	$	28
Accounts receivable, net		35
Prepaid costs and other current assets		18
Property, plant, and equipment, net		261
Other assets		13
Intangible assets		15
Goodwill		149
Total assets acquired		519
Accounts payable		45
Short term debt and current portion of long term debt		53
Other current liabilities		82
Long term debt		187
Other liabilities		21
Total liabilities assumed		388
Net assets acquired	$	131

Of the $15 of acquired intangible assets (10-year weighted-average useful life), $10, $2, and $3 were assigned to customer relationships (12-year weighted-average useful life), customer contracts (4-year weighted-average useful life) and internally developed software (4-year weighted-average useful life), respectively.

All of the goodwill and all other amounts noted above are recorded in the GC Impsat Segment. None of the goodwill is deductible for tax purposes.

Approximately $216 of short term and long term debt was subsequently refinanced (see Note 3).

As a result of refinements to the preliminary purchase price allocation, there were additional changes to goodwill that were made during the third quarter of 2007. The primary adjustment was to reallocate $4 of goodwill to intangible assets.

Fibernet Acquisition

On October 11, 2006, the Company took control of Fibernet. Fibernet is a provider of specialist telecommunications services to large enterprises and other telecommunications and internet service companies primarily located in the United Kingdom and Germany. The Company purchased Fibernet to expand its presence as a provider of telecommunications services in those markets.

In the Company’s consolidated financial statements as of December 31, 2006, the cost related to the accrued restructuring liability for facility closures was based on preliminary information and was subject to adjustment as new information was obtained. During the first quarter of 2007, an adjustment to the facilities closure liability resulted in an increase of $4 to accrued restructuring costs, and a corresponding $4 increase to goodwill, compared to our preliminary allocation of the acquisition costs of the Fibernet acquisition.

Pro Forma Financial Information

The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of Impsat and Fibernet had occurred at January 1, 2006:

	Three months ended September 30,			Nine months ended September 30,
	2006			2007			2006
Revenue	$	556		$	1,751		$	1,642
Net loss applicable to common shareholders	$	(67	)	$	(326	)	$	(261	)
Net loss applicable to common shareholders per share - basic and diluted	$	(1.84	)	$	(8.49	)	$	(8.89	)

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Included in the pro forma consolidated results of operations for the nine months ended September 30, 2007 is a non-recurring charge of $30 representing the accelerated issuance of common stock to STT Crossing Ltd. on account of foregone interest through the original scheduled maturity date of the Mandatorily Convertible Notes as an inducement to convert the Mandatorily Convertible Notes, which is included in other expense, net in the accompanying condensed consolidated statements of operations (see Note 3). In addition, the pro forma consolidated results of operations for the nine months ended September 30, 2007 include non-recurring expenses of approximately $8 related to the write off of deferred financing fees for a bridge loan facility which was terminated upon issuance of the GC Impsat Notes; these expenses are included in other expense, net in the accompanying condensed consolidated statements of operations. Additionally, the pro forma consolidated results of operations for the nine months ended September 30, 2007 include a $27 gain recorded in accordance with EITF 04-1 which is included in other income (expense), net in the accompanying condensed consolidated statements of operations (see discussion above).

6. OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

	September 30, 2007		December 31, 2006
	(unaudited)
Accrued taxes, including value added taxes in foreign jurisdictions	$	116	$	86
Accrued payroll, bonus, commissions, and related benefits		50		30
Accrued professional fees		20		24
Accrued interest		37		40
Accrued real estate and related costs		13		16
Accrued capital expenditures		6		14
Current portion of capital lease obligations		44		32
Income taxes payable		8		5
Accrued operations, administration & maintenance costs		9		8
Deferred reorganization costs		4		4
Customer deposits		35		26
Other		59		51
Total other current liabilities	$	401	$	336

7. STOCK BASED COMPENSATION

The Company recognized $13 and $47, respectively, of non-cash stock related expenses for the three and nine months ended September 30, 2007 and $(1) and $18, respectively, for the three and nine months ended September 30, 2006. These expenses are included in real estate, network and operations and selling, general and administrative in the condensed consolidated statements of operations. The stock-related expenses for each period reflect share-based awards outstanding during such period, including awards granted both prior to and during such period.

On January 31, 2007, the members of the Board of Directors were granted awards totaling 6,588 fully vested unrestricted shares of common stock, representing the first semi-annual installment of one-half of the directors’ annual retainer fees that is payable in shares rather than cash.

On March 13, 2007, the Board of Directors approved a grant of awards under a special program to substantially all non-sales employees of the Company. The program is intended to retain and motivate the Company’s employees. The awards granted aggregated: (i) $3 of cash; and (ii) 1,194,880 restricted stock units that vest over a period of either six or twelve months from the date of grant.

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In connection with the Company’s annual long-term incentive program for 2007, on March 13, 2007, the Company awarded to certain employees 330,700 restricted stock units which vest on March 13, 2010 and 393,800 performance share opportunities which vest on December 31, 2009, in each case subject to continued employment through the vesting date and subject to earlier pro-rata payout in the event of death or long-term disability. Each performance share grantee can earn (i) 50% of his or her target award for a given opportunity if the threshold financial performance goal for that opportunity is achieved, (ii) 100% of his or her target award for a given opportunity if the target financial performance goal for that opportunity is achieved or (iii) 150% of his or her target award for a given opportunity if the maximum financial performance goal for that opportunity is achieved. No payout will be made for performance below threshold, and the payout for performance above maximum is capped at 150% of the target opportunity. Actual payouts will be calculated using interpolation between threshold and target or target and maximum, as applicable. The total performance share opportunity of each participant in this program comprises three separate award opportunities based on measures of combined 2007 and 2008 earnings, cash use, and adjusted gross margin attributable to the Company’s enterprise, carrier data and indirect channels business.

On March 13, 2007, the Board of Directors also adopted the 2007 Annual Bonus Program (the “2007 Bonus Program”). The 2007 Bonus Program is an annual bonus program for substantially all non-sales employees of the Company intended to retain such employees and to motivate them to help the Company achieve its financial goals. Each participant is provided a target award under the 2007 Bonus Program expressed as a percentage of base salary. Actual awards under the 2007 Bonus Program will be paid only if the Company achieves specified earnings and cash use goals. Bonus payouts under the 2007 Bonus Program will be made in unrestricted shares of common stock of the Company; provided that the Compensation Committee of the Board of Directors retains discretion to use cash rather than shares as the Committee deems fit. To the extent common shares are used for payment of bonus awards, such shares shall be valued based on the closing price on the NASDAQ National Market on the date financial results are certified by the Compensation Committee and the Board of Directors. As of September 30, 2007, $14 has been accrued for this bonus plan, including employer liability for payroll taxes and charges.

On May 9, 2007, the Board of Directors approved a grant of awards under a special program related to the Impsat acquisition to key employees of the GC Impsat Segment and a limited group of ROW Segment employees involved in the Impsat integration. The program is intended to retain and motivate these employees through the integration of Impsat. The awards granted to non-executives aggregated 32,600 restricted stock units that vest over a period of twelve months from the date of grant. The awards granted to executives aggregated 20,736 restricted stock units that vest one-third per year over a three year period.

On June 1, 2007, certain executives of Impsat entered into employment agreements with the Company which include a special bonus program to encourage executive continuity to maximize the benefit of GCL’s acquisition of Impsat. This bonus program consists of both time based and performance based components. The time based component will vest on the earlier of: (a) 7.5 months from the acquisition date or (b) the date in which the executive is terminated without cause. The performance based component is payable by August 31, 2008, based on the achievement of certain performance metrics for a performance period of July 1, 2007 to June 30, 2008. The performance based component will not be paid out if the executive is terminated for any reason prior to June 30, 2008. These executives are also entitled to participate in the 2007 Bonus Program, as modified such that the targets for the portion of the year prior to the acquisition of Impsat are based on Impsat’s standalone financial results, and to receive a guaranteed annual bonus to be paid out to these executives regardless of whether Company targets are met. These bonuses are expected to be paid in unrestricted shares of common stock of GCL; however GCL retains discretion to use cash rather than shares. As of September 30, 2007, $1 has been accrued for these bonus opportunities, including employer liability for payroll taxes and charges.

On June 12, 2007, the members of the Board of Directors were granted awards totaling 29,040 unrestricted shares of common stock with a one year cliff vesting on June 12, 2008. These awards were made in accordance with the Company’s annual long-term incentive program for Board members.

On July 2, 2007, the members of the Board of Directors were granted awards totaling 8,814 fully vested unrestricted shares of common stock, representing the second semi-annual installment of one-half of the directors’ annual retainer fees.

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8. COMPREHENSIVE LOSS

The components of comprehensive loss for the periods indicated are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Net loss	$	(88	)	$	(50	)	$	(308	)	$	(234	)
Foreign currency translation adjustment		(5	)		1			(5	)		1
Unrealized derivative loss on cash flow hedges		(1	)		—			(1	)		(6	)
Comprehensive loss	$	(94	)	$	(49	)	$	(314	)	$	(239	)

9. LOSS PER COMMON SHARE

Basic loss per common share is computed as loss applicable to common stockholders divided by the weighted-average number of common shares outstanding for the period. Loss applicable to common shareholders includes preferred stock dividends of $1 and $3, respectively, for each of the three and nine months ended September 30, 2007 and 2006. Diluted loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. However, since the Company had net losses for the three and nine months ended September 30, 2007 and 2006, diluted loss per common share is the same as basic loss per common share. See the condensed consolidated statements of operations for loss per common share.

For the three and nine months ended September 30, 2007, potentially dilutive securities not included in diluted loss per common share include: 18,000,000 shares of convertible preferred stock; 6,373,598 common shares issuable upon conversion of convertible debt securities; and 617,798 stock options, and 1,394,291 common shares issuable upon vesting of restricted stock units issued under the 2003 Global Crossing Limited Stock Incentive Plan. For the three and nine months ended September 30, 2006, potentially dilutive securities not included in diluted loss per common share include: 18,000,000 shares of convertible preferred stock; 20,953,794 common shares issuable upon conversion of convertible debt securities; and 681,530 stock options and 1,130,478 common shares issuable upon vesting of restricted stock units under the 2003 Global Crossing Limited Stock Incentive Plan.

10. INCOME TAXES

The Company’s provision for income taxes for the three and nine months ended September 30, 2007 was $16 and $37, respectively, of which $11 and $29, respectively, was attributable to the tax on current earnings, which was offset by realized pre-emergence net deferred tax assets. For the three and nine months ended September 30, 2006, the Company’s provision for income taxes was $2 and $27, respectively, of which $5 and $28, respectively, was attributable to the tax on current earnings, which was offset by realized pre-emergence net deferred tax assets. The provision for income taxes will be offset by net operating losses that existed at the emergence date, but had a full valuation allowance recorded against them. The reversal of the valuation allowance has been recorded as a reduction of intangibles to zero and thereafter as an increase in additional paid-in-capital in accordance with Statement of Position No. 90-7, “Financial Reporting by Entities in Reorganizations under the Bankruptcy Code.” This accounting treatment does not result in any change in liabilities to taxing authorities or in cash flows.

During the three and nine months ended September 30, 2007, the Company realized $2 of tax benefits as a result of the reversal of valuation allowances for deferred tax assets acquired as part of Impsat acquisition. The recognition of the tax benefits for those items (by elimination of the valuation allowance) after the acquisition date are to first reduce to zero any goodwill related to the acquisition and then to reduce to zero other non-current intangible assets related to the acquisition, and then to reduce income tax expense. This accounting treatment does not result in any change in liabilities to taxing authorities or in cash flows.

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The Company and its subsidiaries provide for income taxes based upon the tax laws and rates in the countries in which operations are conducted and income is earned. Bermuda does not impose a statutory income tax and consequently the provision for income taxes recorded relates to income earned by certain subsidiaries of the Company which are located in jurisdictions that impose income taxes.

The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109” (“FIN 48”), on January 1, 2007. This interpretation states that an “enterprise shall initially recognize the financial statement effects of a tax position where it is more likely than not, based on the technical merits, that the position will be sustained upon examination.” “More likely than not” is defined as a likelihood of greater than 50% based on the facts, circumstances and information available at the reporting date.

The total amount of the unrecognized tax benefits as of the date of adoption and September 30, 2007 was $11 and $16, respectively. There was no impact to the January 1, 2007 balance of accumulated deficit upon adoption of FIN 48.

Included in the balance of unrecognized tax benefits at January 1, 2007, are $4 of tax benefits that, if recognized, would affect the effective tax rate. The Company also recognizes interest accrued related to unrecognized tax benefits and income tax contingencies in interest expense and penalties in income tax expense. The Company had approximately $16 and $11 for the payment of interest and penalties accrued in other current liabilities and other deferred liabilities at September 30, 2007 and December 31, 2006, respectively. It is not expected that the amount of unrecognized tax benefits will change significantly in the next 12 months.

Subsequent to June 30, 2007, the Company received notification from the Internal Revenue Service that its audit of the Company’s 2002 and 2003 tax years has resulted in the tax returns being accepted as filed, without change. Subsequent to September 30, 2007, the Company received notification from the IRS that its audit of the Company’s 2004 tax year has resulted in that tax return being accepted as filed, without change. Accordingly, the Company is no longer subject to U.S. federal income tax examination for periods prior to 2005. With respect to the United Kingdom, as of September 30, 2007, the Company is no longer subject to income tax inquiries by Her Majesty’s Revenue & Customs for the years up to and including 2003. The Company is also subject to taxation in various states and other foreign jurisdictions.

11. CONTINGENCIES

From time to time, the Company is party to various legal proceedings in the ordinary course of business or otherwise. In accordance with SFAS No. 5, “Accounting for Contingencies,” the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Litigation is inherently unpredictable and it is possible that cash flows or results of operations could be materially and adversely affected in any particular period by the unfavorable resolution or disposition of these legal proceedings. The following is a description of certain material legal proceedings involving the Company that were commenced or were pending during the nine months ended September 30, 2007.

AT&T Inc. (formally SBC Communications Inc.) Claim

AT&T Inc. (“AT&T”) has asserted that the Company is engaging in the misrouting of traffic through third-party intermediaries for the purpose of avoiding access charges payable to AT&T’s local exchange carrier (“LEC”) affiliates. AT&T asserted that the Company owed it $19 through July 15, 2004. The Company responded to AT&T denying the claim in its entirety.

On November 17, 2004, AT&T’s LEC affiliates commenced an action against the Company and other defendants in the U.S. District Court for the Eastern District of Missouri. The complaint alleges that the Company, through certain unnamed intermediaries, which are characterized as “least cost routers,” terminated long distance traffic in a manner designed to avoid the payment of interstate and intrastate access charges.

The complaint alleges five causes of action: (1) breach of federal tariffs; (2) breach of state tariffs; (3) unjust enrichment (in the alternative to the tariff claims); (4) fraud; and (5) civil conspiracy. Although the complaint does not contain a specific claim for damages, plaintiffs allege that they have been damaged in the amount of

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approximately $20 for the time period of February 2002 through August 2004. The complaint also seeks an injunction against the use of “least cost routers” and the avoidance of access charges. The Company filed a motion to dismiss the complaint on January 18, 2005, which motion was mooted by the filing of a first amended complaint on February 4, 2005. The first amended complaint added as defendants five competitive local exchange carriers and certain of their affiliates (none of which are affiliated with the Company) and re-alleged the same five causes of action. The Company filed a motion to dismiss the first amended complaint on March 4, 2005. On August 23, 2005, the Court referred a comparable case to the Federal Communications Commission (“FCC”) and the FCC has sought comments on the issues referred by the Court. The Company filed comments in the two declaratory judgment proceedings occasioned by the Court’s referral. On February 7, 2006, the Court entered an order: (a) dismissing AT&T’s claims against Global Crossing to the extent that such claims arose prior to December 9, 2003 by virtue of the injunction contained in the joint plan of reorganization (the “Plan of Reorganization”) of the Company’s predecessor and a number of its subsidiaries (collectively, the “GC Debtors”) pursuant to chapter 11 of title 11 of the United States Code which became effective on that date; and (b) staying the remainder of the action pending the outcome of the referral to the FCC described above. On February 22, 2006, AT&T moved the Court to reconsider its decision of February 7, 2006 to the extent that it dismissed claims that arose prior to December 9, 2003. The Company filed its response to the motion on March 6, 2006, requesting that the Court deny the motion. On May 31, 2006, the Court entered an order denying plaintiffs’ motion for reconsideration without prejudice.

Claim by the U.S. Department of Commerce

A claim was filed in the Company’s bankruptcy proceedings by the U.S. Department of Commerce (the “Commerce Department”) on October 30, 2002 asserting that an undersea cable owned by Pacific Crossing Limited, the Company’s former subsidiary (“PCL”), violates the terms of a Special Use permit issued by the National Oceanic and Atmospheric Administration (“NOAA”). The Company believes responsibility for the asserted claim rests entirely with PCL. On November 7, 2003, the Company and the Global Crossing Creditors’ Committee filed an objection to this claim with the Bankruptcy Court. Subsequently, the Commerce Department agreed to limit the size of the pre-petition portion of its claim to $14. Negotiations with PCL to resolve the remaining issues are ongoing but no final resolution has been reached. An identical claim that had been filed in the bankruptcy proceedings of PCL was settled in principle in September 2005 and was subsequently approved by the court as part of the PCL plan of reorganization confirmed in an order dated November 10, 2005. The Company has commenced preliminary discussions with NOAA as to the impact that settlement has on the claim against the Company.

Qwest Rights-of-Way Litigation

In May 2001, a purported class action was commenced against three of the Company’s subsidiaries in the U.S. District Court for the Southern District of Illinois. The complaint alleges that the Company had no right to install a fiber-optic cable in rights-of-way granted by the plaintiffs to certain railroads. Pursuant to an agreement with Qwest Communications Corporation, the Company has an indefeasible right to use (“IRU”) certain fiber-optic cables in a fiber-optic communications system constructed by Qwest within the rights-of-way. The complaint alleges that the railroads had only limited rights-of-way granted to them that did not include permission to install fiber optic cable for use by Qwest or any other entities. The action has been brought on behalf of a national class of landowners whose property underlies or is adjacent to a railroad right-of-way within which the fiber-optic cables have been installed. The action seeks actual damages in an unstated amount and alleges that the wrongs done by the Company involve fraud, malice, intentional wrongdoing, willful or wanton conduct and/or reckless disregard for the rights of the plaintiff landowners. As a result, plaintiffs also request an award of punitive damages. The Company made a demand of Qwest to defend and indemnify the Company in the lawsuit. In response, Qwest has appointed defense counsel to protect the Company’s interests.

This litigation was stayed against the Company pending the effective date of the Plan of Reorganization, and the plaintiffs’ pre-petition claims against the Company were discharged at that time in accordance with the Plan of Reorganization. By agreement between the parties, the Plan of Reorganization preserved plaintiffs’ rights to pursue any post- confirmation claims of trespass or ejectment. If the plaintiffs were to prevail, the Company could lose its ability to operate large portions of its North American network, although it believes that it would be entitled to indemnification from Qwest for any losses under the terms of the IRU agreement under which the Company originally purchased this capacity. As part of a global resolution of all bankruptcy claims asserted against the Company by Qwest, Qwest agreed to reaffirm its obligations of defense and indemnity to the Company for the assertions made in this claim. In September 2002, Qwest and certain of the other telecommunication carrier defendants filed a proposed settlement agreement in the U.S. District Court for the Northern District of Illinois. On

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July 25, 2003, the court granted preliminary approval of the settlement and entered an order enjoining competing class action claims, except those in Louisiana. The settlement and the court’s injunction were opposed by a number of parties who intervened and an appeal was taken to the U.S. Court of Appeals for the Seventh Circuit. In a decision dated October 19, 2004, the Court of Appeals reversed the approval of the settlement and lifted the injunction. The case has been remanded to the District Court for further proceedings.

Foreign Customs Tax Audit

A tax authority in South America has concluded an audit of the Company’s books and records for the years ended December 31, 2001 and 2000 and has made certain findings adverse to the Company including the following: failure to disclose discounts on certain goods imported into the country, failure to include the value of software installed on certain computer equipment, and clerical errors in filed import documents. The Company has been assessed final claim amounts in excess of $6. The Company is now engaged in litigation with the tax authority to resolve the issues raised in the assessment.

Foreign Income Tax Audit

A tax authority in South America issued a preliminary notice of findings based on an income tax audit for calendar years 2001 and 2002. The examiner’s initial findings took the position that the Company incorrectly documented its importations and incorrectly deducted its foreign exchange losses against its foreign exchange gains on loan balances. An official assessment of $26, including potential interest and penalties, was issued in 2005. The Company challenged the assessment and commenced litigation in September 2006 to resolve its dispute with the tax authority.

Claim by Pacific Crossing Limited

This claim arises out of the management of the PC-1 trans-Pacific fiber-optic cable, which was constructed, owned and operated by PCL. PCL asserts that the Company and Asia Global Crossing, another former subsidiary of the Company, breached their fiduciary duties to PCL, improperly diverted revenue derived from sales of capacity on PC-1, and failed to account for the way revenue was allocated among the corporate entities involved with the ownership and operation of PC-1. The claim also asserts that revenues derived from operation and maintenance fees were also improperly diverted and that PCL’s expenses increased unjustifiably through agreements executed by the Company and Asia Global Crossing Limited on behalf of PCL. To the extent that PCL asserted the foregoing claims were prepetition claims, PCL has now settled and released such claims against the Company.

During the pendency of the Company’s Chapter 11 proceedings, on January 14, 2003, PCL filed an administrative expense claim in the GC Debtors’ bankruptcy court for $8 in post-petition services plus unliquidated amounts arising from the Company’s alleged breaches of fiduciary duty and misallocation of PCL’s revenues. The Company objected to the claim and asserted that the losses claimed were the result of operational decisions made by PCL management and its corporate parent, Asia Global Crossing. On February 4, 2005, PCL filed an amended claim in the amount of $79 claiming the Company failed to pay revenue for services and maintenance charges relating to PC-1 capacity and failed to pay PCL for use of the related cable stations and seeking to recover a portion of the monies received by the Company under a settlement agreement entered into with Microsoft Corporation and an arbitration award against Softbank. The Company filed an objection to the amended claim seeking to dismiss, expunge and/or reclassify the claim and PCL responded to the objection by filing a motion for partial summary judgment claiming approximately $22 for the capacity, operations and maintenance charges and co-location charges and up to approximately $78 for the Microsoft and Softbank proceeds. PCL’s claim for co-location charges (which comprised approximately $2 of the total claim) has now settled.

Subsequently on June 5, 2006, the parties agreed not to proceed with PCL’s partial summary judgment motion and to file a new summary judgment motion. On June 5, 2006 PCL filed a new motion for partial summary judgment claiming not less than $2 for revenues for short term leases on PC-1, not less than $6 in respect of operation and maintenance fees paid to the Company by its customers for capacity on PC-1 and an unspecified amount to be determined at trial in respect of the Microsoft/ Softbank claim. The Company filed a response to that motion on June 26, 2006, together with a cross motion for partial summary judgment disallowing certain of PCL’s administrative claims. On August 28, 2006, PCL replied to the Company’s response to PCL’s new motion for partial summary judgment and responded to the Company’s cross motion for partial summary judgment. On November 20, 2006, the Company filed its reply to PCL’s response to the Company’s cross motion for partial summary judgment.

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The parties have now agreed to mediate their competing claims (including the Company’s claim filed against PCL in its separate bankruptcy case) and the current proceedings have been stayed until completion of mediation which is due to take place on November 15, 2007.

Impsat Employee Severance Disputes

A number of former directors and executive officers of Impsat have asserted claims for separation pay, severance, commissions, pension benefits, unpaid vacation pay, breach of employment contracts and unpaid performance bonuses as a result of their separation from Impsat shortly after the acquisition of Impsat by the Company.

The Company has been in negotiations with the claimants over the amount of their claims and other issues arising out of their departure. In October 2007, a former director and officer commenced litigation seeking to recover damages from the Company for alleged separation benefits and compensation. The Company will be defending the claims vigorously.

Buenos Aires Antenna Tax Liability

The Government of the City of Buenos Aires (“GCBA”) established a tax applicable to private companies owning antennas with supporting structures, whether in service or not, in the amount set forth in the annual tariff law for the use of the public and private air space and for the installation of such antennas (the “Antenna Fees”).

Since September 2003, the GCBA has periodically notified Impsat of the Antenna Fees and requested payment. Impsat has administratively disputed each of these notifications and in the administrative proceeding questioned the legality and constitutionality of the tax on various grounds, including that: (1) air rights belong to the owner of the underlying private property and GCBA’s charge for use of privately owned air rights is confiscatory and incompatible with the constitutional right of property; (2) Argentine telecommunications law exempts the use and occupation of public air space for the purposes of providing telecommunications service from any charge; and (3) the tax that GCBA is trying to impose is excessive and confiscatory. Impsat continues to dispute the Antenna Fees and, to date, no summary collection action has been commenced by GCBA on the unpaid Antenna Fees.

Brazilian Tax Claims

In October 2004, the Brazilian tax authorities issued two tax infraction notices against Impsat for the collection of the Import Duty and the Tax on Manufactured Products, plus fines and interests. The notice informed Impsat Brazil that the taxes were levied because a specific document (Declaração de Necessidade—“Statement of Necessity”) was not provided by Impsat Brazil at the time of importation, in breach of MERCOSUR rules. Oppositions were filed on behalf of Impsat Brazil arguing that the Argentine exporter (Corning Cable Systems Argentina S.A.) complied with the MERCOSUR rules and a favorable first instance decision was granted. However, due to the amount involved, the case was remitted to the official compulsory review by the Federal Taxpayers Council. The administrative final decision is still pending.

In addition, in December 2004, the tax authorities of the State of São Paulo, in Brazil, issued an infraction notice against Impsat for collection of Tax on Distribution of Goods and Services (“ICMS”) supposedly due on the lease of movable properties by comparing such activity to communications services, on which the ICMS state tax is actually levied. A defense was filed on behalf of Impsat Brazil, arguing that the lease of assets could not be treated as a communication service subject to ICMS. The defense was rejected in the first administrative level, and an appeal to State Administrative Court was then filed, which is pending judgment. Impsat believes there are good grounds to have the tax assessment cancelled. However, if the tax assessment is not cancelled at the administrative level for any reason, judicial measures may be adopted to remove such tax assessment.

Paraguayan Government Contract Claim

The National Telecommunications Commission of Paraguay (“CONATEL”) has commenced administrative investigations against a joint venture between GC Impsat’s Argentine subsidiary and Electro Import S.A. (“JV 1”) and another joint venture between GC Impsat’s Argentine subsidiary and Loma Plata S.A. (“JV 2”), for breach of contract and breach of licensee’s obligations by each of such joint ventures.

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In December 2000, after a public bidding process, JV 1 was awarded a contract, with funding, and a universal service license for the design, supply, installation, launch, operation and maintenance of a telecommunications system for public telephones and/or phone booths in certain specified locations in Paraguay. In 2005, CONATEL initiated an administrative investigation due to an alleged breach of contract by JV 1, as well as a criminal investigation pursuant to which two officers of Impsat’s Argentine subsidiary were preliminarily indicted. As a result of such investigation, CONATEL resolved to: (i) determine JV 1’s liability as to the breach of its contract and its legal obligations as licensee of the Universal Service; (ii) revoke the license granted; (iii) terminate the contract due to JV 1’s default; (iv) impose a fine; (v) foreclose on the insurance policy; and (vi) seize the equipment already installed by JV 1.

JV 1 moved for injunctive protection and the reconsideration and annulment of the above referred resolution, based onforce majeure and violation of due process defenses. CONATEL filed a motion to dismiss such action, based on the lack of standing to sue, as well as on failure to state a claim upon which relief may be granted. A final judgment regarding CONATEL’s motions must be obtained, prior to moving forward with the following stages on this administrative claim (answer to the claim, evidentiary stage, etc.).

In September 2007, an agreement was reached with the prosecution to conditionally suspend the criminal proceedings against the Company’s employees, and to have the charges ultimately dismissed. The agreement is presently pending approval by the Court.

In 2001, after a public bidding process, JV 2 was awarded a contract, with funding, for the installation and deployment of public telephones and/or telephone booths in certain specified locations in Paraguay. JV 2 was required to install and start operating all the required equipment within twelve months of the execution of the contract. In January 2003, JV 2 requested an extension of the twelve month term from CONATEL as a result offorce majeure which prevented it from completing the installation of the committed number of remote terminals within the agreed time period. CONATEL denied the request and decided to terminate the contract based on JV 2’s default.

JV 2 then filed a claim before the Administrative Court requesting the annulment of the termination and seeking a stay of the challenged administrative acts. After the legal term to respond to JV 2’s request had lapsed, JV 2 filed a motion to continue the proceedings in CONATEL’s absence. The Administrative Court denied the motion and accepted CONATEL’s late presentation, opening the proceeding’s evidentiary period. In this connection, JV2 filed an appeal before the Supreme Court, which was rejected August 31, 2007. JV2 filed a reinstatement and clarification motion against the Supreme Court’s resolution on September 5, 2007 and a final judgment regarding such motion is currently pending.

12. RELATED PARTY TRANSACTIONS

Commercial and other relationships between the Company and ST Telemedia

During the three and nine months ended September 30, 2007, the Company provided approximately $0.0 and $0.2, respectively, of telecommunications services to subsidiaries and affiliates of the Company’s majority shareholder and parent company, Singapore Technologies Telemedia Pte. Ltd. (“ST Telemedia”). Further, during the three and nine months ended September 30, 2007, the Company received approximately $0.9 and $2.4, respectively, of telecommunication services from affiliates of ST Telemedia. During the three and nine months ended September 30, 2006, the Company provided approximately $0.0 and $0.1, respectively of telecommunications services to subsidiaries and affiliates of ST Telemedia and received approximately $0.6 and $1.5, respectively, of telecommunications services from an affiliate of ST Telemedia. Additionally, the Company accrued dividends and interest related to debt and preferred stock held by affiliates of ST Telemedia in the amounts of $8.3 and $28.7 during the three and nine months, respectively, ended September 30, 2007 and in the amounts of $8.9 and $26.1 during the three and nine months, respectively, ended September 30, 2006.

At September 30, 2007 and December 31, 2006, the Company had approximately $14.1 and $47.1, respectively, due to ST Telemedia and its subsidiaries and affiliates, and in each case nothing due from ST Telemedia and its subsidiaries and affiliates. At September 30, 2007, the amounts due to ST Telemedia and its subsidiaries and affiliates primarily relate to dividends accrued on the Company’s 2% cumulative senior convertible preferred stock and are included in “other deferred liabilities’ in the accompanying condensed consolidated balance sheet. At December 31, 2006, the amounts due to ST Telemedia and its subsidiaries and affiliates primarily relate to

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interest due under the Mandatorily Convertible Notes and dividends accrued on the Company’s 2% cumulative senior convertible preferred stock, and are included in “other current liabilities” and “other deferred liabilities,” respectively, in the accompanying condensed consolidated balance sheets. Prior to the conversion of the Mandatorily Convertible Notes into equity (see below), the Company accrued interest on the Mandatorily Convertible Notes at the annual rate of 11% due to certain provisions in the Mandatorily Convertible Notes indenture that could obligate the Company to pay interest retroactively at that rate if the Company were unable to deliver common shares upon receiving a notice of conversion from a holder of such notes.

In conjunction with the recapitalization pursuant to which the Company entered into the Term Loan Agreement, on August 27, 2007, STT Crossing Ltd converted the Mandatorily Convertible Notes into approximately 16.58 million shares of common stock (see Note 3).

Settlement with Asia Global Crossing Bankruptcy Trustee

In November 2004, the bankruptcy trustee for Asia Global Crossing Ltd, a former majority-owned subsidiary of the Company now in liquidation under Chapter 7 of the U.S. Bankruptcy Code (“AGC”), filed a lawsuit against a number of former directors and officers of AGC, including the chief executive officer and certain other senior officers of the Company. The lawsuit alleged, among other things, breaches of fiduciary duty and duty of loyalty, preferential transfers, and fraudulent conveyances, in each case arising prior to the AGC bankruptcy filing in November 2002. The Company was not named as a defendant in the lawsuit. To avoid adverse consequences to the Company that might result from protracted litigation of the matter, the Company entered into a stipulation of settlement on November 30, 2005 with (among others) the AGC bankruptcy trustee and agreed to contribute $4 to a larger settlement fund. The stipulation was approved by Judge Lynch of the U.S. District Court for the Southern District of New York on March 23, 2006. Under the terms of the settlement, the Company contributed $2 to the settlement fund in June 2006 and the remaining $2 in January 2007.

13. SEGMENT REPORTING

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”), defines operating segments as components of an enterprise for which separate financial information is available and which is evaluated regularly by the Company’s chief operating decision makers (“CODMs”) in deciding how to assess performance and allocate resources. As a result of the Impsat acquisition (see Note 5) and the establishment of a business unit management structure, the Company’s CODMs assess performance and allocate resources based on three separate operating segments which management operates and manages as strategic business units: (i) the GCUK Segment; (ii) the GC Impsat Segment; and (iii) the ROW Segment.

The GCUK Segment is a provider of managed network communications services providing a wide range of telecommunications services, including data, IP and voice services to government and other public sector organizations, major corporations and other communications companies in the United Kingdom (“UK”). GC Impsat is a provider of telecommunications, Internet and information technology services to corporate and government clients in Latin America. The ROW Segment represents the operations of Global Crossing Limited and its subsidiaries excluding the GCUK Segment and the GC Impsat Segment and comprises operations primarily in North America, with smaller operations in Europe and Latin America, serving many of the world’s largest corporations and many other telecommunications carriers with a full range of managed data and voice products and services that support a migration path to a fully converged IP environment.

The CODMs measure and evaluate the Company’s reportable segments based on Adjusted Cash EBITDA. Adjusted Cash EBITDA, as defined by the Company, is earnings before non-cash stock compensation, depreciation and amortization, interest income, interest expense, other income (expense), net, net gain (loss) on pre-confirmation contingencies, provision for income taxes and preferred stock dividends.

Management believes that Adjusted Cash EBITDA is an important part of the Company’s internal reporting and is a key measure used by management to evaluate profitability and operating performance of the Company and to make resource allocation decisions. Management believes such measure is especially important in a capital-intensive industry such as telecommunications. However, there may be important differences between the Company’s Adjusted Cash EBITDA measure and similar performance measures used by other companies. Additionally, this financial measure does not include certain significant items such as non-cash stock

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compensation, depreciation and amortization, interest income, interest expense, other income (expense) net, net gain or (loss) on pre-confirmation contingencies, provision for income taxes and preferred stock dividends. Adjusted Cash EBITDA should not be considered a substitute for net income, operating income, operating cash flows or other measures of financial performance.

The following tables provide operating financial information for the Company’s three reportable segments and a reconciliation of segment results to consolidated results. Prior period amounts are revised to reflect the change in reportable segments as discussed above.

	Three months ended September 30,						Nine months ended September 30,
	2007			2006			2007			2006
Revenues from external customers
GCUK	$	144		$	110		$	429		$	315
GC Impsat		82			—			130			—
ROW		368			356			1,086			1,068
Total consolidated	$	594		$	466		$	1,645		$	1,383
Intersegment revenues
GCUK	$	—		$	—		$	—		$	—
GC Impsat		3			—			5			—
ROW		2			—			3			—
Total	$	5		$	—		$	8		$	—
Total segment operating revenues
GCUK	$	144		$	110		$	429		$	315
GC Impsat		85			—			135			—
ROW		370			356			1,089			1,068
Less: intersegment revenues		(5	)		—			(8	)		—
Total consolidated	$	594		$	466		$	1,645		$	1,383
	Three months ended September 30,						Nine months ended September 30,
	2007			2006			2007			2006
Adjusted Cash EBITDA
GCUK	$	40		$	25		$	104		$	67
GC Impsat		21			—			30			—
ROW		13			(19	)		(60	)		(104	)
Total segments		74			6			74			(37	)
Eliminations and reconciling items		—			—			—			—
Total consolidated	$	74		$	6		$	74		$	(37	)

A reconciliation of Adjusted Cash EBITDA to Income (Loss) Applicable to Common Shareholders follows:

	Three Months Ended September 30, 2007
	GCUK			GC Impsat			ROW			Eliminations			Total Consolidated
Adjusted Cash EBITDA	$	40		$	21		$	13		$	—		$	74
Non-cash stock compensation		(1	)		(1	)		(11	)		—			(13	)
Depreciation and amortization		(24	)		(14	)		(35	)		—			(73	)
Interest income		2			1			4			(2	)		5
Interest expense		(17	)		(8	)		(28	)		2			(51	)
Other income (expense), net		2			6			(24	)		—			(16	)
Net gain on pre-confirmation contingencies		—			—			2			—			2
Provision for income taxes		(1	)		(3	)		(12	)		—			(16	)
Preferred stock dividends		—			—			(1	)		—			(1	)
Income (loss) applicable to common shareholders	$	1		$	2		$	(92	)	$	—		$	(89	)

	Three Months Ended September 30, 2006
	GCUK			ROW			Eliminations			Total Consolidated
Adjusted Cash EBITDA	$	25		$	(19	)	$	—		$	6
Non-cash stock compensation		—			1			—			1
Depreciation and amortization		(12	)		(29	)		—			(41	)
Interest income		3			4			(2	)		5
Interest expense		(13	)		(16	)		2			(27	)
Other income (expense), net		4			(6	)		—			(2	)
Net gain on pre-confirmation contingencies		—			10			—			10
Provision for income taxes		(1	)		(1	)		—			(2	)
Preferred stock dividends		—			(1	)		—			(1	)
Income (loss) applicable to common shareholders	$	6		$	(57	)	$	—		$	(51	)

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	Nine Months Ended September 30, 2007
	GCUK			GC Impsat			ROW			Eliminations			Total Consolidated
Adjusted Cash EBITDA	$	104		$	30		$	(60	)	$	—		$	74
Non-cash stock compensation		(5	)		(1	)		(41	)		—			(47	)
Depreciation and amortization		(62	)		(22	)		(102	)		—			(186	)
Interest income		7			4			12			(6	)		17
Interest expense		(52	)		(17	)		(70	)		6			(133	)
Other income (expense), net		5			(1	)		(2	)		—			2
Net gain on pre-confirmation contingencies		—			—			2			—			2
Provision for income taxes		(2	)		(5	)		(30	)		—			(37	)
Preferred stock dividends		—			—			(3	)		—			(3	)
Loss applicable to common shareholders	$	(5	)	$	(12	)	$	(294	)	$	—		$	(311	)

	Nine Months Ended September 30, 2006
	GCUK			ROW			Eliminations			Total Consolidated
Adjusted Cash EBITDA	$	67		$	(104	)	$	—		$	(37	)
Non-cash stock compensation		(1	)		(17	)		—			(18	)
Depreciation and amortization		(32	)		(82	)		—			(114	)
Interest income		5			10			(3	)		12
Interest expense		(38	)		(41	)		3			(76	)
Other income (expense), net		17			(20	)		—			(3	)
Net gain on pre-confirmation contingencies		—			29			—			29
Provision for income taxes		(1	)		(26	)		—			(27	)
Preferred stock dividends		—			(3	)		—			(3	)
Income (loss) applicable to common shareholders	$	17		$	(254	)	$	—		$	(237	)

Total assets by segment follow:

	September 30, 2007			December 31, 2006
Total Assets
GCUK	$	879		$	764
GC Impsat		627			—
ROW		1,428			1,353
Total segments		2,934			2,117
Less: Intercompany loans and receivables		(291	)		(62	)
Total consolidated assets	$	2,643		$	2,055

Unrestricted cash by segment:

	September 30, 2007		December 31, 2006
Unrestricted Cash
GCUK	$	61	$	79
GC Impsat		44		—
ROW		264		380
Total consolidated unrestricted cash	$	369	$	459

Restricted cash by segment:

	September 30, 2007		December 31, 2006
Restricted cash
GCUK	$	1	$	—
GC Impsat		23		—
ROW		38		6
Total consolidated restricted cash	$	62	$	6

Eliminations and other reconciling items include intersegment eliminations.

The Company accounts for intersegment sales of products and services and asset transfers at current market prices.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our results of operations and current financial position. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report and the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2006.

As used in this quarterly report on Form 10-Q, references to the “Company,” “we,” “us,” “our” or similar terms include Global Crossing Limited and its consolidated subsidiaries.

Cautionary Note Regarding Forward-Looking Statements

Our disclosure and analysis in this quarterly report on Form 10-Q contain certain “forward-looking statements,” as such term is defined in Section 21E of the Securities Exchange Act of 1934. These statements set forth anticipated results based on management’s plans and assumptions. From time to time, we also provide forward-looking statements in other materials we release to the public as well as oral forward-looking statements. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance or strategies. Such forward-looking statements include, but are not limited to, statements regarding:

• our services, including the development and deployment of data products and services based on Internet Protocol (“IP”) and other technologies and strategies to expand our targeted customer base and broaden our sales channels;

• the operation of our network, including with respect to the development of IP-based services;

• our liquidity and financial resources, including anticipated capital expenditures, funding of capital expenditures and anticipated levels of indebtedness and the ability to raise capital through financing activities;

• trends related to and management’s expectations regarding results of operations, required capital expenditures, integration of acquired businesses, revenues from existing and new lines of business and sales channels, and cash flows including but not limited to those statements set forth below in this Item 2; and

• sales efforts, expenses, interest rates, foreign exchange rates, and the outcome of contingencies, such as legal proceedings.

We cannot guarantee that any forward-looking statement will be realized. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements.

We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our quarterly reports on Form 10-Q and current reports on Form 8-K. Also note that we provide the following cautionary discussion of risks and uncertainties related to our businesses. These are factors that we believe, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by Section 21E of the Securities Exchange Act of 1934. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

Our forward-looking statements are subject to a variety of factors that could cause actual results to differ significantly from current beliefs and expectations. In addition to the risk factors identified under the captions below, the operations and results of our business are subject to general risks and uncertainties such as those relating to general economic conditions and demand for telecommunications services.

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Risks Related to Liquidity and Financial Resources

• We have incurred substantial operating losses and negative cash flows from operating and investing activities, which have continued in 2007. We may be unable to improve operating results and/or achieve positive cash flows in the future, which could prevent us from meeting our long-term liquidity requirements.

• We believe that economies of scale will allow us to grow revenues while incurring incremental costs that are proportionately lower than those applicable to our existing business. If the increased costs required to support our revenue growth turn out to be greater than anticipated, we may be unable to improve our profitability and/or cash flows even if revenue growth goals are achieved.

• The sale of indefeasible rights of use (“IRUs”) and similar prepayments for services are an important source of cash flows for us, representing tens of million of dollars of cash in most quarters. If customers’ buying patterns were to change such that those traditionally buying IRUs were to switch to monthly payment plans, our liquidity would be adversely affected. In addition, the large dollar amounts and long sales cycles typically associated with IRU sales increase the volatility of our quarter-to-quarter cash flow results.

• Cost of access represents our single largest expense and gives rise to material current liabilities. During the first nine months of 2007, we deemed it necessary to accelerate payments to key access vendors to reduce days payable outstanding, which resulted in increased demands on our liquidity. If such demands were to continue to a greater degree than anticipated, we could be prevented from meeting our cash flow projections and our long-term liquidity requirements.

• The covenants in our debt instruments restrict our financial and operational flexibility. These covenants include significant restrictions on the ability of entities in any one of our segments from making intercompany funds transfers to entities in any other segment. We are also subject to financial maintenance and other covenants the breach of which could result in our long term debt instruments becoming immediately due and payable.

• We cannot predict our future tax liabilities. If we become subject to increased levels of taxation, our results of operations could be adversely affected.

• As a result of the Impsat acquisition, we may be subject to significant liabilities due to taxes on antennas imposed by City of Buenos Aires and other municipalities in Argentina.

• Our international corporate structure limits the availability of our consolidated cash resources for intercompany funding purposes and reduces our financial flexibility. Legal restrictions arising out of our international corporate structure include prohibitions on paying dividends in excess of retained earnings (or similar concepts under applicable law), which prohibition applies to most of our subsidiaries given their history of operating losses, as well as foreign exchange controls on the expatriation of funds that are particularly prevalent in Latin America.

Risks Related to our Operations

• Our rights to the use of the dark fiber that make up our network may be affected by the financial health of our fiber providers.

• We may not be able to continue to connect our network to incumbent carriers’ networks or maintain Internet peering arrangements on favorable terms.

• The Network Security Agreement imposes significant requirements on us. A violation of the agreement could have severe consequences.

• It is expensive and difficult to switch new customers to our network, and lack of cooperation of incumbent carriers can slow the new customer connection process.

• The operation, administration, maintenance and repair of our systems are subject to risks that could lead to disruptions in our services and the failure of our systems to operate as intended for their full design lives.

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• The failure of our operations support systems to perform as we expect could impair our ability to retain customers and obtain new customers, or provision their services, or result in increased capital expenditures.

• While capital expenditures have remained relatively stable at levels significantly below those prevailing prior to our bankruptcy reorganization, such levels may not be sustainable in the future, particularly as our business continues to grow.

• Intellectual property and proprietary rights of others could prevent us from using necessary technology.

• We may not be successful in integrating the Impsat business or may not realize the benefits originally anticipated from this acquisition.

• We have substantial international operations and face political, legal and other risks from our operations in foreign jurisdictions. These risks have significantly increased as a result of our acquisition of the Latin American operations of Impsat.

• We are subject to the Foreign Corrupt Practices Act (the “FCPA”), and our failure to comply with FCPA and regulations hereunder could result in penalties which could harm our reputation and have a material adverse effect on our business, results of operations and financial condition.

• Many of our customers deal predominantly in foreign currencies, so we are exposed to exchange rate risks and our net loss may suffer due to currency translations.

• Many of our most important government customers have the right to terminate their contracts with us if a change of control occurs or to reduce the services they purchase from us.

• Our forecasts of customer and market demand could prove to be inaccurate or we could lose one or more customers that provide us with significant revenues.

Risks Related to Competition and our Industry

• The prices that we charge for our services have been decreasing, and we expect that such decreases will continue over time.

• Technological advances and regulatory changes are eroding traditional barriers between formerly distinct telecommunications markets, which could increase the competition we face and put downward pressure on prices.

• Many of our competitors have superior resources, which could place us at a cost and price disadvantage.

• Our selection of technology could prove to be incorrect, ineffective or unacceptably costly, which would limit our ability to compete effectively.

• Our operations are subject to extensive regulation in the United States (“U.S.”) and abroad and require us to obtain and maintain a number of governmental licenses and permits. If we fail to comply with those regulatory requirements or obtain and maintain those licenses and permits, we may not be able to conduct our business. Moreover, those regulatory requirements could change in a manner that significantly increases our costs or otherwise adversely affects our operations.

• Terrorist attacks and other acts of violence or war may adversely affect the financial markets and our business and operations.

Risks Related to our Common Stock

• We have a very substantial overhang of common stock and a majority shareholder that owns a substantial portion of our common stock and preferred stock convertible into common stock. Future sales of our common stock could cause substantial dilution and future share purchases by our majority shareholder will decrease the liquidity of our common stock, each of which may negatively affect the market price of our shares and impact our ability to raise capital.

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• A subsidiary of ST Telemedia is our majority stockholder and the voting rights of other stockholders are therefore limited in practical effect.

• Other than ownership by ST Telemedia and its affiliates, which can not exceed 66.25% without prior Federal Communications Commission (“FCC”) approval, federal law generally prohibits more than 25% of our capital stock from being owned by foreign persons.

Other Risks

• We are exposed to contingent liabilities, including those related to Fibernet and Impsat, that could result in material losses that we have not reserved against.

• Our real estate restructuring reserve represents a material liability, the calculation of which involves significant estimation.

Executive Summary

Overview

We are communications solutions providers, offering a suite of IP and legacy telecommunications services in most major business centers in the world. We serve many of the world’s largest corporations and many other telecommunications carriers, providing a full range of managed data and voice products and services that support a migration path to a fully converged IP environment. We offer these services using a global IP-based network that directly connects more than 390 cities in more than 30 countries and delivers services to more than 600 cities in more than 60 countries around the world. The vast majority of our revenues are generated based on monthly services. As a result of the May 9, 2007 acquisition of Impsat Fiber Networks, Inc. and its subsidiaries (collectively, “Impsat”) (see Note 5) and the establishment of a business unit management structure, we report financial results based on three separate operating segments (i) Global Crossing (UK) Telecommunications Limited (“GCUK”) and its subsidiaries (collectively the “GCUK Segment”); (ii) GC Impsat Holdings I Plc “GC Impsat”) and its subsidiaries (collectively, the “GC Impsat Segment”); and (iii) GCL and its other subsidiaries (collectively, the “Rest of World Segment” or “ROW Segment”).

Third Quarter 2007 Highlights

Revenues from our enterprise, carrier data and indirect channels business were higher by $164 million, or 52%, in the third quarter of 2007 compared to the same period in 2006. This increase was primarily the result of the inclusion of Fibernet and Impsat in our results since October 11, 2006 and May 9, 2007, respectively, and higher revenues at our GCUK and ROW segments, driven by new customers and existing customer base growth in specific enterprise and carrier target markets.

In conjunction with the recapitalization pursuant to which we entered into a $350 million senior secured term loan agreement during the second quarter of 2007 (the “Term Loan Agreement”), on August 27, 2007, STT Crossing Ltd effectively converted $250 million original principal amount of mandatorily convertible notes due December 2008 (the “Mandatorily Convertible Notes”) into approximately 16.58 million shares of common stock. Upon such conversion, the debt interests of STT Crossing Ltd. were terminated. As consideration for the subordination of the Mandatorily Convertible Notes to the Term Loan Agreement through the conversion date, we paid STT Crossing Ltd. a consent fee of $7.5 million in cash shortly after closing in the second quarter 2007 and, at conversion of the Mandatorily Convertible Notes, an additional fee paid in shares of common stock valued at $10.5 million. The 16.58 million shares of common stock received by STT Crossing Ltd. included the shares representing the $10.5 million consent fee as well as shares valued at $30 million representing foregone interest through the original scheduled maturity date of the Mandatorily Convertible Notes. The $18 million of consent fees was considered a debt modification and was recorded as a reduction in the carrying value of the Mandatorily Convertible Notes. The $30 million of foregone interest is considered an inducement to convert and was recorded in other income (expense), net upon conversion of the Mandatorily Convertible Notes. At conversion, the carrying value of and all accrued interest on the notes, as well as the consent fee paid in common shares, all of which together totaled $329, were reclassified to common stock and additional paid in capital.

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During the nine months ended September 30, 2007, we posted a net operating loss of $159 million and had net cash used by operating and investing activities of $391 million. Cash flows used by operating and investing activities included the following items not expected to impact future quarters: (i) $76 million for the purchase price of Impsat; (ii) $28 million for the cash collateralization of existing letters of credit; and (iii) $22 million due to the placement of a portion of the GC Impsat Notes proceeds into a restricted debt service reserve account. In addition, operating cash flows for the period were impacted by a significant reduction in days payable outstanding with key access vendors, as well as $10 million in severance payments primarily driven by the May 10, 2007 restructuring plan.

Going forward, we expect our operating results to improve as a result of: (i) the continued growth of our higher margin enterprise, carrier data and indirect channels business, including the economies of scale expected to result from such growth; (ii) the inclusion of Fibernet and Impsat in our results and the cost savings and other benefits anticipated to result from the successful integration of these businesses; (iii) cost savings resulting from the May 10, 2007 restructuring plan and prior restructuring activities; and (iv) our cost reduction initiatives to optimize the access network and effectively lower unit prices. Over time, we expect these improvements to more than offset the increased interest expense resulting from the significant increase in our debt balance during the nine months ended September 30, 2007. Thus, in the long-term we expect to generate positive cash flow from operating activities. However, in the short term we anticipate using capital leases and other forms of equipment financing or cash on hand to compensate for the cash used in operating and investing activities. Although operational constraints require us to maintain significant minimum cash balances in each of our segments, we believe that our unrestricted cash balances are sufficient to enable us to reach the point of generating recurring positive cash flow from operating activities.

As a result of the Impsat acquisition, we became a regional provider of collocation and managed hosting services in Latin America. We will be expanding these service offerings to our European markets. Co-location and managed hosting services provide enterprise and carrier customers technical space, power, communications access and security for their application servers. We expect the capital investment to be relatively modest and expect to convert existing idle real estate facilities currently included in our restructuring reserve to productive assets in the fourth quarter of 2007.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon the accompanying condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Although these estimates are based on our knowledge of current events, our actual amounts and results could differ from those estimates. The estimates made are based on historical factors, current circumstances, and the experience and judgment of our management, who continually evaluate the judgments, estimates and assumptions and may employ outside experts to assist in the evaluations.

Certain of our accounting policies are deemed “critical,” as they are both most important to the financial statement presentation and require management’s most difficult, subjective or complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a discussion of our critical accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2006, as management believes that there have been no significant changes regarding our critical accounting policies since such time.

New Accounting Pronouncements

See Footnote 2 and 10, “Basis of Presentation” and “Income Taxes” to our condensed consolidated financial statements for a full description of recently issued accounting pronouncements including the date of adoption and effects on our results of operations and financial position, where applicable.

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Results of operations for the three and nine months ended September 30, 2007 compared to the three and nine months ended September 30, 2006:

Consolidated Results

	Three Months Ended September 30,						Increase/(Decrease)					Nine Months Ended September 30,						Increase/(Decrease)
	2007			2006			$			%		2007			2006			$			%
	(dollars in millions)
Revenue	$	594		$	466		$	128		27	%	$	1,645		$	1,383		$	262		19	%
Cost of revenue (excluding depreciation and amortization, shown separately below):
Cost of access		(288	)		(275	)		13		5	%		(853	)		(846	)		7		1	%
Real estate, network and operations		(103	)		(69	)		34		49	%		(292	)		(219	)		73		33	%
Third party maintenance		(26	)		(22	)		4		18	%		(75	)		(67	)		8		12	%
Cost of equipment sales		(18	)		(15	)		3		20	%		(66	)		(43	)		23		53	%
Total cost of revenue		(435	)		(381	)							(1,286	)		(1,175	)
Selling, general and administrative		(98	)		(78	)		20		26	%		(332	)		(263	)		69		26	%
Depreciation and amortization		(73	)		(41	)		32		78	%		(186	)		(114	)		72		63	%
Total operating expenses		(606	)		(500	)							(1,804	)		(1,552	)
Operating loss		(12	)		(34	)							(159	)		(169	)
Other income (expense):
Interest income		5			5			—		NM			17			12			5		42	%
Interest expense		(51	)		(27	)		24		89	%		(133	)		(76	)		57		75	%
Other income (expense), net		(16	)		(2	)		14		NM			2			(3	)		(5	)	NM
Loss from continuing operations before reorganization items and provision for income taxes		(74	)		(58	)							(273	)		(236	)
Net gain on preconfirmation contingencies		2			10			(8	)	(80	)%		2			29			(27	)	(93	%)
Loss from continuing operations before provision for income taxes		(72	)		(48	)							(271	)		(207	)
Provision for income taxes		(16	)		(2	)		14		NM			(37	)		(27	)		10		37	%
Net loss		(88	)		(50	)							(308	)		(234	)
Preferred stock dividends		(1	)		(1	)		—		NM			(3	)		(3	)		—		NM
Loss applicable to common shareholders	$	(89	)	$	(51	)						$	(311	)	$	(237	)

NM—zero balances and comparisons from positive to negative numbers are not meaningful.

Discussion of all significant variances:

Revenue

	Three Months Ended September 30,					$ Increase/ (Decrease)			% Increase/ (Decrease)		Nine Months Ended September 30,					$ Increase/ (Decrease)			% Increase/ (Decrease)
	2007			2006							2007			2006
	(in millions)										(in millions)
GCUK
Enterprise, carrier data and indirect channels	$	141		$	108	$	33		31	%	$	421		$	309	$	112		36	%
Carrier voice		3			2		1		50	%		8			6		2		33	%
Intersegment revenues		—			—		—		NM			—			—		—		NM
	$	144		$	110	$	34		31	%	$	429		$	315	$	114		36	%
GC Impsat
Enterprise, carrier data and indirect channels	$	80		$	—	$	80		NM		$	127		$	—	$	127		NM
Carrier voice		2			—		2		NM			3			—		3		NM
Intersegment revenues		3			—		3		NM			5			—		5		NM
	$	85		$	—	$	85		NM		$	135		$	—	$	135		NM
ROW
Enterprise, carrier data and indirect channels	$	256		$	205	$	51		25	%	$	742		$	589	$	153		26	%
Carrier voice		110			149		(39	)	(26	)%		340			473		(133	)	(28	)%
Other		2			2		—		NM			4			6		(2	)	(33	)%
Intersegment revenues		2			—		2		NM			3			—		3		NM
	$	370		$	356	$	14		4	%	$	1,089		$	1,068	$	21		2	%
Intersegment eliminations		(5	)		—		(5	)	NM			(8	)		—		(8	)	NM
Consolidated revenues	$	594		$	466	$	128		27	%	$	1,645		$	1,383	$	262		19	%

NM—Not Meaningful.

Our consolidated revenues are separated into two businesses based on our target markets and sales structure: (i) enterprise, carrier data and indirect channels and (ii) carrier voice.

The enterprise, carrier data and indirect channels business consists of: (i) the provision of voice, data and collaboration services to all customers other than carriers and consumers; (ii) the provision of data products, including IP, transport and capacity services, to telecommunications carrier customers; and (iii) the provision of voice, data and managed services to or through business relationships with other telecommunications carriers, sales agents and system integrators. The carrier voice business consists of the provision of predominantly United States domestic and international long distance voice services to carrier customers.

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Our consolidated revenues increased in the three and nine months ended September 30, 2007 compared with the same periods in 2006 primarily as the result of higher revenues at our GCUK and ROW segments, and the inclusion of Fibernet and Impsat in our results since October 11, 2006 and May 9, 2007, respectively. Revenue growth reflected strong demand across all of our segments for broadband lease, managed services and IP VPN data products, partially offset by decreased carrier voice revenues as a result of decreases in sales volumes due to our strategy to reduce our emphasis on this market. We expect our carrier voice business revenue to remain relatively flat going forward.

See “Segment Results” in this Item 2 for further discussion of results by segment.

Cost of revenue.Cost of revenue primarily includes the following: (i) cost of access, including usage-based voice charges paid to local exchange carriers and interexchange carriers to originate and/or terminate switched voice traffic and charges for leased lines for dedicated facilities and local loop (“last mile”) charges from both domestic and international carriers; (ii) real estate, network and operations charges which include (a) employee-related costs such as salaries and benefits, incentive compensation and stock-related expenses for employees directly attributable to the operation of our network, (b) real estate expenses for all non-restructured technical sites, and (c) other non-employee related costs incurred to operate our network, such as license and permit fees and professional fees; (iii) third party maintenance costs incurred in connection with maintaining the network; and (iv) cost of equipment sales, which includes the software, hardware, equipment and maintenance sold to our customers.

Cost of Access

	Three Months Ended September 30,					$ Increase/ (Decrease)			% Increase/ (Decrease)		Nine Months Ended September 30,					$ Increase/ (Decrease)			% Increase/ (Decrease)
	2007			2006							2007			2006
	(in millions)										(in millions)
GCUK
Enterprise, carrier data and indirect channels	$	38		$	33	$	5		15	%	$	118		$	93	$	25		27	%
Carrier voice		2			2		—		NM			6			6		—		NM
Intersegment cost of access		—			—		—		NM			—			—		—		NM
	$	40		$	35	$	5		14	%	$	124		$	99	$	25		25	%
GC Impsat
Enterprise, carrier data and indirect channels	$	21		$	—	$	21		NM		$	33		$	—	$	33		NM
Carrier voice		1			—		1		NM			2			—		2		NM
Intersegment cost of access		2			—		2		NM			3			—		3		NM
	$	24		$	—	$	24		NM		$	38		$	—	$	38		NM
ROW
Enterprise, carrier data and indirect channels	$	129		$	108	$	21		19	%	$	391		$	328	$	63		19	%
Carrier voice		96			131		(35	)	(27	)%		302			418		(116	)	(28	)%
Other		1			1		—		NM			1			1		—		NM
Intersegment cost of access		2			—		2		NM			3			—		3		NM
	$	228		$	240	$	(12	)	(5	)%	$	697		$	747	$	(50	)	(7	)%
Intersegment eliminations		(4	)		—		(4	)	NM			(6	)		—		(6	)	NM
Consolidated cost of access	$	288		$	275	$	13		5	%	$	853		$	846	$	7		1	%

NM—Not Meaningful.

Cost of access increased in the three and nine months ended September 30, 2007 compared with the same periods of 2006 primarily driven by increases in access charges in our GCUK, GC Impsat and ROW segments enterprise, carrier data and indirect channels business. The increase in cost of access was partially offset by: (i) our cost reduction initiatives to optimize the access network and effectively lower unit prices and (ii) lower carrier voice sales volume in our ROW Segment. Included in our results were $2 million and $14 million related to Fibernet for the three and nine months ended September 30, 2007, respectively, and $22 million and $35 million related to Impsat (net of intersegment cost of access) for the three and nine months ended September 30, 2007, respectively.

        Real estate, network and operations increased in the three and nine months ended September 30, 2007 compared with the same periods in 2006 primarily due to: (i) a $4 million and $15 million increase, respectively, in salaries and benefits as a result of increased headcount and salary increases; (ii) a $9 million and $18 million increase, respectively, in stock and cash compensation primarily as a result of the retention and motivation awards granted to employees in the first quarter of 2007 and accruing the 2007 annual bonus program at a higher rate than 2006; (iii) an increase of $5 million and $15 million, respectively, resulting from including Fibernet in our results since October 11, 2006; and (iv) an increase of $12 million and $18 million, respectively, resulting from including Impsat in our results since May 9, 2007.

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Third-party maintenance increased in the three and nine months ended September 30, 2007 as compared with the same periods in 2006 primarily due to the inclusion of Fibernet and Impsat in our results since October 11, 2006 and May 9, 2007, respectively. During the nine months ended September 30, 2007, we identified certain third-party maintenance costs to be eliminated.

We expect our real estate, network and operations salaries and benefits charges to decrease in our GCUK and ROW Segments in the fourth quarter of 2007 as a result of headcount decreases from both the May 10, 2007 restructuring plan and attrition, together representing an estimated reduction in annualized cost of approximately $10 million.

Cost of equipment sales increased in the three and nine months ended September 30, 2007 compared with the same periods in 2006 primarily due to increased equipment, conferencing and managed services sales.

Selling, general and administrative expenses (“SG&A”).SG&A expenses primarily consist of: (i) employee-related costs such as salaries and benefits, incentive compensation and stock-related expenses for employees not directly attributable to the operation of our network; (ii) real estate expenses for all non-restructured administrative sites; (iii) bad debt expense; (iv) non-income taxes, including property taxes on owned real estate and trust fund related taxes such as gross receipts taxes, franchise taxes and capital taxes; (v) restructuring costs; and (vi) regulatory costs, insurance, telecommunications costs, professional fees and license and maintenance fees for internal software and hardware.

The increase in SG&A in the three months ended September 30, 2007 compared with the same period in 2006 is primarily due to: (i) a $10 million increase in stock and cash compensation primarily as a result of the retention and motivation awards granted to employees in the first quarter of 2007 and accruing the 2007 annual bonus program at a higher rate than 2006; (ii) an increase of $2 million resulting from including Fibernet in our results since October 11, 2006 and (iii) an increase of $24 million resulting from including Impsat in our results since May 9, 2007. This increase was partially offset by a decrease in restructuring charges of $11 million primarily due to the settlement of existing real estate lease agreements for technical facilities and a decrease of $2 million in salaries and benefits primarily as a result of our May 10, 2007 restructuring plan.

The increase in SG&A in the nine months ended September 30, 2007 compared with the same period in 2006 is primarily due to: (i) a $7 million increase in salaries and benefits primarily as a result of increased sales commissions and salary increases; (ii) a $13 million increase in stock and cash compensation primarily as a result of the retention and motivation awards granted to employees in the first quarter of 2007 and accruing the 2007 annual bonus program at a higher rate than 2006; (iii) an increase of $7 million resulting from including Fibernet in our results since October 11, 2006; (iv) an increase of $40 million resulting from including Impsat in our results since May 9, 2007; and (v) an increase in restructuring charges of $11 million due to the May 10, 2007 restructuring plan. This increase was partially offset by a decrease in restructuring charges of $11 million primarily due to the settlement and termination of existing real estate lease agreements for the technical facilities during the third quarter of 2007.

We expect our SG&A salaries and benefits charges to decrease in our GCUK and ROW Segments in the fourth quarter of 2007 as a result of headcount decreases from both the May 10, 2007 restructuring plan and attrition, together representing an estimated reduction in annualized cost of approximately $15 million.

Depreciation and amortization.Depreciation and amortization consists of depreciation of property and equipment, including leased assets, amortization of cost of access installation costs and amortization of identifiable intangibles. Depreciation and amortization increased in the three and nine months ended September 30, 2007 compared with the same periods in 2006 primarily due to: (i) an increased asset base as a result of fixed asset additions, including capital leases; (ii) amortization of acquired intangible assets related to the Fibernet and Impsat acquisitions; (iii) inclusion of Fibernet’s results in our results since October 11, 2006 and (iv) inclusion of Impsat’s results in our results since May 9, 2007.

Interest income.Interest income increased in the nine months ended September 30, 2007 compared with the same period in 2006 primarily due to higher average cash balances as a result of issuing the GC Impsat Notes and $350 million Term Loan Agreement.

Interest expense.Interest expense includes interest related to indebtedness for money borrowed, capital lease obligations, certain tax liabilities and amortization of deferred finance costs. The increase in interest expense for the three and nine months ended September 30, 2007 compared with the same periods in 2006 is primarily a result of incurring additional indebtedness and capital lease obligations, including the $144

31

million aggregate principal amount of 5% convertible senior notes due 2011 (the “5% Convertible Notes”) which were issued by GCL on May 30, 2006, the 11.75% senior secured notes issued by GCUK on December 28, 2006, the GC Impsat Notes issued by GC Impsat on February 14, 2007, the $350 million Term Loan Agreement incurred by GCL during the second quarter of 2007 and amortization of deferred financing costs related to these debt obligations. The increase in interest expense for the three months ended September 30, 2007 compared to the same period of the prior year was slightly offset by decreased interest related to the STT Crossing Ltd. conversion of the Mandatorily Convertible Notes into approximately 16.58 million shares of common stock on August 27, 2007.

Other income (expense), net.Other income (expense), net consists of foreign currency impacts on transactions, gains and losses on the sale of assets including property and equipment, marketable securities and other assets and other non-operating items.

Other expense, net increased in the three months ended September 30, 2007 compared to the same period of 2006 primarily as a result of recording a $30 million inducement fee related to the early conversion of STT convertible debt to equity, partially offset by foreign exchange gains in the current year period compared to foreign exchange losses in the prior year period.

Other expense, net decreased in the nine months ended September 30, 2007 compared to the same period of 2006 primarily as a result of a $27 million non-cash, non-taxable gain from deemed settlement of pre-existing arrangements with Impsat on the date of its acquisition and foreign exchange gains in the current year period, mostly offset by recording a $30 million inducement fee related to the early conversion of STT debt to equity as well as expensing of $10 million deferred financing fees related to: (i) the Bank of America working capital facility, which was retired during the second quarter of 2007; and (ii) a bridge loan commitment which was terminated upon issuance of the GC Impsat Notes.

Net gain on pre-confirmation contingencies.During the three and nine months ended September 30, 2007 and 2006, respectively, we settled various third-party disputes and revised our estimated liability for certain contingencies related to periods prior to our emergence from Chapter 11 proceedings. We accounted for these contingencies in accordance with AICPA Practice Bulletin 11—”Accounting for Preconfirmation Contingencies in Fresh Start Reporting” and recorded a net gain on the settlements and/or changes in estimated liabilities.

Segment Results

As a result of the Impsat acquisition (see Note 5), our chief operating decision makers (“CODMs”) assess performance and allocate resources based on three separate operating segments which we operate and manage as strategic business units: (i) the GCUK Segment; (ii) the GC Impsat Segment; and (iii) the ROW Segment.

The GCUK Segment is a provider of managed network communications services providing a wide range of telecommunications services, including data, IP and voice services to government and other public sector organizations, major corporations and other communications companies in the United Kingdom (“UK”). The GC Impsat Segment is a provider of telecommunications, Internet and information technology services to corporate and government clients in Latin America. The ROW Segment represents the operations of Global Crossing Limited and its subsidiaries excluding the GCUK and GC Impsat Segments and comprises operations primarily in North America, with smaller operations in Europe and Latin America, serving many of the world’s largest corporations and many other telecommunications carriers with a full range of managed data and voice products and services that support a migration path to a fully converged IP environment.

The CODMs measure and evaluate our reportable segments based on Adjusted Cash EBITDA. Adjusted Cash EBITDA, as defined by us, is earnings before non-cash stock compensation, depreciation and amortization, interest income, interest expense, other income (expense), net, net gain (loss) on pre-confirmation contingencies, provision for income taxes, and preferred stock dividends.

We believe that Adjusted Cash EBITDA is an important part of our internal reporting and is a key measure used by us to evaluate our profitability and operating performance and to make resource allocation decisions. We believe such measure is especially important in a capital-intensive industry such as telecommunications.

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However, there may be important differences between the Company’s Adjusted Cash EBITDA measure and similar performance measures used by other companies. Additionally, this financial measure does not include certain significant items such as non-cash stock compensation, depreciation and amortization, interest income, interest expense, other income (expense) net, net gain or (loss) on pre-confirmation contingencies, provision for income taxes and preferred stock dividends. Adjusted Cash EBITDA should not be considered a substitute for net income, operating income, operating cash flows or other measures of financial performance.

GCUK segment:

Revenue

	Three Months Ended September 30,				$ Increase/ (Decrease)		% Increase/ (Decrease)		Nine Months Ended September 30,				$ Increase/ (Decrease)		% Increase/ (Decrease)
	2007		2006						2007		2006
	(in millions)								(in millions)
GCUK
Enterprise, carrier data and indirect channels	$	141	$	108	$	33	31	%	$	421	$	309	$	112	36	%
Carrier voice		3		2		1	50	%		8		6		2	33	%
Intersegment revenues		—		—		—	NM			—		—		—	NM
	$	144	$	110	$	34	31	%	$	429	$	315	$	114	36	%

Revenues for our GCUK segment increased in the three and nine months ended September 30, 2007 compared with the same periods in 2006 primarily as a result of the inclusion of Fibernet in our results since October 11, 2006 and positive foreign exchange fluctuations. The net effect of Fibernet on our consolidated results was $24 million and $73 million increase to GCUK segment revenues for the three and nine months ended September 30, 2007, respectively.

Two of GCUK’s principal customer relationships are with OGC buying solutions, with which GCUK has a framework contract for the provision of a managed telecom service, and with Camelot, the current holder of the license to operate the UK National Lottery. The managed telecom service contract was for an initial term of 10 years; this term was initially extended until the end of December 2008 and in June 2007 was further extended until the end of December 2011. Camelot’s current license to operate the National Lottery expires in January 2009. On August 31, 2007, Camelot entered into an enabling agreement with the National Lottery Commission which officially appoints Camelot as operator of the National Lottery for a 10 year period from February 2009. On October 9, 2007, Camelot announced its intention to replace its existing landline-based ISDN network supplied by GCUK with a broadband satellite communications network supplied by another service provider. Although we cannot determine the precise impact on GCUK until we become fully aware of Camelot’s network transition plans, we do not expect to retain the same level of services or revenue from our relationship with Camelot.

Adjusted Cash EBITDA

	Three Months Ended September 30,					Nine Months Ended September 30,
			$ Increase/ (Decrease)	% Increase/ (Decrease)				$ Increase/ (Decrease)	% Increase/ (Decrease)
	2007	2006				2007	2006
	(in millions)					(in millions)
GCUK
Adjusted Cash EBITDA	40	25	15	60	%	104	67	37	55	%

Adjusted Cash EBITDA in this segment increased in the three and nine months ended September 30, 2007 compared with the same periods in 2006 primarily as a result of the increase in revenue described above, partially offset by higher access charges resulting from additional usage volume, higher costs for our real estate, network and operations and SG&A expenses. The higher real estate, network and operations costs and SG&A expenses resulted primarily from higher employee-related costs and higher facilities-based expenses. The employee-related costs resulted from increased headcount driven by the Fibernet acquisition and higher commissions paid to sales employees. In addition, included in the year-to-date comparison are higher employee severance charges related to our May 10, 2007 restructuring plan. The higher facilities based expenses were driven by higher facilities rent and real estate taxes.

33

GC Impsat Segment:

Revenue

	Three Months Ended September 30, 2007		Nine Months Ended September 30, 2007
	(in millions)		(in millions)
GC Impsat
Enterprise, carrier data and indirect channels	$	80	$	127
Carrier voice		2		3
Intersegment revenues		3		5
	$	85	$	135

Prior to our acquisition of Impsat on May 9, 2007, our GC Impsat segment had no revenue generating activities and consisted of a holding company that issued the GC Impsat Notes in anticipation of consummating the acquisition of Impsat.

Revenues for our GC Impsat Segment are primarily composed of data transmission services; Internet services, including backbone access and managed modem services; value added services, including hosting, security and collocation services; and telephony services, including national and international long distance. GC Impsat revenues benefited from an increased customer base and improved macroeconomic conditions throughout Latin America.

Adjusted Cash EBITDA

	Three Months Ended		Nine Months Ended
	September 30, 2007		September 30, 2007
	(in millions)		(in millions)
GC Impsat
Adjusted Cash EBITDA	$	21	$	30

Adjusted Cash EBITDA for our GC Impsat segment for the three and nine months ended September 30, 2007 comes from the inclusion of Impsat in our results since May 9, 2007.

ROW Segment:

Revenue

	Three Months Ended September 30,									Nine Months Ended September 30,
					$ Increase/ (Decrease)			% Increase/ (Decrease)						$ Increase/ (Decrease)			% Increase/ (Decrease)
	2007		2006							2007		2006
	(in millions)									(in millions)
ROW
Enterprise, carrier data and indirect channels	$	256	$	205	$	51		25	%	$	742	$	589	$	153		26	%
Carrier voice		110		149		(39	)	(26	)%		340		473		(133	)	(28	)%
Other		2		2		—		NM			4		6		(2	)	(33	)%
Intersegment revenues		2		—		2		NM			3		—		3		NM
	$	370	$	356	$	14		4	%	$	1,089	$	1,068	$	21		2	%

Revenues for our ROW Segment increased in the three and nine months ended September 30, 2007 compared with the same periods in 2006 resulting from strong demand for higher margin enterprise voice and broadband lease and IP VPN data products. This increase in enterprise, carrier data, and indirect channel business revenue was partially offset by decreased lower margin carrier voice revenues as a result of decreases in sales volumes due to our strategy to reduce our emphasis on this market. Our sales volume related to U.S. domestic long distance voice services declined by approximately 25% both in the three and nine months ended September 30, 2007 compared with the same periods in 2006, while our average pricing for our U.S. domestic long distance voice services increased by approximately 7% in the three months ended September 30, 2007 due to select price increases and was flat in the nine months ended September 30, 2007, compared with the same periods in 2006. We expect our carrier voice business revenue to remain relatively flat going forward.

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Adjusted Cash EBITDA

	Three Months Ended September 30,						Nine Months Ended September 30,
				$ Increase/ (Decrease)	% Increase/ (Decrease)						$ Increase/ (Decrease)	% Increase/ (Decrease)
	2007	2006					2007		2006
	(in millions)						(in millions)
ROW
Adjusted Cash EBITDA	13	(19	)	32	168	%	(60	)	(104	)	44	42	%

Adjusted Cash EBITDA in this segment increased in the three months ended September 30, 2007 compared with the same period in 2006 as a result of the increases in revenue described above, lower access costs driven by lower carrier voice sales volume and lower facilities-based expenses driven by a decrease in restructuring charges primarily due to the settlement of existing real estate lease agreements for technical facilities during the third quarter of 2007.

Adjusted Cash EBITDA in this segment increased in the nine months ended September 30, 2007 compared with the same period in 2006 as a result of the reasons described above, but was further offset by higher employee severance charges related to our May 10, 2007 restructuring plan and increased salaries driven by increased headcount and other non-restructuring severance.

Liquidity and Capital Resources

Financial Condition and Liquidity

At September 30, 2007, our available liquidity consisted of $369 million of unrestricted cash and cash equivalents. In addition, we held $62 million in restricted cash and cash equivalents on that date. The restricted cash and cash equivalents is primarily comprised of (i) cash collateral for letters of credit originally issued under our $55 million working capital facility that remain outstanding after termination of that facility in the second quarter of 2007 and (ii) the debt service reserve fund for the GC Impsat Notes. Our available liquidity includes net cash provided by financing activities of $298 million during the nine months ended September 30, 2007.

During the nine months ended September 30, 2007, we posted a net operating loss of $159 million and had net cash used by operating and investing activities of $391 million. Cash flows used by operating and investing activities included the following items not expected to impact future quarters: (i) $76 million for the purchase price of Impsat; (ii) $28 million for the cash collateralization of existing letters of credit; and (iii) $22 million due to the placement of a portion of the GC Impsat Notes proceeds into a restricted debt service reserve account. In addition, operating cash flows for the period were impacted by a significant reduction in days payable outstanding with key access vendors, as well as $10 million in severance payments primarily driven by the May 10, 2007 restructuring plan.

Going forward, we expect our operating results to improve as a result of: (i) the continued growth of our higher margin enterprise, carrier data and indirect channels business, including the economies of scale expected to result from such growth; (ii) the inclusion of Fibernet and Impsat in our results and the cost savings and other benefits anticipated to result from the successful integration of these businesses; (iii) cost savings resulting from the May 10, 2007 restructuring plan and prior restructuring activities; and (iv) our cost reduction initiatives to optimize the access network and effectively lower unit prices. Over time, we expect these improvements to more than offset the increased interest expense resulting from the significant increase in our debt balance during the nine months ended September 30, 2007. Thus, in the long-term we expect to generate positive cash flow from operating activities. However, in the short term we anticipate using capital leases and other forms of equipment financing or cash on hand to compensate for the cash used in operating and investing activities. Although operational constraints require us to maintain significant minimum cash balances in each of our segments, we believe that our unrestricted cash balances are sufficient to enable us to reach the point of generating recurring positive cash flow from operating activities.

As a result of recent financing activities, the vast majority of our long-term debt matures after 2010. With regard to our major debt instruments, (i) the $144 million original principal amount of our 5% Convertible Notes matures in 2011 (subject to earlier conversion into GCL common stock at the conversion price of approximately $22.98 per share); (ii) $333 million of our Term Loan Agreement is due at maturity in 2012; (iii) the $523 million

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original principal amount of the GCUK Notes matures in 2014; and (iv) the $225 million original principal amount of the GC Impsat Notes matures in 2017. If cash on hand at the time were insufficient to satisfy these and our other debt repayment obligations, we would need to access the capital markets to meet our liquidity requirements. Such access would depend on market conditions and our credit profile at the time. The liquidity crisis that began earlier this year as a result of the collapse of the subprime mortgage market has adversely impacted global credit markets and could make it more difficult for us to obtain debt financing.

As a holding company, all of our revenues are generated by our subsidiaries and substantially all of our assets are owned by our subsidiaries. As a result, we are dependent upon inter-company transfers of funds from our subsidiaries to meet our debt service and other payment obligations. Our subsidiaries are incorporated and operate in various jurisdictions throughout the world and are subject to legal and contractual restrictions affecting their ability to make inter-company funds transfers. Such legal restrictions include prohibitions on paying dividends in excess of retained earnings (or similar concepts under applicable law), which prohibition applies to most of our subsidiaries given their history of operating losses, as well as foreign exchange controls on the expatriation of funds that are particularly prevalent in Latin America. Contractual restrictions on intercompany funds transfers include limitations in our major debt instruments on the ability of our subsidiaries to make dividend and other payments on equity securities, as well as limitations on our subsidiaries’ ability to make intercompany loans. These contractual restrictions arise under our major debt instruments, each of which is generally limited in application to one of our segments (e.g., the restrictions in the $350 million Term Loan Agreement apply to the ROW Segment, the restrictions in the GCUK Notes indenture apply to the GCUK Segment, and the restrictions in the GC Impsat Notes indenture apply to the GC Impsat Segment). Thus, these contractual restrictions generally do not restrict intercompany funds transfers within a given segment, but rather significantly restrict intercompany funds transfers from one segment to another. Each such debt instrument includes exceptions which allow a limited amount of intercompany loans to entities in other segments.

At September 30, 2007, unrestricted cash and cash equivalents were $61 million, $44 million, and $264 million at our GCUK, GC Impsat and ROW segments, respectively. Unlike our GCUK and GC Impsat Segments, our ROW Segment has historically generated significant negative cash flows from operations. However, this segment is experiencing strong revenue growth in the higher margin enterprise, carrier data and indirect channels business, and in the third quarter of 2007 for the first time achieved positive Adjusted Cash EBITDA, which included an $11 million reversal of restructuring reserves (see “Segment Results” above in this Item 2).

GCUK has in the past served as a source of funding for us and our other subsidiaries. During 2006, GCUK made net loans to our Global Crossing Europe Limited (“GCEL”), a ROW subsidiary, of approximately $50 million. These intercompany loans are guaranteed by GCL, accrue a market-related interest rate, and are denominated in United States dollars and mature five business days prior to the maturity of the principal outstanding of the GCUK Notes. On April 11, 2007 the GCUK board of directors approved an additional $15 million loan which could be made to GCEL during the second quarter of 2007 and $5 million was extended under this approval, which GCEL repaid prior to the end of June.

Substantially all of our assets other than the assets of our GC Impsat segment have been pledged to secure our indebtedness. A failure to comply with the covenants contained in any of our loan instruments could result in an event of default, which, if not cured or waived, could result in an acceleration of all such debts, which would adversely affect our rights under other commercial agreements and have a material adverse effect on our business, results of operations and financial condition. If the indebtedness under any of our loan instruments were to be accelerated, there can be no assurance that our assets would be sufficient to repay such indebtedness in full.In such event, we would have to raise funds from alternative sources, which may not be available on favorable terms, on a timely basis or at all. Moreover, a default by any of our subsidiaries under a capital lease obligation or debt obligation totaling more than $2.5 million, as well as the bankruptcy or insolvency of any of our subsidiaries, could trigger cross-default provisions under our other debt instruments.

Indebtedness

At September 30, 2007, we had $1,283 million of indebtedness outstanding (including the current portion of long term debt and short term debt), consisting of $523 million of GCUK Notes, $144 million of 5% Convertible Notes, $225 million of GC Impsat Notes, $348 million under the Term Loan Agreement and $43 million of other debt.

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On February 14, 2007, GC Impsat, a wholly owned subsidiary of the Company, issued $225 million in aggregate principal amount of 9.875% senior notes due February 15, 2017 (the “GC Impsat Notes”). Interest on these notes is payable in cash semi-annually in arrears every February 15 and August 15 commencing August 15, 2007. The proceeds of this offering were used to finance a portion of the purchase price (including the repayment of indebtedness and payment of fees) of our acquisition of Impsat, which was consummated on May 9, 2007 (see Note 5). Pursuant to a pledge and security agreement, entered into on the date of the acquisition, GC Impsat maintains a debt service reserve account in the name of the collateral agent for the benefit of the note holders equal to two interest payments ($22 million) on the GC Impsat Notes until certain cash flow metrics have been met. The amounts included in the debt service account are included in long term restricted cash and cash equivalents.

The GC Impsat Notes are the senior unsecured (other than with respect to the debt service reserve account) obligations of GC Impsat and rank equal in right of payment with all of its other senior unsecured debt. Upon consummation of the acquisition, the restricted subsidiaries of GC Impsat (including Impsat and most of its subsidiaries) guaranteed the GC Impsat Notes on a senior unsecured basis, ranking equal in right of payment with all of their other senior unsecured debt.

The indenture for the GC Impsat Notes limits GC Impsat’s and its restricted subsidiaries’ ability to, among other things: (1) incur or guarantee additional indebtedness; (2) pay dividends or make other distributions; (3) make certain investments or other restricted payments; (4) enter into arrangements that restrict dividends or other payments to GC Impsat from its restricted subsidiaries; (5) create liens; (6) sell assets, including capital stock of subsidiaries; (7) engage in transactions with affiliates; and (8) merge or consolidate with other companies or sell substantially all of its assets. All of these limitations are subject to a number of important qualifications and exceptions set forth in the indenture.

After giving effect to the refinancing of approximately $216 million of debt assumed in the acquisition of Impsat with the proceeds from the issuance of the GC Impsat Notes and other cash, at September 30, 2007 the primary debt of Impsat that remains outstanding is approximately $22 million of bonds issued by Impsat’s subsidiary in Colombia. These bonds bear interest at the Colombian consumer price index plus 8%. The Colombia Bonds are repayable 50% in December 2008 and 50% in December 2010.

On May 9, 2007, we entered into a senior secured term loan agreement (the “Term Loan Agreement”) with Goldman Sachs Credit Partners L.P. and Credit Suisse Securities (USA) LLC pursuant to which we borrowed $250 million on that date. The Term Loan Agreement was amended on June 1, 2007 to, among other things, provide for the borrowing of an additional $100 million on that date. These term loans (i) mature on May 9, 2012, with amortization of 0.25% of principal repayable on a quarterly basis and the remaining principal due at maturity, (ii) bear interest at LIBOR plus 6.25% per annum payable semi-annually, (iii) have repayment premiums of 103% in the first year, 102% in the second year and 101% in the third year, and (iv) are guaranteed by all of our subsidiaries and secured by substantially all the assets of us and our subsidiaries, in each case other than those subsidiaries forming part of our Latin American operations or our GCUK Segment. The Term Loan Agreement limits our and the guarantor subsidiaries’ ability, among other things, to: (1) incur or guarantee additional indebtedness; (2) pay dividends or make other distributions; (3) make certain investments or other restricted payments; (4) enter into arrangements that restrict dividends or other payments to us from our restricted subsidiaries; (5) create liens; (6) sell assets, including capital stock of subsidiaries; (7) engage in transactions with affiliates; and (8) merge or consolidate with other companies or sell substantially all of our assets. All of these limitations are subject to a number of important qualifications and exceptions set forth in the Term Loan Agreement.

In conjunction with the recapitalization pursuant to which we entered into the Term Loan Agreement, on August 27, 2007, STT Crossing Ltd effectively converted the Mandatorily Convertible Notes into approximately 16.58 million shares of common stock. Upon such conversion, the debt interests of STT Crossing Ltd. were terminated. As consideration for the subordination of the Mandatorily Convertible Notes to the Term Loan Agreement through the conversion date, the Company paid STT Crossing Ltd. a consent fee of $7.5 million in cash shortly after closing in the second quarter 2007 and, at conversion of the Mandatorily Convertible Notes, an additional fee paid in shares of common stock valued at $10.5 million. The 16.58 million shares of common stock received by STT Crossing Ltd. included the shares representing the $10.5 million consent fee as well as shares valued at $30 million representing foregone interest through the original scheduled maturity date of the Mandatorily Convertible Notes. The $18 million of consent fees was considered a debt modification and was recorded as a reduction in the carrying value of the Mandatorily Convertible Notes during the second quarter of 2007. The $30 million of foregone interest is considered an inducement to convert and was recorded in other expense, net upon conversion of the Mandatorily Convertible Notes in the third quarter of 2007. At conversion, the carrying value of and all accrued interest on the notes, as well as the consent fee paid in common shares, all of which together totaled $329 million, were reclassified to common stock and additional paid in capital.

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A portion of the proceeds of the Term Loan Agreement was immediately used to repay in full our $55 million working capital facility with Bank of America, N.A (and other lenders), to cash collateralize $29 million of letters of credit previously issued under the facility (or replacement thereof), and to fund a portion of the Impsat acquisition. The working capital facility has been terminated and no further extensions of credit will be made thereunder. Approximately $2 million of unamortized deferred financing fees related to the working capital facility were expensed in other income (expense), net in the condensed consolidated statement of operations during the nine months ended September 30, 2007. The remaining net proceeds of the Term Loan Agreements are being used for working capital and general corporate purposes, which may include the acquisition of assets or businesses that are complimentary to our existing business.

In satisfaction of an obligation under the Term Loan Agreement, in July 2007 we entered into an agreement to mitigate the risk arising from the floating rate debt by hedging the term loans against interest risk volatility. The hedge consists of two types of instruments: interest rate swaps for approximately one year of floating (LIBOR + 6.25%) for fixed rate debt having a notional amount between $248 and $348, and interest rate caps for the ensuing two years having notional amounts between $340 and $344.

During the nine months ended September 30, 2007 we entered into debt agreements to finance various equipment purchases and software licenses. The total debt obligation resulting from these agreements is $15 million. These agreements have terms that range from 24 to 36 months and annual interest rates that generally range from 2.8% to 12% and in certain instances, are variable based on a spread over the London Inter-bank Offered rate (“LIBOR”). In addition, we also entered into various capital leasing arrangements that amounted to $46 million. These agreements have terms that range from 24 to 48 months and range generally from 5.5% to 15.8% and, in certain instances, are variable over LIBOR.

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Indebtedness,” of our 2006 annual report on Form 10-K, for a description of the GCUK Notes and 5% Convertible Notes. We are in compliance with all covenants under our material debt agreements. However, certain of our capital lease agreements contain non-financial covenants which require specific inventorying of leased assets. The failure to meet these covenants allows the lessor to accelerate payments under the lease agreements. At September 30, 2007, these non-financial covenants have not been met for lease agreements representing $64 million of indebtedness. We have received a waiver for such non-compliance through January 1, 2009 assuming certain milestones are achieved. We expect to achieve these milestones and become compliant prior to the deadline.

As required by the indenture governing the senior secured notes due 2014 (the “GCUK Notes”), within 120 days after the end of each twelve month period ending December 31, GCUK must offer (the “Annual Repurchase Offer”) to purchase a portion of the GCUK Notes at a purchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, to the purchase date, with 50% of “Designated GCUK Cash Flow” from that period. “Designated GCUK Cash Flow” means GCUK’s consolidated net income plus non-cash charges minus capital expenditures, calculated in accordance with the terms of the indenture governing the GCUK Notes.

As of September 30, 2007, we do not anticipate meeting the stipulated cash flow requirements for the twelve months ended December 31, 2007 and therefore do not anticipate making an Annual Repurchase Offer in respect of such period.

Cash Management Impacts and Working Capital

Our working capital deficit increased $11 million to a working capital deficit of $110 million at September 30, 2007 from $99 million at December 31, 2006. The increase in working capital deficit is primarily the result of operating cash flow losses and capital expenditures offset by financing activities.

Cash Flow Activity for the nine months ended September 30, 2007

Cash and cash equivalents decreased by $90 million during the nine months ended September 30, 2007 to $369 million from $459 million at December 31, 2006. The decrease resulted from refinancing Impsat’s legacy debt, normal operations, cash becoming restricted under the credit facilities and capital purchases, offset by net funds received from the issuance of long term debt.

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The following table is a summary of our condensed consolidated statements of cash flows for the nine months ended September 30, 2007 and 2006:

	Nine Months Ended September 30,
	2007			2006			$ Increase/(Decrease)
	(in millions)
Net cash flows used in operating activities	$	(109	)	$	(86	)	$	(23	)
Net cash flows used in investing activities		(282	)		(76	)		(206	)
Net cash flows provided by financing activities		298			352			(54	)
Effect of exchange rate changes on cash and cash equivalents		3			3			—
Net increase (decrease) in cash and cash equivalents	$	(90	)	$	193		$	(283	)

Cash flows used by operating activities increased in the nine months ended September 30, 2007 compared to the same period in 2006 primarily as a result of: (i) a reduction in days payable outstanding with key access vendors; (ii) an increase in interest payments for debt incurred since September 30, 2006 including the Term Loan Agreement issued in 2007, additional GCUK Notes issued in December 2006 and additional capital leases; and (iii) increased restructuring payments primarily driven by the May 10, 2007 restructuring plan.

Cash flows used in investing activities increased in the nine months ended September 30, 2007 compared with the same period in 2006 primarily as a result of: (i) $81 million of additional capital purchases primarily due to increased network capacity purchases due to strong customer demand and including capital purchases of Impsat since May 9, 2007; (ii) a $76 million payment for the acquisition of Impsat, net of cash acquired; and (iii) a $72 million change in restricted cash and cash equivalents primarily as a result of the collateralization of letters of credit issued under the Bank of America Working Capital Facility upon retirement and the requirement under the GC Impsat Notes to maintain a debt service reserve account for benefit of the note holders equal to two interest payments.

Cash flows provided by financing activities decreased in the nine months ended September 30, 2007 compared with the same period in 2006 primarily as a result of: (i) $18 million of additional principal payments for capital lease obligations; and (ii) $37 million less net cash inflow from financings after repayment of debt obligations. We have entered into significant capital lease agreements since the third quarter of 2006 to finance property and equipment purchases and expect to continue to enter additional capital leases in the future.

Contractual Cash Commitments

During the nine months ended September 30, 2007 we entered into the following material contractual cash commitments as determined/measured from the date of the new commitments: (i) additional interest on the GC Impsat Notes of approximately $222 million over the next 10 years and $225 million of principal at maturity in 2017, (ii) interest of approximately $203 million (based on the current 3 month LIBOR rate) over the next 5 years and quarterly amortization payments of 0.25% of the original $350 million principal amount of the senior secured term loans with the remain principal due at maturity in 2012, (iii) an agreement to purchase access services that will require us to make payments of $58 million over the next two years, (iv) an agreement to purchase maintenance services that requires a cash commitment of $57 million over the next 5 years, (v) agreements to construct or upgrade our network that required payments of $72 million over the next 3 years, (vi) cost of sales obligations that require payments of $22 million over the next 5 years and (vii) agreements to lease network facilities of $210 million over the next 20 years. Additionally, as a result of the Impsat acquisition, we assumed debt and capital lease obligations that will require us to pay $25 million of principal and approximately $8 million of interest over the next 3 years.

Credit Risk

We are subject to concentrations of credit risk in our trade receivables. Although our receivables are geographically dispersed and include customers both large and small and in numerous industries, our receivables from our carrier sales channels are generated from sales of services to other carriers in the telecommunications industry. At September 30, 2007 and December 31, 2006, our receivables related to our carrier sales channels

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represented approximately 43% and 56%, respectively, of our consolidated receivables. Also at September 30, 2007 and December 31, 2006, our receivables due from various agencies of the U.K. Government together represented approximately 13% and 15%, respectively, of our consolidated receivables.

Off-Balance Sheet Arrangements

As of September 30, 2007 we did not have any off-balance sheet arrangements outstanding. The previously issued Bank of America standby letters of credit were collateralized by cash received from the issuance of the $350 million senior secured term loans at the time that the Bank of America working capital facility was retired during the second quarter of 2007.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

See Item 7A in the Company’s 2006 annual report on Form 10-K for information regarding quantitative and qualitative disclosures about market risk.

Interest Rate Risk

In satisfaction of an obligation under the Term Loan Agreement, we entered into an agreement in July 2007 to mitigate the risk arising from the floating rate debt by hedging the term loans against interest risk volatility. The hedge consists of two types of instruments: interest rate swaps for approximately one year of floating (LIBOR + 6.25%) for fixed rate debt having a notional amount between $248 and $348 and interest rate caps for the ensuing two years having notional amounts between $340 and $344. The salient terms of the hedges follow:

Hedging Instruments	Effective date	Termination date	Fixed Swap Rate/Cap Strike Rate		Notional Amount (in millions)
Interest Rate Swap	8/9/2007	8/31/2007	5.379	%	$	248
Interest Rate Swap	8/31/2007	11/9/2007	5.375	%	$	348
Interest Rate Swap	11/9/2007	2/11/2008	5.375	%	$	347
Interest Rate Swap	2/11/2008	5/9/2008	5.375	%	$	347
Interest Rate Cap	5/9/2008	5/11/2009	5.75	%	$	344
Interest Rate Cap	5/11/2009	11/9/2009	6.25	%	$	342
Interest Rate Cap	11/9/2009	5/10/2010	6.75	%	$	340

As a result of the Impsat acquisition, we assumed debt that bears a variable interest rate that is based on the Colombian consumer price index (which has increased at an annual rate of approximately 5% for the twelve months ended September 30, 2007) plus 8%. The Colombia bonds are repayable 50% in December 2008 and 50% in December 2010. At September 30, 2007, the carrying value of the Colombia bonds is $22 million.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by a public company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a public company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In connection with the preparation of this quarterly report on Form 10-Q, management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, pursuant to Rule 13a-15 under the Exchange Act. Based upon management’s evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2007.

In accordance with Frequently Asked Questions No. 3, “Management’s Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports,” of the Office of Chief Accountant of the SEC’s Division of Corporation Finance (revised September 24, 2007), the scope of management’s evaluation excluded internal control over financial reporting for GC Impsat, which was acquired during the second quarter of 2007 and which represented approximately 14% and 8%, respectively, of consolidated revenues for the three and nine months ended September 30, 2007 and approximately 24% of the Company’s consolidated total assets as of September 30, 2007 and which contributed $21 million and $30 million, respectively, toward the Company’s $74 million and $74 million, respectively, of net consolidated Adjusted Cash EBITDA for the three and nine months ended September 30, 2007.

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Changes in Internal Control Over Financial Reporting

On October 11, 2006, the Company took control of Fibernet. During the third quarter of 2007, we migrated Fibernet’s financial reporting systems to Global Crossing’s SAP financial reporting system. We consider this migration a material change in our internal control over financial reporting.

On May 9, 2007, the Company acquired Impsat. We are currently in the process of incorporating Impsat’s internal controls into our control structure and migrating overlapping processes and systems to legacy Global Crossing processes and systems. We consider the ongoing integration of Impsat a material change in our internal control over financial reporting.

Except for these items noted above, there were no other material changes in our internal control over financial reporting during the third quarter of 2007.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Note 11, “Contingencies,” to the accompanying unaudited condensed consolidated financial statements for a discussion of certain legal proceedings affecting the Company.

Item 1A. Risk Factors

Except as set forth below, there have been no material changes in the most significant factors that make an investment in the Company speculative or risky from those set forth in Item 1A., “Risk Factors,” to the Company’s annual report on Form 10-K for the year ended December 31, 2006:

• We have substantial international operations and face political, legal and other risks from our operations in foreign jurisdictions. These risks have significantly increased as a result of our acquisition of the Latin American operations of Impsat.

• As a result of the Impsat acquisition, we may be subject to significant liabilities due to taxes on antennas imposed by the City of Buenos Aires and other municipalities in Argentina.

• Cost of access represents our single largest expense and gives rise to material current liabilities. During the nine months ended September 30, 2007, we deemed it necessary to accelerate payments to key access vendors to reduce days payable outstanding, which resulted in increased demands on our liquidity. If such demands were to continue to a greater degree than anticipated, we could be prevented from meeting our cash flow projections and long-term liquidity requirements.

• We believe that economies of scale will allow us to grow revenues while incurring incremental costs that are proportionately lower than those applicable to our existing business. If the increased costs required to support our revenue growth turn out to be greater than anticipated, we may be unable to improve our profitability and/or cash flows even if revenue growth goals are achieved.

• The sale of indefeasible rights of use (“IRUs”) and similar prepayments for services are an important source of cash flows for us, representing tens of million of dollars of cash in most quarters. If customers’ buying patterns were to change such that those traditionally buying IRUs were to switch to monthly payment plans, our liquidity would be adversely affected. In addition, the large dollar amounts and long sales cycles typically associated with IRU sales increase the volatility of our quarter-to-quarter cash flow results.

• While capital expenditures have remained relatively stable at levels significantly below those prevailing prior to our bankruptcy reorganization, such levels may not be sustainable in the future, particularly as our business continues to grow.

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Item 6. Exhibits

31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf on November 7, 2007 by the undersigned thereunto duly authorized.

GLOBAL CROSSING LIMITED
By:	/S/ JEAN F.H.P. MANDEVILLE
	Jean F.H.P. Mandeville
	Chief Financial Officer
	(Principal Financial Officer)
By:	/S/ ROBERT A. KLUG
	Robert A. Klug
	Chief Accounting Officer
	(Principal Accounting Officer)

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