GLOBAL CROSSING LTD - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 1999

OR

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission File Number: 000-24565

GLOBAL CROSSING LTD.

BERMUDA 98-0189783
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

WESSEX HOUSE
45 REID STREET
HAMILTON HM12, BERMUDA
(Address Of Principal Executive Offices)

(441) 296-8600
(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class Names of Each Exchange on Which
Common Stock, par value $.01 per share Registered
Nasdaq National Market

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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

The aggregate market value of the common stock of the Registrant held by
non-affiliates of the Registrant on March 3, 2000, based on the closing price
of the common stock reported on the Nasdaq National Market on such date of $56
7/16 per share, was $32,719,415,619.

The number of shares of the Registrant's common stock, par value $0.01 per
share, outstanding as of March 3, 2000, was 801,748,228, including 22,033,758
treasury shares.

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GLOBAL CROSSING LTD. AND SUBSIDIARIES

For The Year Ended December 31, 1999

INDEX

Page
----

Part I.
Item 1. Business...................................................... 1
Item 2. Properties.................................................... 23
Item 3. Legal Proceedings............................................. 23
Item 4. Submission of Matters to a Vote of Security Holders........... 24
Part II.
Item 5. Market for the Registrant's Common Stock and Related 25
Shareholder Matters...........................................
Item 6. Selected Financial Data....................................... 26
Item 7. Management's Discussion and Analysis of Financial Condition 29
and Results of Operations.....................................
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.... 41
Item 8. Financial Statements and Supplementary Data................... 42
Item 9. Changes in and Disagreements With Accountants on Accounting 42
and Financial Disclosure......................................
Part III.
Item 10. Directors and Executive Officers of the Registrant............ 43
Item 11. Executive Compensation........................................ 47
Item 12. Security Ownership of Certain Beneficial Owners and 55
Management....................................................
Item 13. Certain Relationships and Related Transactions................ 56
Part IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 60
10-K..........................................................
Consolidated Financial Statements........................................ F-1
Signatures............................................................... S-1

PART I

In this Annual Report on Form 10-K, "GCL" refers to Global Crossing Ltd. and
the "Company," "Global Crossing," "we," "our" and "us" refer to GCL and its
consolidated subsidiaries (unless the context otherwise requires).

Throughout this Annual Report on Form 10-K, references to "dollars" and "$"
are to United States dollars.

ITEM 1. BUSINESS

Introduction

We are building and offering services over the world's first integrated
global fiber optic network, consisting of 101,000 announced route miles and
serving five continents, 27 countries and more than 200 major cities. Upon
completion of our currently announced systems, our network and its
telecommunications and Internet product offerings will be available in markets
constituting over 80% of the world's international communications traffic.

We are included in both the S&P 500 index and the Nasdaq 100 index. Our
operations are headquartered in Hamilton, Bermuda, with executive offices in
Los Angeles, California; Morristown, New Jersey; and Rochester, New York.

We are incorporated in Bermuda, and the address of our principal executive
offices is Wessex House, 45 Reid Street, Hamilton HM12, Bermuda. Our telephone
number is 441-296-8600. You may visit us at our website located at
www.globalcrossing.com.

Business Strategy

Global Crossing's strategy is to be the premier provider of global Internet
Protocol ("IP") and data services for both wholesale and retail customers. We
are building a state-of-the-art fiber optic network that we believe to be of
unprecedented global scope and scale to serve as the backbone for this
strategy. We believe that our network will enable us to be the low cost
service provider in most of our addressable markets.

Global Crossing offers a variety of voice, data and Internet services
throughout most of North America and Europe. During 2000, we intend to
aggressively roll out similar services in Asia, Mexico, Central America and
South America.

In Asia, these services will be offered through our Asia Global Crossing
joint venture with Softbank Corp. and Microsoft Corporation. Asia Global
Crossing aims to become the first truly pan-Asian carrier to offer worldwide
bandwidth and data communications. As such, we believe that Asia Global
Crossing will be uniquely positioned to take advantage of the anticipated
explosive growth and increasingly favorable regulatory environment in the
Asian telecommunications markets.

In each of our businesses, we intend to expand significantly our current
product offerings, with an increasing focus on value-added services. In
particular, our GlobalCenter subsidiary will expand its product set to become
a single-source e-commerce service solution that will provide web-centric
businesses with the high availability, flexibility and scalability necessary
to compete in the rapidly expanding digital economy.

Business Combinations

The Asia Global Crossing joint venture was established on November 24, 1999.
We contributed to the joint venture our development rights in East Asia
Crossing, an approximately 11,000 mile undersea network that will link several
countries in eastern Asia, and our 58% interest in Pacific Crossing, an
undersea system connecting

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the United States and Japan. Softbank Corp. and Microsoft Corporation each
contributed $175 million in cash to Asia Global Crossing. In addition,
Softbank and Microsoft committed to make a total of at least $200 million in
capacity purchases on our network over a three-year period, expected to be
utilized primarily on PC-1 and EAC. Softbank and Microsoft have also agreed to
use Asia Global Crossing's network in the region, subject to specified
conditions.

Also on November 24, 1999, we completed our acquisition of Racal Telecom, a
group of wholly owned subsidiaries of Racal Electronics plc, for approximately
$1.6 billion in cash. Racal Telecom owns one of the most extensive fiber
telecommunications networks in the United Kingdom, consisting of approximately
4,650 route miles of fiber and reaching more than 2,000 cities and towns.

On September 28, 1999, we completed the acquisition of Frontier Corporation
in a merger transaction valued at over $10 billion, with Frontier shareholders
receiving 2.05 shares of our common stock for each share of Frontier common
stock held. Frontier is one of the largest long distance telecommunications
companies in the United States and one of the leading providers of facilities-
based integrated communications and Internet services.

On July 2, 1999, we completed our acquisition of the Global Marine Systems
division of Cable & Wireless Plc for approximately $908 million in cash and
assumed liabilities. Global Marine Systems owns the largest fleet of cable
laying and maintenance vessels in the world and currently services more than a
third of the world's undersea cable miles.

Recent Developments

On March 2, 2000, we announced that Leo Hindery had succeeded Robert
Annunziata as Global Crossing's Chief Executive Officer. Mr. Hindery will also
continue to serve as Chief Executive Officer of GlobalCenter Inc., our
subsidiary that provides complex web hosting and Internet infrastructure
services. Mr. Annunziata will continue as a director of Global Crossing. In
addition, on March 2, 2000, we also announced our intentions to create a
tracking stock for GlobalCenter, which will continue to complement our
worldwide operations.

On February 29, 2000, we announced that we had concluded an agreement to
provide substantial additional capacity to Deutsche Telekom AG. Total capacity
sold to Deutsche Telekom is now 35 gigabits per second ("Gbps") on AC-1, the
fiber-optic system that provides a link between North America and Germany.

On February 22, 2000, we announced a definitive agreement to acquire IXnet,
Inc., a leading provider of specialized IP-based network services to the
global financial services community, and its parent company, IPC
Communications, Inc., in exchange for shares of common stock of Global
Crossing valued at approximately $3.8 billion. Under the terms of the
definitive merger agreement, 1.184 Global Crossing shares will be exchanged
for each IXnet share not owned by IPC and 5.417 Global Crossing shares will be
exchanged for each share of IPC. The acquisition is expected to be completed
in the second quarter of 2000 and is subject to regulatory approval and
customary closing conditions.

On January 26, 2000, our Asia Global Crossing joint venture announced an
agreement to create GlobalCenter Japan, a joint venture with Japan's Internet
Research Institute, Inc. ("IRI"). GlobalCenter Japan will design, develop and
construct a media distribution center in Japan providing connectivity
worldwide through the Global Crossing Network. The joint venture will also
develop and provide complex web hosting services, e-commerce support and
applications hosting solutions. Asia Global Crossing will own 89 percent of
GlobalCenter Japan, with IRI owning the remaining 11 percent.

On January 12, 2000, we established a joint venture, called Hutchison Global
Crossing, with Hutchison Whampoa Limited to pursue fixed-line
telecommunications and Internet opportunities in Hong Kong. For its 50% share,
Hutchison Whampoa contributed to the joint venture its building-to-building
fixed-line telecommunications network in Hong Kong and a number of Internet-
related assets. In addition, Hutchison Whampoa has agreed that any fixed-line
telecommunications activities it pursues in China will be carried out by

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the joint venture. For our 50% share, we provided to Hutchison Whampoa $400
million in Global Crossing convertible preferred stock (convertible into
shares of Global Crossing common stock at a rate of $45 per share) and
committed to contribute to the joint venture international telecommunications
capacity rights on our network and certain media distribution center
capabilities which together are valued at $350 million, as well as $50 million
in cash. We intend to integrate our interest in Hutchison Global Crossing into
Asia Global Crossing.

Services

General

We provide services in three principal segments. Our telecommunications
services segment offers a variety of integrated telecommunications products
and services to customers through our global fiber optic network. Our
installation and maintenance services segment, consisting of our Global Marine
Systems subsidiary, installs and maintains undersea fiber optic cable systems
to carrier customers worldwide. Finally, our incumbent local exchange carrier
("ILEC") services segment provides local communications services through local
exchange service providers in 13 states, serving over one million access
lines.

Telecommunications Services

Global Crossing provides a variety of integrated telecommunications and
Internet-based products designed to meet the customer's total communications
needs. Global Crossing provides domestic and international voice services,
data products, Internet-based services, structured bandwidth services and
other communications products to primarily small to mid-size business
customers, web-centric businesses and other telecommunication carriers.
Beginning in 2000, we will begin marketing products more intensely to large
multinational customers who have bandwidth-intensive applications and
international requirements. Such customers demand global end-to-end solutions.
We are well positioned to address this market due to the international scope
and broadband capacity of our network along with the flexibility of product
pricing to maintain competitiveness.

Global Crossing offers the following products and services to its customers:

. Voice: Switched and dedicated outbound voice services for local,
domestic, and international traffic.

. Data Transport: Point-to-point data services in a number of products
(including private line, ATM, frame relay, X.25 and Internet access) and
varying bandwidth sizes (from fractional T-1 to OC-192).

. Virtual Private Network ("VPN"): Customizable network solutions where
our customers create a private network by using the Global Crossing
Network without purchasing dedicated facilities. In addition, customers
have flexibility to change capacity requirements between points over
time and reconfigure their VPNs to meet changing requirements.

. International Private Line ("IPL"): Expanded services providing retail
customers greater flexibility at reduced cost. We currently provide
access to New York, London, Amsterdam, Frankfurt, Paris and Tokyo, with
access expected to be available to 18 additional cities within the next
six months.

. Web Hosting Services: A combination of digital distribution services,
server co-location, equipment sales, consulting services and
professional expertise aimed at supporting customers' mission critical
Internet operations. This product is easily scalable to meet customer
needs and is marketed primarily by our GlobalCenter subsidiary.

. Advanced Voice and Data Services: These services combine traditional
voice or data products with additional features. Products include
calling card, 800/888 toll free services, voice mail, audio
conferencing, video conferencing and broadcast fax.

. Advanced Internet Services: Products include basic dial-up and dedicated
Internet access along with web-based applications such as e-mail
hosting, unified messaging, off-site data storage and backup.

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. Structured Bandwidth Services: Historically, we have sold capacity on
our systems on an Indefeasible Right of Use ("IRU") basis, whereby the
customer purchased a unit of point to point capacity for the expected
economic life of the system, typically in increments of 155 megabits per
second ("Mbps"), a unit known as an STM-1. However, with the
consummation of our acquisition of Frontier in September 1999, we have
begun to derive a significant source of revenue from service offerings
involving leases of capacity on our systems in smaller increments and
for periods significantly shorter than the expected useful life of the
system. From time to time, we also engage in sales of "dark" fiber
(i.e., fiber that has not been equipped with the electronic components
necessary for telecommunications transmission).

Payment for long-term leases of capacity or dark fiber is typically made
in advance of activation, although in some cases a customer's payments
are made in installments over two to four years. For short-term
bandwidth services, customers are typically billed on a monthly basis.

Due to the breadth of the Global Crossing Network, we are uniquely
positioned to offer worldwide capacity to our customers. Many customers
acknowledge that their need for large bandwidth is increasing, but they
are often uncertain with regard to the precise routes where their
particular growth will take place. In order to stimulate customer
loyalty and leverage this uncertainty, we have developed the Global
Crossing Network Offer, which allows customers who can make a multi-year
commitment the flexibility to activate capacity where needed, in a
"just-in-time" manner, in return for volume discounted pricing. As our
network continues to expand, we are exploring other marketing programs
that will provide further benefits to our customers and position Global
Crossing as the broadband infrastructure provider of choice.

Moreover, because our centralized Global Crossing Network Center
("GCNC"), located in The Docklands, London, England, enables us to
monitor and direct transmission on our cable systems worldwide, we
believe that we have a strategic advantage in being able to more quickly
activate capacity for a customer on any of our systems.

. Switched Services: We provide originating and switched terminating
services to long distance carriers over our switched services network.
Such services are generally offered on a month-to-month basis, and the
service is billed on a minutes-of-use basis.

. Internet Protocol Services: We offer IP Services to carriers, Internet
Service Providers ("ISPs") and other business customers over our global
IP network. Such services are offered on a month-to-month basis and
generally billed on a megabit per second (Mbps) basis.

Installation and Maintenance Services

We offer both installation and maintenance services for undersea cable
systems through our Global Marine Systems subsidiary. Global Marine Systems
has the largest fleet of cable ships in the world, comprised of both
maintenance vessels and installation vessels. These vessels operate throughout
the world. Since the acquisition, Global Marine Systems added three ships,
with five additional ships to enter service early in 2000. Global Marine
Systems also announced an agreement with Maersk to charter ships as needed.

Global Marine Systems' business consists of two components: installation and
maintenance.

. Maintenance: Global Marine Systems is the world's market leader for
submarine cable maintenance with 31% of the world market by value in
1999.

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Global Marine Systems' maintenance business is centered around cable
system security. Despite optimum route planning and installation, cables
are sometimes damaged on the seabed. The maintenance cable ship must be
able to retrieve a partially buried cable down to two thousand meters as
well as retrieve and repair a cable from the furthest ocean depths. With
cable in water depths of up to nine thousand meters, the cable ship is a
specialized vessel designed to operate continuously in the extreme
weather conditions found in the major cable routes around the world.

. Installation: Global Marine Systems' installation business has a market
share in excess of 25%, making it a leading competitor in the undersea
telecommunications installation industry.

Revenue from installation is linked to the number of submarine
telecommunication cable systems annually installed worldwide. Such
systems traverse many types of seabed, including active continental
shelves, flat deep-water abyssal plains and mountainous oceanic ridges.
The objective when installing cable is to deploy it in such a way as to
minimize the risk of damage to the cable either from external threats or
from natural wear effects caused by ocean currents and tides. The cable
can either be buried into the seabed if protection is required from
threats such as fishing and anchoring or it can simply be laid across
the surface of the seabed.

ILEC Services

Global Crossing's ILEC services segment comprises one of the largest local
exchange service providers in the United States. This segment consists of 34
regulated telephone operating subsidiaries in 13 states, serving in excess of
one million access lines. Such services are marketed under the name Frontier
Telephone, a Frontier Communications Company. The local exchange carriers
provide local, toll, access and resale services, sell, install and maintain
customer premises equipment and provide directory services. Our ILEC services
segment excludes local services provided by our subsidiaries authorized as
competitive local exchange carriers ("CLECs"), which services are included in
our telecommunications services segment. Generally speaking, ILECs tend to be
the original provider of local exchange service in a given area and,
accordingly, receive a greater degree of regulation than do CLECs and other
carriers without market power.

We have installed advanced digital switching platforms throughout all of our
switching network, making it one of the first in the industry to be served by
an entirely digital network for our local exchange companies. We have achieved
substantial cost reductions through the elimination of duplicative services
and procedures and the consolidation of administrative functions. We believe
that additional cost reductions may be obtainable from advanced switching
platforms and outside plant delivery systems. We intend to pursue additional
gains in productivity by investing in these technologies where feasible and by
reengineering customer service processes.

Of the approximately 1,072,000 access lines in service on December 31, 1999,
737,000 were residential lines and 335,000 were business lines. Long distance
network service to and from points outside of the telephone companies'
operating territories is provided by interconnection with the facilities of
interexchange carriers.

We are pursuing several alternatives to provide expanded broadband
capabilities to our customers. To date, we have installed over 31,000 fiber
miles of fiber based network facilities, totaling more than 930 route miles,
in the Rochester, New York area to provide our customers with enhanced
capacity and to enable us to offer new products. We provide expanded broadband
services to select customers, including video-distance learning arrangements
for educational institutions and access to SONET based fiber rings for major
business customers. In addition to these offerings, we plan to aggressively
begin marketing Digital Subscriber Line ("DSL") services in 2000.

In connection with our integration strategy, we have developed a program
known as "Frontier Long Distance," whereby our local exchange companies resell
our integrated services. We believe that many customers prefer the convenience
of obtaining their long distance service through their local telephone company
and receiving a single bill. Frontier Long Distance is currently offered in
the product lines of most of Global Crossing's local telephone exchange
companies.

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The Global Crossing Network

The fiber optic cable systems that we have completed or that are under
development will form a state-of-the-art interconnected worldwide high
capacity fiber optic network. The following systems are currently in service:

. Atlantic Crossing-1, referred to as "AC-1", an undersea system
connecting the United States and Europe;

. North American Crossing, referred to as "NAC", formerly part of
Frontier, a terrestrial system connecting major cities in the United
States;

. Pan European Crossing, referred to as "PEC", a primarily terrestrial
system connecting major European cities to AC-1;

. Racal Telecom Network, a terrestrial network in the United Kingdom to be
operated in conjunction with PEC;

. Pacific Crossing, referred to as "PC-1", an undersea system connecting
the United States and Japan;

. Global Access Ltd., referred to as "GAL", a terrestrial system
connecting a number of major cities in Japan to PC-1;

. Hutchison Global Crossing, referred to as "HGC", a terrestrial network
in Hong Kong, connecting to EAC; and

. Mid-Atlantic Crossing, referred to as "MAC", an undersea system
connecting the eastern United States and the Caribbean.

The following systems are in varying stages of development:

. Atlantic Crossing-2 ("AC-2", and together with AC-1, referred to as
"AC"), an undersea system that will connect the United States and
Europe;

. East Asia Crossing, referred to as "EAC", an undersea system that will
connect several countries in Asia to PC-1;

. Pan American Crossing, referred to as "PAC", a primarily undersea system
that will connect the western United States, Mexico, Panama, Venezuela
and the Caribbean; and

. South American Crossing, referred to as "SAC", an undersea and
terrestrial system that will connect the major cities of South America
to MAC, PAC and the rest of our network.

Although many of these fiber optic cable systems are wholly-owned, some are
being developed through joint ventures with one or more partners. EAC and our
58% economic interest in PC-1 are being developed through our Asia Global
Crossing joint venture, for which we are responsible for management and
operation. In addition, we expect to construct parts of the terrestrial
portion of SAC through joint venture arrangements, and terrestrial
connectivity to PAC in Mexico will similarly be developed through a joint
venture. We will be responsible for management and operation of these
entities. Finally, we own a 50% interest in Hutchison Global Crossing and a
49% interest in Global Access Ltd., which is constructing GAL. Management and
operation of these two entities will be performed by or with our joint venture
partners.

All of our undersea systems are equipped with state-of-the-art dense wave
division multiplexing ("DWDM") technology, a method of increasing the amount
of a cable's transmission capacity through installation of electronic
equipment at cable landing stations and without requiring the undersea cable
to be physically handled.

The twin operations and management centers for the Global Crossing Network
are the Customer Care Center, located in Bermuda, and the GCNC, located in The
Docklands, London, England. These two facilities provide complete customer
support--from provisioning and assistance to billing. From the GCNC, Global

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Crossing technicians and network managers monitor and control all undersea
cable systems, shore station equipment and terrestrial facilities worldwide.
The GCNC began operations in the fourth quarter of 1999.

Network Systems

Atlantic Crossing

AC-1, our first undersea fiber optic cable in the Atlantic region, is an
approximately 9,000 mile, four fiber pair self-healing ring that connects the
United States and Europe with landing stations in the United States, the
United Kingdom, the Netherlands and Germany. The full ring currently offers 80
Gbps of service capacity and is being upgraded to offer 140 Gbps. AC-1 started
service on its United States to United Kingdom segment during May 1998, and
the full system was completed during February 1999.

On February 17, 2000, we announced that we had entered into an agreement
with Level 3 Communications, Inc. to co-build an additional high-capacity,
fiber optic transatlantic cable. Our two fiber pairs in the cable, to be
called AC-2, will provide us with an additional 560 Gbps of capacity along
this route. AC-2 will be integrated with the two cables of AC-1, providing AC-
2 with self-healing capabilities. The new cable is expected to be in service
in September 2000. In addition, Level 3 Communications, Inc. agreed to acquire
capacity on AC-1 to provide Level 3 Communications, Inc. with self-healing
ring circuitry.

North American Crossing

We acquired NAC, formerly the Frontier Optronics Network, as a result of our
September 1999 merger with Frontier Corporation. The core fiber network,
offering more than 13,000 route miles of optical fiber capacity, was completed
in August 1999. The full network, consisting of approximately 20,000 route
miles, is expected to be completed by the end of March 2000.

Pan European Crossing

Upon completion, PEC will consist of eight self-healing rings offering
connectivity between AC and 41 major European metropolitan centers. Phase I of
this system, connecting 13 cities, was completed in December 1999. The
complete system, expected to consist of approximately 13,400 miles with 24 to
72 fiber pairs as well as spare conduits, is anticipated to be completed by
early 2001.

We intend to operate the Racal Telecom Network in conjunction with PEC.
Acquired in November 1999, the Racal Telecom Network is one of the most
extensive fiber telecommunications networks in the United Kingdom, consisting
of approximately 4,500 route miles of fiber and reaching more than 2,000
cities and towns.

Pacific Crossing

PC-1, our first undersea fiber optic cable in the Pacific region, is being
developed as an approximately 13,100 mile, four fiber pair self-healing ring
connecting California and Washington in the western United States with two
landing sites in Japan. The PC-1 self-healing ring is designed to operate
initially at 80 Gbps of service capacity, upgradable to a minimum of 160 Gbps.
The first segment of PC-1 commenced service in December 1999 and the full
system is anticipated to be completed in July 2000.

Global Access Ltd.

GAL is an approximately 1,000 mile fiber optic terrestrial system in Japan
that, among other things, will connect the PC-1 cable stations with Tokyo,
Osaka and Nagoya, Japan. The first phase of GAL's development was completed in
December 1999, with the full system anticipated to be completed by the third
quarter of 2000.

Hutchison Global Crossing

Hutchison Global Crossing owns and operates a building-to-building fixed-
line telecommunications network in Hong Kong and a number of Internet-related
assets. The fiber optic network as of December 1999 extended over 400 miles
and is expected to be expanded during 2000. In addition, any fixed-line
telecommunications activities that Hutchison Whampoa pursues in China will be
carried out by the joint venture.

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Mid-Atlantic Crossing

MAC is an approximately 4,700 mile two fiber pair self-healing ring
connecting New York, the Caribbean and Florida. MAC connects to AC via its
cable station in Brookhaven, New York, to NAC via its cable stations in
Brookhaven and in Hollywood, Florida and to SAC and PAC via its cable station
in St. Croix, United States Virgin Islands. This system is being designed to
operate initially at 20 Gbps of service capacity, upgradable to a minimum of
40 Gbps. MAC commenced service in January 2000, with the full system
anticipated to be completed during 2000.

East Asia Crossing

EAC will be an approximately 11,000 mile terrestrial and undersea cable
system, Phase I of which will link Japan, Taiwan, South Korea and Hong Kong,
and Phase II of which is expected to further link Singapore, Malaysia and the
Philippines. EAC is being designated to operate initially at 80 Gbps of
service capacity, upgradable to a minimum of 1,200 Gbps. The first segment of
EAC's development, linking Japan and Hong Kong, is expected to be completed by
December 2000, with the full Phase I system anticipated to be completed by
June 2001.

Pan American Crossing

PAC will be an approximately 6,000 mile two fiber pair cable system
connecting California, Mexico, Panama, Venezuela and the Caribbean. PAC will
interconnect with PC- 1 and NAC through our landing station in Grover Beach,
California, with MAC through our landing station in St. Croix, United States
Virgin Islands and with SAC through our landing station in Fort Amador,
Panama. PAC is being designed to operate initially at 20 Gbps of service
capacity, upgradable to a minimum of 40 Gbps. PAC is anticipated to commence
service during 2000.

In connection with PAC, we own a 49% interest in Global Crossing Landing
Mexicana, S. de R.L. de C.V., a joint venture company jointly owned with an
affiliate of Bestel, S.A. de C.V., that will provide approximately 2,200 miles
of terrestrial connectivity in Mexico and connect to the PAC system.

South American Crossing

SAC will be an approximately 9,900 mile undersea and 1,500 mile terrestrial
fiber optic network directly linking the major cities of South America through
MAC and PAC to the United States, Mexico, Central America, the Caribbean, Asia
and Europe. We plan to build SAC in three phases. The first two phases,
providing Argentina and Brazil with connectivity to the Global Crossing
Network, are scheduled to commence service in the fourth quarter of 2000. The
final phase, completing the loop around the continent, is scheduled for
completion in the first quarter of 2001. Initially, SAC is expected to have a
capacity of 40 Gbps and to be upgradable to a minimum of 80 Gbps.

The undersea portion of SAC will constitute a state-of-the-art four-fiber
pair, self-healing ring, expected to connect to landing sites at St. Croix;
Fortaleza, Rio de Janeiro and Santos, Brazil; Las Toninas, Argentina;
Valparaiso, Chile; Lurin, Peru; Buenaventura, Colombia; and Fort Amador,
Panama. Terrestrial segments are expected to connect to most major South
American cities, including Rio de Janeiro, Sao Paulo, Buenos Aires, Santiago,
Lima, Cali and Bogota. The SAC ring is expected to be completed on its
southern-most end by a terrestrial link across the Andes between Las Toninas
and Valparaiso. The PAC system from Panama to St. Croix is expected to
complete the ring.

Additional Business Opportunities

In addition to the core components of the Global Crossing Network, we also
intend from time to time to make strategic investments and other contractual
arrangements to better enable us to expand our offerings of products and
services. Some of these opportunities include:

8

NextWave. We have agreed to make an equity investment in NextWave Telecom
Inc. as part of NextWave's plan of bankruptcy reorganization, subject to
certain conditions relating to NextWave's retaining communications licenses
from the Federal Communications Commission. In addition, we have entered into
a strategic services agreement with NextWave making us the preferred provider
of backhaul, long distance backbone, web-hosting and other communications
services to NextWave. NextWave plans to deploy a wireless telecommunications
network specifically designed to provide next generation wireless services,
including Internet access.

Telergy. We have entered into an agreement with Telergy, Inc., under which
we have acquired 96 strands of fiber throughout the New York area on Telergy's
100-mile New York City network. In addition, the agreement provides us with an
ownership position in Telergy and representation on its board of directors.
Global Crossing and Telergy have also agreed to explore co-build opportunities
in the northeastern United States and to seek to utilize the Telergy network
as needed for redundancy and termination of Global Crossing traffic in certain
areas.

Africa ONE. We have been selected to provide marine operations and to act as
project manager of Africa ONE, an estimated $1.6 billion cable system
consisting of a self-healing ring around the continent of Africa. We do not
intend to make an equity investment in this system.

Principal Customers

Although we have greatly expanded the number of products and services that
we offer to our customers, our principal customers to date have been licensed
telecommunications providers, including post, telephone and telegraph
companies, Internet service providers and established and emerging
telecommunications companies, that have purchased significant amounts of
capacity on our systems worldwide. Significant customers in our
telecommunications services segment include Deutsche Telekom, MCI Worldcom,
Level 3 Communications, KPN Qwest, Teleglobe, Telia, British Telecom, Viatel
and AT&T. In addition, the largest of our web hosting customers include
Yahoo!, The Motley Fool, Ziff-Davis, MP3.com and eToys.

Principal Suppliers

Our principal suppliers are the companies that are constructing the various
cable systems that comprise the Global Crossing Network. Tyco Submarine
Systems Ltd. ("TSSL") completed construction of AC-1; is responsible for the
design and installation of PAC; together with Alcatel, is responsible for
design and installation of MAC; and, together with Kokusai Denshin Denwa-
Submarine Cable Systems ("KDD-SCS") (as a subcontractor), is responsible for
design and installation of PC-1. Alcatel is responsible for the design and
construction of SAC, while KDD-SCS is responsible for the design and
construction of the first phase of EAC. We utilize multiple suppliers for
terrestrial systems.

Competition

Telecommunications Services

The telecommunications industry is highly competitive. Many of our existing
and potential competitors, particularly in our telecommunications services
markets, compete with significantly greater financial, personnel, marketing
and other resources, and have other competitive advantages.

The telecommunications industry is in a period of rapid technological
evolution, marked by increasing fiber and satellite transmission capacity, new
technologies and the introduction of new products and services. For instance,
recent technological advances enable substantial increases in transmission
capacity of both new and existing fiber, which could affect capacity supply
and demand. Also, the introduction of new products or emergence of new
technologies may reduce the cost or increase the supply of certain services
similar to those we provide.

9

High initial network cost and low marginal costs of carrying long distance
traffic have led to a trend among non-facilities-based carriers to consolidate
in order to achieve economies of scale. Such consolidation could result in
larger, better-capitalized competitors. However, we believe that owning our
own network will offer an advantage over carriers that lease network capacity.

Increased consolidation and strategic alliances in the industry resulting
from the Telecommunications Act of 1996 (the "Telecom Act") have allowed
significant new competitors to enter the industry, including local exchange
carriers, previously prohibited from the inter-state market.

In recent years, competition has increased dramatically in all areas of our
communications services market. Our primary competitors include Qwest, AT&T,
Sprint and MCI WorldCom and foreign PTTs, all of whom have extensive
experience in the long distance market. The impact of continuing consolidation
in the industry is uncertain. In addition, pursuant to the Telecom Act, local
exchange carriers, including Bell Atlantic, have begun to enter the long
distance market in their home service areas.

As we expand our business into Internet protocol services, we are also
competing with a wide range of companies that provide web hosting, Internet
access and other Internet protocol products and services. Significant
competitors include IBM, GTE, UUNet (a subsidiary of MCI WorldCom), Digex and
Exodus. In addition, many smaller companies have entered the market for web-
based services.

The routes addressed by our systems are currently served by several cable
systems as well as satellites. Primary future sources of transatlantic
competition for us may result from, among others, (1) TAT-14, a transatlantic
cable system which is being developed by its consortium members, including
British Telecom, AT&T, France Telecom and Deutsche Telekom, (2) Flag Atlantic-
1, a transatlantic system which is being developed by Flag Telecom and Global
Telesystems Group Inc., (3) a transatlantic cable system being developed by
Level 3 (the other half of the cable we are co-building as AC-2); and (4)
Hibernia, a transatlantic cable system being developed by Worldwide Fiber Inc.

Similarly, we expect to face competition in the transpacific market from,
among others, (1) the China-U.S. Cable Network, a transpacific system being
developed as a "private cable system" by fourteen large carriers, including
SBC Communications Inc., MCI WorldCom Inc., AT&T and Sprint, most of which
have traditionally sponsored consortium cables and (2) the Japan-U.S. Cable
Network, a transpacific system being developed by a consortium of major
telecommunications carriers, including MCI WorldCom Inc., AT&T, Kokusai
Denshin Denwa Co. Ltd., Nippon Telegraph and Telephone Corp., Cable & Wireless
and GTE.

In addition, we will face competition on PEC, our trans-European network.
There are several carriers, including Viatel, KPN-Qwest, MCI WorldCom, Inc., a
joint venture between Deutsche Telekom and France Telecom, British Telecom,
Global Telesystems Group and a joint venture between Level 3 and COLT Telecom
Group plc, which are currently planning or building trans-European network
assets.

We also face competition for our SAC network in South America. At least six
other systems are planned to be completed in the region by the third quarter
of 2001, including two consortium cables (Americas-2 and Atlantis-2);
Atlantica-1, a ring network being constructed by GlobeNet connecting
Venezuela, Brazil, and (through terrestrial cables) Argentina to North
America; and SAm-1, a ring system being constructed by Telefonica S.A. and
TSSL connecting Brazil, Argentina, Chile, Peru and Colombia to the United
States. In addition, we may face competition from existing and planned
regional systems and satellites on our MAC and PAC routes, where entrants are
vying for purchases from a small but rapidly growing customer base.

In addition to the systems mentioned above, several other regional and
global systems are being developed, most notably by TSSL, which has recently
announced its plans to build a worldwide cable network, and Project Oxygen, a
global system being evaluated by the CTR Group, Ltd.

10

In the United States, there are several facilities-based long distance fiber
optic networks competing with our NAC cable system, including those of AT&T,
Sprint, MCI WorldCom, Qwest, GTE, Broadwing Communications, Level 3
Communications and Williams Communications.

Installation and Maintenance Services

Although Global Marine Systems is the world's largest undersea cable
installation and maintenance company, with approximately 25% of the industry's
total vessels, it faces potential competition not only from existing market
participants but also from potential new entrants. There are currently three
other major supply companies in the undersea cable industry: TSSL, Alcatel and
KDD-SCS. Pirelli also has a presence in the industry, and there are a number
of smaller suppliers which have focused primarily on regional routes or non-
repeatered systems. It is unclear whether TSSL will continue to provide
significant installation and maintenance services to others following its
announcement that it is constructing its own worldwide cable network.

ILEC Services

We face many competitors in the provision of equipment and facilities used
in connection with our local exchange networks, as this market has become
increasingly competitive in recent years. The market for the provision of
local services itself is now competitive in Rochester, New York, as a result
of the Open Market Plan, and the Telecom Act is likely to result in
significantly greater competition in other markets. The Company's telephone
properties outside the Rochester, New York, area are experiencing competition
in limited areas.

Long distance companies largely access their end user customers through
interconnection with local exchange companies. These long distance companies
pay access fees to the local exchange companies for these services. The
provision of access services in Rochester and elsewhere by our ILEC services
segment is considered to be competitive.

Regulation

Our submarine and terrestrial fiber optic cable systems and
telecommunications services are subject to regulation at the federal, state,
and local levels in the United States, as well as regulation by regulatory
agencies in the various foreign countries in which we have facilities or
operations.

REGULATION IN THE UNITED STATES

Federal Regulation

The Federal Communications Commission ("FCC") regulates the interstate and
international telecommunications facilities and services of telecommunications
common carriers. Specifically, common carriers must comply with the
requirements of the Communications Act of 1934, as amended by the Telecom Act.
Implementation of the Telecom Act is subject to various federal and state
rulemaking and judicial procedures; therefore, the effects of the Telecom Act
on us cannot be accurately predicted.

We have obtained authority from the FCC to provide international
telecommunications services as a non-dominant carrier on a facilities-based
and resale basis. We also have obtained cable landing licenses that permit us
to land and operate submarine cable systems in U.S. territory. Domestically,
our subsidiaries provide local services as authorized CLECs in 34 states
(including Washington D.C.). Other subsidiaries are certificated as ILECs in
13 states.

The scope of our activities in the United States makes us subject to
varying, and sometimes conflicting, regulation. We are treated as non-dominant
for our interstate and international operations. For local exchange services,
some of our subsidiaries are treated as ILECs and others as CLECs. Generally
speaking, the FCC imposes a greater degree of regulation on ILECs and other
dominant providers and less regulation on CLECs

11

and other carriers without market power. The issues discussed below may have
positive effects on certain of our subsidiaries and negative effects on other
subsidiaries, and, thus, the net effect on us cannot be accurately predicted.

The intent of the Telecom Act is to increase competition in the U.S.
telecommunications market. To achieve this goal, the Telecom Act seeks to open
local access markets to competition by requiring ILECs to permit
interconnection to their networks and imposing various other obligations on
them.

Interconnection. In August 1996, the FCC released its First Report and Order
on interconnection, which established rules for the implementation of the
Telecom Act's obligations. In July 1997, the U.S. Circuit Court of Appeals for
the Eighth Circuit vacated portions of the FCC's decision. On January 25,
1999, the United States Supreme Court reversed, and affirmed the FCC's
authority to promulgate rules governing pricing, found that the FCC had
authority to promulgate a "pick and choose" rule for interconnection, and
upheld most of the FCC's rules governing access to unbundled network elements.
The Court remanded to the FCC the issue of which network elements must be
unbundled by ILECs. On remand, the FCC retained most of its original list of
network elements to be unbundled, but eliminated the requirements that ILECs
provide unbundled access to (i) local switching for customers with four or
more lines in the most densely populated parts of the top 50 Metropolitan
Statistical Areas, (ii) operator services, and (iii) directory assistance. The
rules governing the pricing, terms, and conditions of interconnection
agreements remain unsettled, and the scope of our interconnection rights and
obligations, both as an ILEC and a CLEC, may change in ways that are not
foreseeable.

Unbundling and Collocation. In March 1999, the FCC required ILECs to offer
unbundled loops and collocation on more favorable terms than were available
previously. The FCC order permits collocation of equipment that can be used to
provide advanced data services, such as Digital Subscriber Line services, and
requires ILECs to permit "cageless" collocation by CLECs. The FCC deferred
action on its proposal to permit ILECs to offer advanced data services through
separate affiliates and to free those affiliates from some of the obligations
of the Telecom Act.

Universal Service. The Telecom Act required the FCC to restructure the
manner in which universal service fund payments are established and
distributed, and the FCC has significantly expanded the federal universal
service subsidy regime to include low-income consumers. We are required to
contribute to these programs based on our interstate and international revenue
from end-user telecommunications services. Contribution rates change
quarterly. Currently, the contribution rate is 5.877% of interstate and
international end-user telecommunications revenue. We are unable to specify
the amount of any universal service contributions that we will be required to
make in future years.

Reciprocal Compensation. Under the Telecom Act, a local exchange carrier
that terminates calls to customers on its network is entitled to be
compensated by the local exchange carrier of the originating customer. Some
ILECs have taken the position that compensation is not owed for inbound calls
to Internet Service Providers ("ISPs") on the grounds that this type of
traffic is not local and, thus, not covered by the terms of existing
interconnection agreements. As a result, some ILECs have threatened to
withhold, and in some cases have withheld, compensation to CLECs for such
calls. The FCC has requested comments on the rules that it should adopt to
govern compensation for ISP-bound traffic. Comments have been filed by
interested parties and a decision is expected in the first quarter of 2000. We
cannot accurately predict how the FCC will rule or what impact that rule may
have on future interconnection negotiations.

As an ILEC in New York, we currently are required to pay significant
reciprocal compensation payments for inbound calls to ISPs. The state public
utility commissions ("PUCs") of Pennsylvania, Illinois, and Minnesota, states
in which we also operate ILECs, also have concluded that reciprocal
compensation is owed for ISP-bound calls. Any reciprocal compensation payments
in those states are not material to our operations. We cannot predict whether
the amounts of our reciprocal compensation payments in these or other states
will change in the future.

12

Access Charges. Our costs to provide long distance services and our revenue
from providing local services are affected by ongoing substantial changes in
the "access charge" rates imposed by ILECs on long distance carriers for
origination and termination of long distance calls over local facilities.

The increased pricing flexibility of "price cap ILECs" (i.e. ILECs subject
to the FCC's access charge price cap rules), such as our Frontier ILEC
subsidiaries, may have an adverse impact on our interstate access costs if not
properly implemented by ILECs and enforced by the FCC, but could also make it
easier for price cap ILECs to offer reduced access charge rates in markets
subject to competition. The FCC is continuing to examine further access charge
changes, including granting further pricing flexibility to price cap ILECs.

Tariffing and Filing Requirements. Non-dominant carriers must file tariffs
with the FCC stating the rates, terms, and conditions of their interstate and
international services. The FCC also imposes reporting and filing requirements
on such carriers. We must file periodic reports regarding our interstate and
international circuits and the deployment of network facilities. Traffic and
revenue reports and universal service contribution worksheets also must be
filed. Carriers also must obtain prior approval from or give notice to the FCC
of certain transfers of control and assignments of operating authorizations,
as well as certain affiliations with foreign carriers. In addition, certain
operating and services agreements with dominant foreign carriers must be filed
with the FCC.

Submarine Cables. In connection with the construction and operation of our
submarine cable systems, we have obtained cable landing licenses for the AC-1,
PC-1, MAC, PAC and SAC systems. These licenses give us authority to construct
and land our submarine cables in the United States. In each case, the license
permits the operation of the cable on a non-common carrier basis. Each of our
cable landing licenses is valid for a period of 25 years from its grant. We
are subject to various FCC reporting and filing requirements as the result of
our holding of these cable landing licenses.

State Regulation

In addition to regulation by the FCC, the intrastate services of each of our
local telephone service companies are regulated by the PUCs of the respective
states in which each subsidiary operates with respect to such issues as
prices, service quality, the issuance of securities, and the construction of
facilities. To provide intrastate services, we generally must obtain a
certificate of public convenience and necessity from the appropriate PUC and
comply with state requirements for telecommunications utilities. The level of
regulation imposed by state PUCs varies. Generally, however, ILECs are
regulated more heavily than competitive providers. Our subsidiaries are
certificated as ILECs in 13 states: New York, Alabama, Florida, Georgia,
Illinois, Indiana, Iowa, Michigan, Minnesota, Mississippi, Ohio, Pennsylvania,
and Wisconsin. Other subsidiaries provide competitive local services in 34
states (including Washington D.C.).

A number of states in which we have local or long distance operations are
conducting proceedings related to the rules under which carriers may operate
in an increasingly competitive environment. The issues that the PUCs are
examining include unbundling of local network elements, local interconnection
obligations, dialing parity for intra-LATA (or short-haul) toll traffic, local
number portability, resale of local exchange service and universal service. We
cannot predict how these proceedings will ultimately be resolved, nor when
decisions will be issued.

Open Market Plan. Our Frontier subsidiary in Rochester, New York began its
sixth year of operations under the Open Market Plan in January 2000. The Open
Market Plan promotes telecommunications competition in the Rochester, New York
marketplace by providing for (i) interconnection of competing local networks
including reciprocal compensation for terminating traffic, (ii) equal access
to network databases, (iii) access to local telephone numbers, (iv) service
provider telephone number portability, and (v) certain wholesale discounts to
resellers of local services.

13

During the operation of the Open Market Plan, we are regulated under pure
price cap regulation rather than rate-of-return regulation. Planned rate
reductions of $21.0 million (the "Rate Stabilization Plan") are being
implemented for Rochester area consumers, including $18.0 million of
reductions that occurred through 1999, and an additional $1.5 million which
commenced in January 2000. Rates charged for basic residential and business
telephone service may not be increased during the seven-year period of the
Plan. We are allowed to raise prices on certain enhanced products such as
Caller ID and call forwarding.

On August 25, 1999, the New York State Public Service Commission ("NYSPSC")
solicited comments regarding our Rochester local exchange subsidiary's
financial condition, earnings and service quality, competition in the
Rochester market, and the terms and conditions of the Open Market Plan.
Settlement discussions in this NYSPSC proceeding have resulted in a Joint
Proposal for Open Market Plan Continuation and Modification (the "Joint
Proposal"), which is subject to NYSPSC review and approval. If approved, our
Frontier ILEC subsidiary in New York will (i) remain under "price cap"
regulation through 2002 (and possibly for an additional two years); (ii) be
required to improve specified elements of service quality and to offer certain
additional services; (iii) be subject to increased potential penalties related
to service targets; and (iv) be required to lower certain residential and
commercial service rates. The impact of the Joint Proposal, if adopted, will
not have a material adverse effect on Global Crossing as a whole. The NYSPSC
also has issued orders on other regulatory issues that affect our New York
Frontier subsidiaries, related to service quality, staff allocations,
provisions, and relations with other carriers.

Dividend Policy. The Open Market Plan prohibits the payment of dividends by
Frontier Telephone of Rochester, Inc. ("FTR"), to Frontier Corporation ("FRO")
if (i) FTR's senior debt is downgraded to "BBB" by Standard & Poor's ("S&P"),
or the equivalent rating by other rating agencies, or is placed on credit
watch for such a downgrade, or (ii) a service quality penalty is imposed under
the Open Market Plan. Dividend payments to FRO also require FTR's directors to
certify that such dividends will not impair FTR's service quality or its
ability to finance its short and long-term capital needs on reasonable terms
while maintaining an S&P debt rating target of "A".

In 1999, FTR achieved the required service levels, but a previously imposed
temporary restriction on dividend payments from FTR to FRO will remain in
place until the NYSPSC is satisfied that FTR's service levels demonstrate that
FTR has rectified the service deficiency. In addition, on June 2, 1999,
Moody's and S&P downgraded FTR's senior debt ratings from A1/AA- to Baa2/BBB,
respectively. These ratings actions were a result of the announced merger
between FRO and Global Crossing Ltd., and did not reflect any change in the
financial condition or creditworthiness of FTR. These actions triggered an
additional dividend restriction for FTR, which will be in effect until either
the NYSPSC approves the payment of dividends or FTR's senior debt rating rises
above BBB (for S&P) or the equivalent for other rating agencies. On December
22, 1999, S&P downgraded FTR's senior debt rating to BB+ and, on January 18,
2000, Duff & Phelps downgraded FTR's senior debt rating to A. Both rating
agencies stated that their actions reflected their views that a large
separation in ratings could not be maintained between an operating subsidiary
and its parent. Accordingly, it remains uncertain when the restriction on
payment of dividends from FTR to FRO will be lifted.

Local Regulation

Our activities also are subject to local regulation, including compliance
with franchise obligations, building codes, and local licensing requirements.
Such regulations vary widely by jurisdiction. To construct and install
transmission facilities, we may need to obtain rights-of-way over public and
privately owned land.

INTERNATIONAL REGULATION

Our construction and operation of telecommunications networks and our
provision of telecommunications services in foreign countries require us to
obtain a variety of permits, licenses, and authorizations in the ordinary
course of business. In addition to telecommunications licenses and
authorizations, we may be required to obtain environmental, construction,
zoning and other permits, licenses, and authorizations. The construction and
operation of our facilities and our provision of telecommunications services
may subject us to regulation in other countries at the national, state,
provincial, and local levels.

14

Europe

In connection with the construction and operation of the PEC network, we
have obtained telecommunications licenses and authorizations in Belgium,
France, Germany, Ireland, Italy, the Netherlands, Spain, Sweden, Switzerland
and the United Kingdom. No telecommunications authorization is required for us
to construct and operate facilities or provide services in Denmark. We expect
to obtain additional telecommunications licenses and authorizations in Europe
in the ordinary course of business.

Our activities in Europe are subject to regulation by the European Union and
national regulatory authorities. The level of regulation and the regulatory
obligations and rights that attach to us as a licensee in each country vary.
In all countries, we, as a competitive entrant, are currently considered to
lack significant market power ("SMP"), which generally subjects us to less
regulation than providers that are deemed to possess SMP. As we complete
construction of the PEC network and begin providing services in Europe, we
anticipate that the regulatory obligations imposed on us will increase. In
addition, we may be required to address many of the "local competition" issues
that we face as a competitive provider in the United States, such as
interconnection, collocation, unbundling, reciprocal compensation, and resale.
The laws and regulations of the Member States of the EU on these issues vary.
Various of the Member States have opened or concluded public consultations
relating to these and other "local competition" issues. We cannot predict what
decisions will be made by the EU and the Member States in these ongoing
proceedings or the effects of any those decisions on our operations.

Asia

We are increasing the scope of our activities in Asia. In connection with
the construction and operation of the GAL network in Japan, GAL has received a
Japanese Type I telecommunications license. In addition, on February 18, 2000,
our subsidiary, Global Crossing Japan, received a Special Type II license in
Japan, which authorizes us to provide a variety of international
telecommunications services in Japan. As a Japanese telecommunications
licensee, we are subject to a range of regulatory requirements. In late 1999,
the Japanese Ministry of Post and Communications (the "MPT") opened a public
consultation on simplifying the telecommunications regulatory process. We have
submitted comments in that proceeding. We cannot accurately predict whether or
when a decision will be issued, whether the MPT will simplify the regulatory
regime, or the potential effects of such an action.

On February 1, 2000, Asia Global Crossing Hong Kong Ltd. ("AGC-HK") was
advised by a Letter of Intent from the Hong Kong telecommunications regulator
that, upon the satisfaction of certain conditions, AGC-HK will be issued an
External Fixed Telecommunications Network Services ("EFTNS") license to land
the EAC cable and to provide international telecommunications facilities and
services in Hong Kong. Our Hutchison Global Crossing ("HGC") joint venture is
authorized to construct and operate local and international fixed-line
telecommunications networks and to provide domestic and international
telecommunications services in Hong Kong. As a result of the HGC venture and
our EFTNS license, we are subject to regulatory oversight and supervision in
Hong Kong.

The status of liberalization of the telecommunications regulatory regimes of
the Asian countries in which we intend to operate varies. Some countries allow
full competition in the telecommunications sector, while others limit
competition for most services. Most of the countries in the region have
committed to liberalizing their telecommunications regimes and opening their
telecommunications markets to foreign investment as part of the World Trade
Organization ("WTO") Agreement on Telecommunications. China also has committed
to liberalizing its telecommunications markets and reducing foreign ownership
limitations if it is admitted to the WTO. We cannot be certain whether this
liberalizing trend will continue or accurately predict the pace and scope of
liberalization. It is possible that one or more of the countries in which we
operate will slow or halt the liberalization of its telecommunications
markets. The effect of such an action on us cannot be accurately predicted.

15

Latin America

In Latin America, we currently are constructing the MAC, PAC and SAC
systems. In connection with the construction of these cable systems, we have
obtained cable landing licenses and/or telecommunications licenses in
Argentina, Panama, and the United States. Applications have been filed in
Mexico, Venezuela and Brazil and we expect to file applications in additional
Latin American countries in the ordinary course of business.

As in Asia, the status of liberalization of the telecommunications markets
of Latin America varies. All of the countries in which we currently plan to
have operations are members of the WTO and have committed to liberalizing
their telecommunications markets and lifting foreign ownership restrictions.
Some countries now permit competition for all telecommunications facilities
and services, while others allow competition for some facilities and services,
but restrict competition for other services. Some countries in which we
operate or intend to operate currently impose limits on foreign ownership of
telecommunications carriers. We anticipate that we will be granted authority
to land and operate our submarine cable systems in each of the countries in
which they currently are expected to land. It is possible, however, that one
or more of these countries will not grant authority to land a submarine cable
or will impose conditions that make landing and operating the cable
commercially unfeasible.

The telecommunications regulatory regimes of many Latin American countries
are in the process of development. Many issues, such as regulation of
incumbent providers, interconnection, unbundling of local loops, resale of
telecommunications services, and pricing have not been addressed fully or at
all. We cannot accurately predict whether or how these issues will be resolved
and their impact on our operations in Latin America.

Employees

As of December 31, 1999, we had approximately 12,400 employees. We consider
our relations with our employees to be good.

Forward Looking Statements and Risk Factors

We have included in this Annual Report on Form 10-K forward-looking
statements that state our own or our management's intentions, beliefs,
expectations or predictions for the future. Forward-looking statements are
subject to a number of risks, assumptions and uncertainties which could cause
our actual results to differ materially from those projected in the forward-
looking statements. The discussions set forth below constitute cautionary
statements identifying important factors with respect to such forward-looking
statements, including risks and uncertainties, that could cause actual results
to differ materially from results referred to in the forward-looking
statements. There can be no assurance that our expectations regarding any of
these matters will be fulfilled.

We cannot assure you of the successful integration of newly acquired
businesses. We cannot assure you that the expected benefits will be
achieved.

Part of our growth strategy is to make selective strategic acquisitions of
businesses operated by others. Achieving the benefits of these acquisitions
will depend in part on the integration of those businesses with our business
in an efficient manner. We cannot assure you that this will happen or that it
will happen in a timely manner. The consolidation of operations following
these acquisitions will often require substantial attention from management.
The diversion of management attention and any difficulties encountered in the
transition and integration process could have a material adverse effect on the
revenue, levels of expenses and operating results of the combined company. We
cannot assure you that the combined company will realize any of the
anticipated benefits of any acquisition.

16

It may be difficult to evaluate our business because we have a limited
operating history.

We were organized in March 1997 and, with the exception of our Frontier,
Global Marine Systems and Racal Telecom subsidiaries, have a limited operating
history. Because of this limited history and our rapid growth though
successive acquisitions, it may be difficult for potential investors to
evaluate the performance of our operations. In particular, comparisons of our
results of operations from one period to another may not be fully indicative
of our current ability to conduct our business.

We may encounter difficulties in completing our cable systems currently
under development.

Our ability to achieve our strategic objectives will depend in large part
upon the successful, timely and cost-effective completion of our cable systems
currently under development, as well as on achieving substantial capacity
sales on these systems once they become operational and on our other
operational systems. The construction of these systems will be affected by a
variety of factors, uncertainties and contingencies, many of which are beyond
our control, including:

. our ability to manage their construction effectively;

. our ability to obtain all construction and operating permits and
licenses;

. third-party contractors performing their obligations on schedule; and

. our ability to enter into favorable construction contracts with a
limited number of suppliers.

These factors may significantly delay or prevent completion of one or more
of our systems currently under development, which could have a material
adverse effect on our business, financial condition and results of operations.

We cannot assure you that each of these systems will be completed at the
cost and in the time frame currently estimated by us, or even at all. Although
we award contracts for construction of our systems to suppliers who in most
cases are expected to be bound by a fixed-price construction cost schedule and
to provide guarantees in respect of completion dates and system design
specifications, we cannot assure you that the actual construction costs or the
time required to complete these systems will not exceed our current estimates.
These circumstances could have a material adverse effect on our business,
financial condition and results of operations.

Our revenue growth plan depends on product and service expansion.

We intend to grow revenue and profits by:

. introducing new services and products;

. developing or acquiring additional cable systems; and

. upgrading capacity on our planned systems.

Our inability to effect these expansions of our products and services could
have a material adverse effect on our business, financial condition and
results of operations.

We face competition which may reduce demand for our products and services.

The international telecommunications industry is highly competitive. We
compete primarily on the basis of price, availability, service quality and
reliability, customer service and the location of our systems and services.
The ability of our competitors to provide comparable products and services at
similar prices could have a material adverse effect on demand for our products
and services. In addition, much of our planned growth is predicated upon the
growth in demand for international telecommunications capacity and services.
We cannot assure you that this anticipated demand growth will occur.

17

We are growing rapidly in a changing industry.

Our strategy is to be the premier provider of global broadband
telecommunication services for both wholesale and retail customers. As a
result of this aggressive strategy, we are experiencing rapid expansion and
expect it to continue for the foreseeable future. This growth has increased
our operating complexity. At the same time, the international
telecommunications industry is changing rapidly due to, among other things:

. the easing of regulatory constraints;

. the privatization of established carriers;

. the expansion of telecommunications infrastructure;

. the growth in demand for bandwidth caused by expansion of Internet and
data transmissions;

. the globalization of the world's economies; and

. the changing technology for wired, wireless and satellite communication.

We cannot assure you that we will succeed in adapting to the rapid changes
in the international telecommunications industry.

We may have difficulty in obtaining the additional financing required to
develop our business.

In order to further implement our aggressive growth strategy, we anticipate
that we will require substantial additional equity and debt financing. Under
our business plan, we and our affiliates expect to require significant
financing by the end of 2000 to build out the Global Crossing Network and
provide additional services to our customers. Obtaining additional financing
will be subject to a number of factors, including, without limitation, the
following:

. the state of operations of our company;

. our actual or anticipated results of operations, financial condition and
cash flows;

. investor sentiment towards companies with substantial international
operations; and

. generally prevailing market conditions.

If additional funds are raised through the issuance of equity securities,
the percentage ownership of our then current shareholders will be reduced, and
the new equity securities may have rights, preferences or privileges senior to
those of the holders of our common stock. If additional funds are raised
through the issuance of debt securities, these securities would have some
rights, preferences and privileges senior to those of the holders of our
common stock, and the terms of this debt could impose restrictions on our
operations and result in significant interest expense to us. In the event that
we are unable to raise sufficient financing on satisfactory terms and
conditions in the future, our company would be adversely affected.

We face price declines that could adversely affect our business.

Advances in fiber optic technology have resulted in significant per circuit
price declines in the fiber optic cable transmission industry. Recent changes
in technology caused prices for telecommunications capacity and services to go
down even further. If there is less demand than we project or a bigger drop in
prices than we project, there could be a material adverse effect on our
business, financial condition and results of operations. We cannot assure you,
even if our projections with respect to those factors are realized, that we
will be able to implement our strategy or that our strategy will be successful
in the rapidly evolving telecommunications market.

We confront several system risks that could affect our operations.

Each of our systems is and will be subject to the risks inherent in a large-
scale, complex fiber optic telecommunications system. The operation,
administration, maintenance and repair of our systems requires the
coordination and integration of sophisticated and highly specialized hardware
and software technologies and equipment located throughout the world. We
cannot assure you that our systems will continue to function as expected in a
cost-effective manner. The failure of the hardware or software to function as
required could render a cable system unable to perform at design
specifications.

18

Each of our undersea systems either has or is expected to have a design life
of generally 25 years, while each of our terrestrial systems either has or is
expected to have a design life of at least 20 years. The economic lives of
these systems, however, are expected to be shorter than their design lives,
and we cannot assure you of the actual useful life of any of these systems. A
number of factors will ultimately affect the useful life of each of our
systems, including, among other things:

. quality of construction;

. unexpected damage or deterioration; and

. technological or economic obsolescence.

Failure of any of our systems to operate for its full design life could have
a material adverse effect on our business, financial condition and results of
operations.

Our success depends on our ability to maintain, hire and successfully
integrate key personnel.

Our future success depends on the skills, experience and efforts of our
officers and key technical and sales employees. In particular, our senior
management has significant experience in the telecommunications and Internet
industries, and the loss of any of them could negatively affect our ability to
execute our business strategy. In addition, we cannot assure you that we will
be able to integrate new management into our existing operations. Competition
for these individuals is intense, and we may not be able to attract, motivate
and retain highly skilled qualified personnel. We do not have "key person"
life insurance policies covering any of our employees.

We face risks associated with international operations.

Because we will derive substantial revenue from international operations and
intend to have substantial physical assets in several jurisdictions along our
routes, our business is subject to risks inherent in international operations,
including:

. political and economic conditions;

. unexpected changes in regulatory environments;

. exposure to different legal standards; and

. difficulties in staffing and managing operations.

We have not experienced any material adverse effects with respect to our
foreign operations arising from these factors. However, problems associated
with these risks could arise in the future. Finally, managing operations in
multiple jurisdictions may place further strain on our ability to manage our
overall growth.

Because many of our customers deal predominantly in foreign currencies, we
may be exposed to exchange rate risks and our net income may suffer due to
currency translations.

We primarily invoice for our services in U.S. dollars; however, most of our
customers and many of our prospective customers derive their revenue in
currencies other than U.S. dollars. The obligations of customers with
substantial revenue in foreign currencies may be subject to unpredictable and
indeterminate increases in the event that such currencies devalue relative to
the U.S. dollar. Furthermore, such customers may become subject to exchange
control regulations restricting the conversion of their revenue currencies
into U.S. dollars. In such event, the affected customers may not be able to
pay us in U.S. dollars. In addition, where we invoice for our services in
currencies other than U.S. dollars, our net income may suffer due to currency
translations in the event that such currencies devalue relative to the U.S.
dollar and we do not elect to enter into currency hedging arrangements in
respect of those payment obligations.

19

Our operations are subject to regulation in the United States 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.

In the United States, our intrastate, interstate, and international
telecommunications networks and services are subject to regulation at the
federal, state, and local levels. We also have facilities and provide services
in numerous countries in Europe, Latin America, and Asia. Our operations in
those countries are subject to regulation at the national level and, in some
cases, at the state, provincial, and local levels.

. Our interstate and international operations in the United States are
governed by the Communications Act of 1934, as amended by the Telecom
Act. There are several ongoing proceedings at the FCC and in the federal
courts regarding the implementation of various aspects of the Telecom
Act. The outcomes of these proceedings may affect the manner in which we
are permitted to provide our services in the United States and may have
a material adverse effect on our operations.

. The intrastate activities of our local telephone service companies are
regulated by the states in which they do business. A number of states in
which we operate are conducting proceedings related to the provision of
services in a competitive telecommunications environment. These
proceedings may affect the manner in which we are permitted to provide
our services in one or more states and may have a material adverse
effect on our operations.

. Our operations outside the United States are governed by the laws of the
countries in which we operate. The regulation of telecommunications
networks and services outside the United States varies widely. In some
countries, the range of services that we are legally permitted to
provide may be limited. In other countries, existing telecommunications
legislation is in the process of development, is unclear or
inconsistent, or is applied in an unequal or discriminatory fashion. Our
inability or failure to comply with the telecommunications laws and
regulations of one or more of the countries in which we operate could
result in the temporary or permanent suspension of operations in one or
more countries. We also may be prohibited from entering certain
countries at all or from providing all of our services in one or more
countries. In addition, many of the countries in which we operate are
conducting proceedings that will affect the implementation of their
telecommunications legislation. We cannot be certain of the outcome of
these proceedings. These proceedings may affect the manner in which we
are permitted to provide our services in these countries and may have a
material adverse effect on our operations.

. In the ordinary course of constructing our networks and providing our
services we are required to obtain and maintain a variety of
telecommunications and other licenses and authorizations in the
countries in which we operate. We also must comply with a variety of
regulatory obligations. Our failure to obtain or maintain necessary
licenses and authorizations, or to comply with the obligations imposed
upon license-holders in one or more countries, may result in sanctions,
including the revocation of authority to provide services in one or more
countries.

We depend on third parties for many functions. If the services of those
third parties are not available to us, we may not be able to conduct our
business.

We depend and will continue to depend upon third parties to:

. construct some of our systems and provide equipment and maintenance;

. provide access to a number of origination and termination points of our
systems in various jurisdictions;

. construct and operate landing stations in a number of those
jurisdictions;

. acquire rights of way;

. provide terrestrial capacity to our customers through contractual
arrangements; and

. act as joint venture participants with regard to some of our current and
potential future systems.

20

We cannot assure you that third parties will perform their contractual
obligations or that they will not be subject to political or economic events
which may have a material adverse effect on our business, financial condition
and results of operations. If they fail to perform their obligations, we may
not be able to conduct our business. If any of our joint venture participants
experiences a change in strategic direction such that their strategy regarding
our mutual joint venture diverges from our own, we may not be able to realize
the benefits anticipated to be derived from the joint venture.

We have substantial leverage which may limit our ability to comply with the
terms of our indebtedness and may restrict our ability to operate.

Our significant indebtedness could adversely affect us by leaving us with
insufficient cash to fund operations and impairing our ability to obtain
additional financing. The amount of our debt could have important consequences
for our future, including, among other things:

. cash from operations may be insufficient to meet the principal and
interest on our indebtedness as it becomes due;

. payments of principal and interest on borrowings may leave us with
insufficient cash resources for our operations; and

. restrictive debt covenants may impair our ability to obtain additional
financing.

We have incurred a high level of debt. As of December 31, 1999, we and our
consolidated subsidiaries had a total of $8,051 million of total liabilities,
including approximately $5,056 million in senior indebtedness, of which $1,295
million was secured. As of such date, Global Crossing Ltd. additionally had
outstanding cumulative convertible preferred stock with a face value of $1,650
million. Our subsidiary, Global Crossing Holdings, also has mandatorily
redeemable preferred stock outstanding with a face value of $500 million. In
addition, our Pacific Crossing joint venture entered into an $850 million non-
recourse credit facility, under which it had incurred $750 million of
indebtedness as of December 31, 1999.

Our ability to repay our debt depends upon a number of factors, many of
which are beyond our control. In addition, we rely on dividends, loan
repayments and other intercompany cash flows from our subsidiaries to repay
our obligations. Our operating subsidiaries have entered into a senior secured
corporate credit facility. Accordingly, the payment of dividends from these
operating subsidiaries and the making and repayments of loans and advances are
subject to statutory, contractual and other restrictions.

In addition, if we are unable to generate sufficient cash flow to meet our
debt service requirements, we may have to renegotiate the terms of our long-
term debt. We cannot assure you that we would be able to renegotiate
successfully those terms or refinance our indebtedness when required or that
satisfactory terms of any refinancing would be available. If we were not able
to refinance our indebtedness or obtain new financing under these
circumstances, we would have to consider other options, such as:

. sales of some assets;

. sales of equity;

. negotiations with our lenders to restructure applicable indebtedness; or

. other options available to us under applicable law.

Our principal shareholders may be able to influence materially the outcome
of shareholder votes.

As of March 3, 2000, Pacific Capital Group had an 11.98% beneficial
ownership interest in us. We have entered into various transactions with
Pacific Capital Group and its affiliates and assumed the on-going development
of some of our systems from an affiliate of Pacific Capital Group. Mr. Gary
Winnick, chairman of our board of directors, controls Pacific Capital Group
and its subsidiaries. In addition, several of our other officers and directors
are affiliated with Pacific Capital Group. Furthermore, as of March 3, 2000,
Canadian Imperial

21

Bank of Commerce had a 9.69% beneficial ownership interest in us. Canadian
Imperial Bank of Commerce and its affiliates have acted as underwriter, lender
or initial purchaser in several of our financial transactions in connection
with the development and construction of our systems. Several members of our
board of directors are employees of an affiliate of Canadian Imperial Bank of
Commerce.

As of March 3, 2000, Pacific Capital Group and Canadian Imperial Bank of
Commerce collectively beneficially owned 21.67% of the outstanding shares of
our common stock. Accordingly, Pacific Capital Group and Canadian Imperial
Bank of Commerce may be able to influence materially the outcome of matters
submitted to a vote of our shareholders, including the election of directors.

Officers and directors own a substantial portion of us and may have
conflicts of interest.

Our executive officers and directors have substantial equity interests in
us. As of March 3, 2000, all our directors and executive officers as a group
collectively beneficially owned 24.72% of our outstanding common stock,
including shares beneficially owned by Pacific Capital Group and certain
shares beneficially owned by Canadian Imperial Bank of Commerce. Some of these
individuals have also received amounts from us due to advisory services fees
paid to Pacific Capital Group and its affiliates.

Some of our directors and executive officers also serve as officers and
directors of other companies. Additionally, some of our officers and directors
are active investors in the telecommunications industry. Service as one of our
directors or officers and as a director or officer of another company could
create conflicts of interest when the director or officer is faced with
decisions that could have different implications for us and the other company.
A conflict of interest could also exist with respect to allocation of time and
attention of persons who are our directors or officers and directors and
officers of another company. The pursuit of these other business interests
could distract these officers from pursuing opportunities on our behalf. These
conflicts of interest could have a material adverse effect on our business,
financial condition and results of operations.

We cannot predict our future tax liabilities.

We believe that a significant portion of the income derived from our
undersea systems will not be subject to tax by any of (1) Bermuda, which
currently does not have a corporate income tax, or (2) some other countries in
which we conduct activities or in which our customers are located. However, we
base this belief upon:

. the anticipated nature and conduct of our business, which may change;
and

. our understanding of our position under the tax laws of the various
countries in which we have assets or conduct activities, which position
is subject to review and possible challenge by taxing authorities and to
possible changes in law, which may have retroactive effect.

We cannot predict the amount of tax to which we may become subject and
cannot be certain that any of these factors would not have a material adverse
effect on our business, financial condition and results of operations.

Our shareholders may be subject to Foreign Personal Holding Company, Passive
Foreign Investment Company, Controlled Foreign Corporation and Personal
Holding Company rules.

We believe that neither we nor any of our non-United States subsidiaries are
a foreign personal holding company and do not expect that either we or any of
our affiliates will become a foreign personal holding company. However, we
cannot assure you in this regard. If one of our shareholders is a United
States person and we or one of our non-United States subsidiaries are
classified as a foreign personal holding company, then that shareholder would
be required to pay tax on its pro rata share of our or our relevant non-United
States subsidiary's undistributed foreign personal holding income. We intend
to manage our affairs so as to attempt to avoid or minimize having income
imputed to United States persons under these rules, to the extent this
management of our affairs would be consistent with our business goals,
although we cannot assure you in this regard.

22

We believe that we are not a passive foreign investment company and do not
expect to become a passive foreign investment company in the future. However,
we cannot assure you in this regard. In addition, our expectations are based,
in part, on interpretations of existing law that we believe are reasonable,
but which have not been approved by any taxing authority. If we were a passive
foreign investment company, then any of our shareholders that is a United
States person could be liable to pay tax at the then prevailing rates on
ordinary income plus an interest charge upon some distributions by us or when
that shareholder sold our capital stock at a gain.

Furthermore, additional tax considerations would apply if we or any of our
affiliates were a controlled foreign corporation or a personal holding
company.

ITEM 2. PROPERTIES

Our principal offices are located in leased premises in Hamilton, Bermuda,
with corporate offices under lease in Beverly Hills, California; Morristown,
New Jersey; and Rochester, New York. We also own or lease sales,
administrative and support offices worldwide. In addition, our
telecommunication services segment owns undersea cables crossing the Atlantic
Ocean (AC-1 and AC-2); Pacific Ocean (58% economic interest in PC-1); Eastern
United States and Caribbean (MAC); South America (SAC); eastern Asia (EAC);
and Western United States, Mexico, Central & South America and Caribbean
(PAC); and primarily terrestrial cable systems connecting various cities
within the United States (NAC), Europe (PEC), Japan (GAL) and Hong Kong (HGC).
Our telecommunications services segment also owns or leases numerous cable
landing stations throughout the world related to these undersea and
terrestrial cable systems. GlobalCenter media distribution centers incorporate
web hosting infrastructure and are connected to the Company's international
fiber optic network. Media distribution centers are currently operational in
leased premises in Sunnyvale and Anaheim, California; London, England; South
Melbourne, Australia; Herndon, Virginia; and New York, New York.

Our installation and maintenance services segment owns, leases and operates
a fleet of vessels and submersible/remotely operated vehicles used in the
planning, installation and maintenance of undersea fiber optic cable systems.

Our ILEC services segment owns telephone properties which include:
connecting lines between customers' premises and the central offices; central
office switching equipment; buildings and land; and customer premise
equipment. The connecting lines, including aerial and underground cable,
conduit, poles, wires and microwave equipment, are located on public streets
and highways or on privately owned land. We have permission to use these lands
pursuant to local governmental consent or lease, permit, franchise, easement
or other agreement.

We believe that substantially all of our existing properties are in good
condition and are suitable for the conduct of our business. A security
interest in some of these properties, in particular some of our undersea
cables, has been granted to lenders providing financing for those systems
under non-recourse facilities or to Global Crossing generally under our
corporate credit facility.

ITEM 3. LEGAL PROCEEDINGS

On June 25, 1999, Frontier Corporation, a wholly-owned subsidiary of Global
Crossing Ltd., was served with a summons and complaint in a lawsuit commenced
in the New York State Supreme Court, Monroe County by a Frontier shareholder
alleging that Frontier and its Board of Directors had breached their fiduciary
duties to shareholders by endorsing a definitive merger agreement with the
Company without having adequately considered an alternative merger proposal
made by Qwest Communications International, Inc. The lawsuit was framed as a
purported class action brought on behalf of all shareholders of Frontier and
sought unstated compensatory damages and injunctive relief compelling
Frontier's board to evaluate Frontier's suitability as a merger partner, to
enhance Frontier's value as a merger candidate, to engage in discussions with
Qwest about possible business combinations, to act independently to protect
the interests of Frontier shareholders, and to ensure that no conflicts of
interest exist which would prevent maximizing value to shareholders. In July
1999,

23

three additional lawsuits were commenced against Frontier in the New York
State Supreme Court on behalf of a number of individual shareholders seeking
essentially identical relief. All four lawsuits were consolidated into a
single proceeding pending in Rochester, New York. In February 2000, all four
lawsuits were voluntarily withdrawn.

On July 12, 1999 Frontier was served with a summons and complaint in a
lawsuit commenced in New York State Supreme Court, New York County by a
Frontier shareholder alleging that Frontier and its board breached their
fiduciary duties by failing to obtain the highest possible acquisition price
for Frontier in the definitive merger agreement with Global Crossing. The
action has been framed as a purported class action and seeks compensatory
damages and injunctive relief. The claims against Frontier were originally
asserted in the same action as similar but separate claims against US WEST,
Inc. However, the claims against Frontier have been severed from the US WEST
claims. Global Crossing believes the asserted claims are without merit and is
defending itself vigorously.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

24

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS

Price Range of Common Stock

Our common stock began to trade on both the Nasdaq National Market ("NNM")
and the Bermuda Stock Exchange under the symbol "GBLX" following our Initial
Public Offering ("IPO") of common stock on August 14, 1998 at a per share
price of $9.50. The table below sets forth, on a per share basis for the
periods indicated, the high and low closing sales prices for the common stock
as reported by the NNM.

Price Range
--------------------------
1999 1998
------------- ------------
High Low High Low
------ ------ ------ -----

First Quarter.................................. $56.75 $19.25 $ -- $ --
Second Quarter................................. $64.25 $39.05 $ -- $ --
Third Quarter (from August 14, 1998)........... $41.88 $20.25 $12.75 $8.00
Fourth Quarter................................. $55.75 $24.81 $23.50 $8.63

The closing sale price of the common stock as reported by the NNM on March
3, 2000 was $56 7/16. As of March 3, 2000, there were 29,665 holders of record
of our common stock.

Dividend Policy; Restriction on Payment of Dividends

The Company does not anticipate paying cash dividends on our common stock in
the foreseeable future. The terms of certain of our debt instruments also
place limitations on our ability to pay dividends. Future dividends, if any,
will be at the discretion of the Board of Directors and will depend upon,
among other things, our operations, capital requirements and surplus, general
financial condition, contractual restrictions and such other factors as the
Board of Directors may deem relevant.

Recent Sales of Unregistered Securities

In 1999, the Company issued the following equity securities that were not
registered under the Securities Act of 1933, as amended:

(a) 2,600,000 shares of 7% Cumulative Convertible Preferred Stock at a
liquidation preference of $250.00 per share were issued on December 15,
1999 by GCL for net proceeds of approximately $630 million and sold to
Salomon Smith Barney, Merrill Lynch & Co., Goldman, Sachs & Co., Chase
Securities Inc., Morgan Stanley Dean Witter, CIBC World Markets, Donald,
Lufkin & Jenrette and Credit Suisse First Boston as initial purchasers.
Each share of preferred stock is convertible into 4.6948 shares of GCL
common stock, based on a conversion price of $53.25 per share; and

(b) 10,000,000 shares of 6 3/8% Cumulative Convertible Preferred Stock at a
liquidation preference of $100.00 per share were issued on November 5, 1999
by GCL for net proceeds of approximately $969 million and sold to Merrill
Lynch & Co., Goldman, Sachs & Co. and Salomon Smith Barney as initial
purchasers. Each share of preferred stock is convertible into 2.2222 shares
of GCL common stock, based on a conversion price of $45.00 per share.

Each series of GCL preferred stock issued during 1999 was resold only to
institutional investors that are "qualified institutional buyers" within the
meaning of Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"), and was issued in reliance upon an exemption from the
registration provisions of the Securities Act set forth in Section 4(2)
thereof relative to transactions by an issuer not involving any public
offering or the rules ad regulations thereunder.

25

ITEM 6. SELECTED FINANCIAL DATA

Global Crossing selected historical financial information

The table below shows selected historical financial information for Global
Crossing. This information has been prepared using the consolidated financial
statements of Global Crossing as of the dates indicated and for each of the
years ended December 31, 1999 and 1998 and for the period from March 19, 1997
(Date of Inception) to December 31, 1997.

In reading the following selected historical financial information, please
note the following:

. The statement of operations data for the year ended December 31, 1999
includes the results of Global Marine Systems for the period from July
2, 1999, date of acquisition, through December 31, 1999; the results of
Frontier for the period from September 30, 1999, date of acquisition,
through December 31, 1999; and the results of Racal Telecom for the
period from November 24, 1999, date of acquisition, through December 31,
1999. The Consolidated Balance Sheet as of December 31, 1999 includes
amounts related to Global Marine Systems, Frontier and Racal Telecom.

. During the year ended December 31, 1999, Global Crossing recorded a $15
million expense, net of tax benefit, due to the adoption of Statement of
Position 98-5, "Reporting on the Cost of Start-Up Activities". See the
"Cumulative effect of change in accounting principles" item in the
Statement of Operations Data.

. During the years ended December 31, 1999 and 1998, Global Crossing
recognized $51 million and $39 million, respectively, of stock-related
expense relating to stock options and rights to purchase stock issued
during that period which entitle the holders to purchase common stock.
See the "Stock-related expense" item in the Statement of Operations
Data.

. On December 15, 1999, GCL issued 2,600,000 shares of 7% cumulative
convertible preferred stock at a liquidation preference of $250.00 for
net proceeds of $630 million. Each share of preferred stock is
convertible into 4.6948 shares of common stock based on a conversion
price of $53.25. Dividends on the preferred stock are cumulative from
the date of issue and will be payable on February 1, May 1, August 1 and
November 1 of each year, beginning on February 1, 2000, at the annual
rate of 7%.

. On November 24, 1999, we completed our acquisition of Racal Telecom, a
group of wholly owned subsidiaries of Racal Electronics plc, for
approximately $1.6 billion in cash. Racal Telecom owns one of the most
extensive fiber telecommunications networks in the United Kingdom,
consisting of approximately 4,650 route miles of fiber and reaching more
than 2,000 cities and towns.

. On November 12, 1999, Global Crossing Holdings Ltd. ("GCH"), a wholly-
owned subsidiary of GCL, issued two series of senior unsecured notes
("New Senior Notes"). The 9 1/8% senior notes are due November 15, 2006
with a face value of $900 million and the 9 1/2% senior notes are due
November 15, 2009 with a face value of $1,100 million. The New Senior
Notes are guaranteed by GCL. Interest will be paid on the notes on May
15 and November 15 of each year, beginning on May 15, 2000.

. On November 5, 1999, GCL issued 10,000,000 shares of 6 3/8% cumulative
convertible preferred stock at a liquidation preference of $100.00 for
net proceeds of approximately $969 million. Each share of preferred
stock is convertible into 2.2222 shares of common stock, based on a
conversion price of $45.00. Dividends on the preferred stock are
cumulative from the date of issue and will be payable on February 1, May
1, August 1 and November 1 of each year, beginning on February 1, 2000,
at the annual rate of 6 3/8%.

26

. On September 28, 1999, we completed the acquisition of Frontier
Corporation in a merger transaction valued at over $10 billion, with
Frontier shareholders receiving 2.05 shares of our common stock for each
share of Frontier common stock held. Frontier is one of the largest long
distance telecommunications companies in the United States and one of
the leading providers of facilities-based integrated communications and
Internet services.

. On July 2, 1999, we completed our acquisition of the Global Marine
Systems division of Cable & Wireless Plc for approximately $908 million
in cash and assumed liabilities. Global Marine Systems owns the largest
fleet of cable laying and maintenance vessels in the world and currently
services more than a third of the world's undersea cable miles.

. On May 16, 1999, Global Crossing entered into a definitive agreement to
merge with U S WEST, Inc. On July 18, 1999, Global Crossing and U S WEST
agreed to terminate their merger agreement, and U S WEST agreed to merge
with Qwest Communications International Inc. As a result, U S WEST paid
Global Crossing a termination fee of $140 million in cash and returned
2,231,076 shares of Global Crossing common stock purchased in a related
tender offer, and Qwest committed to purchase capacity on the Global
Crossing network at established market unit prices for delivery over the
next four years and committed to make purchase price payments to Global
Crossing for this capacity of $140 million over the nest two years.
During the year ended December 31, 1999, Global Crossing recognized $210
million, net of merger related expenses, of other income in connection
with the termination of the U S WEST merger agreement.

. The "Termination of advisory services agreement" item in the Statements
of Operations Data includes a charge for the termination of the advisory
services agreement as of June 30, 1998. Global Crossing acquired the
rights from those entitled to fees payable under the advisory services
agreement in consideration from the issuance of common stock having an
aggregate value of $135 million and the cancellation of approximately $3
million owed to Global Crossing under a related advance agreement. As a
result of this transaction, Global Crossing recorded a non-recurring
charge in the approximate amount of $138 million during the year ended
December 31, 1998. In addition, Global Crossing recognized as an expense
approximately $2 million of advisory fees incurred prior to termination
of the contract.

. Global Crossing granted warrants to Pacific Capital Group, Inc., a
shareholder, and some of its affiliates for the Pacific Crossing, Mid-
Atlantic Crossing and Pan American Crossing systems and related rights.
The $275 million value of the common stock was originally allocated to
"Construction in progress" in the amount of $112 million and as
"Investment in and advances to/from affiliates" in the amount of $163
million. See the "property and equipment" item in the Balance Sheet
Data. The "Investment in and advance to/from affiliates" item in the
Balance Sheet Date includes $163 million as of December 31, 1999 and
1998, respectively, representing the value of the warrants described in
the bullet point immediately above applicable to the Pacific Crossing
system.

. Adjusted EBITDA is defined as operating income (loss), plus goodwill
amortization, depreciation and amortization, non-cash cost of capacity
sold, stock related expenses, incremental cash deferred revenue and
amounts relating to the termination of the advisory services agreement.
This definition is consistent with financial covenants contained in the
Company's major financial agreements. This information should not be
considered as an alternative to any measure of performance as
promulgated under GAAP. The Company's calculation of adjusted EBITDA may
be different from the calculation used by other companies and,
therefore, comparability may be limited.

27

The selected consolidated financial data as of December 31, 1999, 1998 and
1997, for the years ended December 31, 1999 and 1998 and for the period from
March 19, 1997 (Date of Inception) to December 31, 1997, respectively, are
derived from our audited consolidated financial statements and should be read
in conjunction with the audited consolidated financial statements and notes
included in this Annual Report on Form 10-K.

Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------
(In thousands, except share and per share information)

Statement of Operations
Data:
Revenue................. $ 1,664,824 $ 419,866 $ --
----------- ----------- -----------
Expenses:
Cost of sales.......... 850,483 178,492 --
Operations,
administration and
maintenance........... 133,202 18,056 --
Sales and marketing.... 149,119 26,194 1,366
Network development.... 26,153 10,962 78
General and
administrative........ 210,107 26,303 1,618
Stock related expense . 51,306 39,374 --
Depreciation and
amortization.......... 124,294 541 39
Goodwill and
intangibles
amortization.......... 127,621 -- --
Termination of advisory
services agreement ... -- 139,669 --
----------- ----------- -----------
1,672,285 439,591 3,101
----------- ----------- -----------
Operating loss.......... (7,461) (19,725) (3,101)
Equity in income (loss)
of affiliates.......... 15,708 (2,508) --
Minority interest....... (1,338) -- --
Other income (expense):
Interest income........ 67,407 29,986 2,941
Interest expense....... (139,077) (42,880) --
Other income, net...... 180,765 -- --
Provision for income
taxes.................. (126,539) (33,067) --
----------- ----------- -----------
Loss before
extraordinary item and
cumulative effect of
change in accounting
principle.............. (10,535) (68,194) (160)
Extraordinary loss on
retirement of debt..... (45,681) (19,709) --
----------- ----------- -----------
Loss before cumulative
effect of change in
accounting principle... (56,216) (87,903) (160)
Cumulative effect of
change in accounting
principle, net of
income tax benefit of
$1,400................. (14,710) -- --
----------- ----------- -----------
Net loss................ (70,926) (87,903) (160)
Preferred stock
dividends.............. (66,642) (12,681) (12,690)
Redemption of preferred
stock.................. -- (34,140) --
----------- ----------- -----------
Net loss applicable to
common shareholders.... $ (137,568) $ (134,724) $ (12,850)
=========== =========== ===========
Net Loss Per Common
Share:
Loss applicable to
common shareholders
before extraordinary
item and cumulative
effect of change in
accounting principle
Basic and diluted....... $ (0.15) $ (0.32) $ (0.04)
=========== =========== ===========
Extraordinary item
Basic and diluted....... $ (0.09) $ (0.06) $ --
=========== =========== ===========
Cumulative effect of
change in accounting
principle
Basic and diluted....... $ (0.03) $ -- $ --
=========== =========== ===========
Net loss applicable to
common shareholders
Basic and diluted....... $ (0.27) $ (0.38) $ (0.04)
=========== =========== ===========
Shares used in computing
basic and diluted loss
per share.............. 502,400,851 358,735,340 325,773,934
=========== =========== ===========
Operating Data:
Cash from operating
activities............. $ 506,084 $ 208,727 $ 5,121
Cash used for investing
activities............. (4,009,977) (430,697) (428,743)
Cash from financing
activities............. 4,330,799 1,027,110 425,075
Adjusted EBITDA ........ $ 708,181 $ 364,948 $ 343,233

28

December 31,
---------------------------------
1999 1998 1997
----------- ---------- --------
(In thousands)

Balance sheet data:
Current assets including cash and cash
equivalents and restricted cash and cash
equivalents................................ $ 2,946,533 $ 976,615 $ 27,744
Long term restricted cash and cash
equivalents................................ 138,118 367,600 --
Long term accounts receivable............... 52,052 43,315 --
Capacity available for sale................. -- 574,849 --
Property and equipment, net ................ 6,026,053 433,707 518,519
Other assets................................ 661,442 65,757 25,934
Investment in and advances to/from
affiliates, net............................ 323,960 177,334 --
Goodwill and intangibles, net............... 9,557,422 -- --
----------- ---------- --------
Total assets............................... $19,705,580 $2,639,177 $572,197
=========== ========== ========
Current liabilities......................... $ 1,852,593 $ 256,265 $ 90,817
Long term debt.............................. 5,018,544 1,066,093 312,325
Deferred revenue............................ 383,287 25,325 --
Deferred credits and other.................. 796,606 34,174 3,009
----------- ---------- --------
Total Liabilities........................... 8,051,030 1,381,857 406,151
Minority interest........................... 351,338 -- --
Mandatorily redeemable and cumulative
convertible preferred stock ............... 2,084,697 483,000 91,925
Shareholders' equity
Common stock............................... 7,992 4,328 3,258
Treasury stock............................. (209,415) (209,415) --
Other shareholders' equity................. 9,578,927 1,067,470 71,023
Accumulated deficit........................ (158,989) (88,063) (160)
----------- ---------- --------
Total shareholders' equity.................. 9,218,515 774,320 74,121
----------- ---------- --------
Total liabilities and shareholders' equity.. $19,705,580 $2,639,177 $572,197
=========== ========== ========

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Accounting Matters

During the third and fourth quarters of 1999, changes in the business
activities of the Company, together with a newly effective accounting
standard, caused the Company to modify certain of its practices regarding
recognition of revenue and costs related to sales of capacity. None of the
accounting practices described below affect the cash flows of the Company.

As a result of Financial Accounting Standards Board (FASB) Interpretation
No. 43, "Real Estate Sales, an interpretation of FASB Statement No. 66" (FIN
43), which became effective July 1, 1999, revenue from terrestrial circuits
sold after that date has been accounted for as operating leases and amortized
over the terms of the related contracts. Previously, these sales had been
recognized as current revenue upon activation of the circuits. This deferral
in revenue recognition has no impact on cash flow.

With the consummation of the Frontier acquisition on September 28, 1999,
service offerings became a significant source of revenue. Consequently, the
Company initiated service contract accounting for its subsea systems during
the fourth quarter, because the Company, since that date, no longer holds
subsea capacity exclusively for sale. As a result, since the beginning of the
fourth quarter, investments in both subsea and terrestrial systems have been
depreciated over their remaining economic lives, and revenue related to
service contracts have been recognized over the terms of the contracts.
Revenue and costs related to the sale of subsea circuits have been recognized
upon activation if the criteria of sales-type lease accounting have been
satisfied with respect to those circuits.

During the fourth quarter, the Company's global network service capabilities
were significantly expanded by the activation of several previously announced
systems, and by the integration of other networks obtained through acquisition
and joint venture agreements. With this network expansion, the Company began
offering its

29

customers flexible bandwidth products to multiple destinations, which makes
the historical practice of fixed, point-to-point routing of traffic and
restoration capacity both impractical and inefficient. To ensure the required
network flexibility, the Company is modifying its standard capacity purchase
agreement forms and its network management in a manner that will preclude the
use of sales-type lease accounting.

Because of these contract changes, and the network management required to
meet customer demands for flexible bandwidth, multiple destinations, and
system performance, the Company anticipates that most of the contracts for
subsea circuits entered into after January 1, 2000 will be part of a service
offering, and therefore will not meet the criteria of sales-type lease
accounting and will be accounted for as operating leases. Consequently,
revenue related to those circuits will be deferred and amortized over the
appropriate term of the contract. In certain circumstances, should a contract
meet all of the requirements of sales-type lease accounting, revenue will be
recognized without deferral upon payment and activation.

The Company notes that accounting practice and authoritative guidance
regarding the applicability of sales-type lease accounting to the sale of
capacity is still evolving. Based on the accounting practices described above,
the Company believes that additional changes, if any, in accounting practice
or authoritative guidance affecting sales of capacity would have little or no
impact on its results of operations.

Results of Operations for the Years Ended December 31, 1999 and December 31,
1998

HISTORICAL

In 1999, the Company completed its merger with Frontier and its acquisitions
of Global Marine Systems and Racal Telecom. Results for 1999 include
operations of Global Marine Systems from July 2, 1999, Frontier from October
1, 1999 and Racal Telecom from November 24, 1999. Due to these transactions,
the comparability of the Company's results of operations for the years ended
December 31, 1999 and 1998 is limited.

Revenue. Revenue for 1999 increased 296% to $1,665 million as compared to
$420 million for 1998. The increase in revenue is attributable to the Frontier
merger and the acquisitions of Global Marine Systems and Racal Telecom, as
well as growth from our existing business.

Cost of sales. Cost of sales during 1999 was $850 million (51% of revenue)
compared to $178 million (43% of revenue) in 1998. This increase is primarily
attributable to the Frontier merger and the Global Marine Systems and Racal
Telecom acquisitions. Lower margins are partially due to lower prices of
capacity sold to customers and wholesale cost of capacity purchased from
unconsolidated joint ventures (GAL and PC-1), the Company's profit on which is
included in equity in income of affiliates.

Non-cash cost of undersea capacity sold was $292 million and $141 million
during the years ended December 31, 1999 and 1998, respectively. For 1998 and
the first nine months of the year ended December 31, 1999, the Company
calculated costs of undersea capacity sold for AC-1 based on the ratio of the
period's actual revenue to total expected future revenues given a minimum
projected sales capacity of 1024 circuits (512 circuits in 1998) times the
construction cost of the system. Beginning in the fourth quarter of 1999, the
Company began to depreciate its undersea capacity and calculate cost of sales
based on the estimated net book value of the circuit at the time of sale.

Operations, administration and maintenance ("OA&M"). OA&M for the year ended
December 31, 1999 was $133 million (8% of revenue), compared to $18 million
(4% of revenue) for the year ended December 31, 1998. The increase is
primarily the result of costs incurred in connection with the development of
the Global Network Operations Center, expansion of the Global Crossing Network
and the expenses of acquired companies.

Sales and marketing. Sales and marketing costs for the year ended December
31, 1999 were $149 million (9% of revenue), compared to $26 million (6% of
revenue) for the year ended December 31, 1998. The increase is primarily
attributable to additions in headcount, occupancy costs, plus marketing costs,
commissions paid and other promotional expenses to support the Company's rapid
growth and the expenses of acquired companies.

30

Network development. Network development costs for the year ended December
31, 1999 were $26 million (2% of revenue), compared to $11 million (3% of
revenue) for the year ended December 31, 1998. The increase is primarily
attributable to the additional salaries, employee benefits, travel and
professional fees associated with the construction of the Global Crossing
Network.

General and administrative. General and administrative expenses for the year
ended December 31, 1999 were $210 million (13% of revenue), compared to $26
million (6% of revenue) for the year ended December 31, 1998. Such charges are
comprised principally of salaries, employee benefits and recruiting fees
reflecting the Company's staffing for multiple systems, travel, professional
fees, insurance costs and occupancy costs. The increase in general and
administrative expenses is primarily attributable to the Frontier merger and
the acquisitions of Global Marine Systems and Racal Telecom.

Stock related expense. Stock related expenses for the year ended December
31, 1999 were $51 million (3% of revenue), which increased by $12 million from
$39 million (9% of revenue) for the year ended December 31, 1998. The increase
is due to the addition of employees granted in-the-money options.

Depreciation and amortization. Depreciation and amortization for the year
ended December 31, 1999 was $124 million (8% as a percentage of revenue),
compared to $.54 million for the year ended December 31, 1998. This increase
was driven by charges from the newly acquired companies and depreciation of
subsea systems as of October 1, 1999.

Goodwill amortization. Goodwill amortization for the year ended December 31,
1999 of $128 million (8% of revenue) resulted from the Company's merger with
Frontier and acquisitions of Global Marine Systems and Racal Telecom during
the year ended December 31, 1999. There was no goodwill amortization for the
year ended December 31, 1998.

Operating loss. The Company incurred an operating loss for the year ended
December 31, 1999 of $7 million, compared to a loss of $20 million (5% of
revenue) for the year ended December 31, 1998.

Interest income and Interest expense. Interest income for the year ended
December 31, 1999 was $67 million, compared to $30 million for the year ended
December 31, 1998. The increase is due to earnings on investments of funds
from financings and operations for the year ended December 31 1999. Interest
expense for the year ended December 31, 1999 was $139 million, compared to $43
million for the year ended December 31, 1998, due to the merger with Frontier
and the acquisitions of Global Marine Systems and Racal Telecom and increases
in debt outstanding to support capital spending.

Other income, net. Other income, net for the year ended December 31, 1999
resulted primarily from a $210 million payment by US West, Inc. in connection
with the termination of its merger agreement with the Company, less related
expenses.

Provision for income taxes. The income tax provision of $127 million and $33
million for the years ended December 31, 1999 and 1998, respectively, provide
for taxes on profits earned from telecommunications services, installation and
maintenance services, ILEC services and other income where subsidiaries of the
Company have a presence in taxable jurisdictions.

Extraordinary loss from retirement of debt. Extraordinary loss from
retirement of debt of $46 million for the year ended December 31, 1999
compared to $20 million for the year ended December 31, 1998. During 1999, we
recognized an extraordinary loss of $15 million in connection with the
prepayment of existing debt in connection with the issuance of our $3 billion
Senior Secured Credit Facility and an additional $31 million for the early
extinguishment of $2 billion, in principal value, under the Senior Secured
Credit Facility. During 1998, we recognized an extraordinary loss of $20
million in connection with the repurchase of GTH's outstanding senior notes
("GTH Senior Notes"), comprising a premium of $10 million and a write-off of
$10 million of unamortized deferred financing costs.

31

Cumulative effect of change in accounting principle. The Company adopted
Statement of Position 98-5 (SOP 98-5), "Reporting on the Cost of Start-Up
Activities," issued by the American Institute of Certified Public Accountants,
during the year ended December 31, 1999. SOP 98-5 requires that certain start-
up expenditures previously capitalized during system development must now be
expensed. The Company incurred a one-time charge during the first quarter of
$15 million, net of tax benefit, that represents start-up costs incurred and
capitalized during previous periods.

Net loss. During the year ended December 31, 1999, the Company reported a
net loss of $71 million compared to a net loss of $88 million for the prior
year.

Net loss applicable to common shareholders. During the years ended December
31, 1999 and 1998, the Company reported a net loss applicable to common
shareholders of $138 million and $135 million, respectively.

Adjusted EBITDA. Adjusted EBITDA of $708 million in 1999 increased 94% from
$365 million for the year ended December 31, 1998. The increase is primarily
due to the inclusion of Frontier, Global Marine Systems and Racal as well as
growth from our existing businesses for the year ended December 31, 1999.

32

PRO FORMA

This section of Management's Discussion and Analysis of Financial Condition
and Results of Operations focuses on pro forma information for the periods
covered giving effect to the acquisitions from the beginning of each period.
The Company's management believes that the pro forma results provide the most
meaningful comparability among periods presented, since historical results
reflect full-company operations only after the close of the Frontier merger
and the acquisitions of Racal Telecom and Global Marine Systems. However, the
pro forma data are not necessarily indicative of the results that would have
been achieved had such transactions actually occurred at the beginning of each
period, nor are they necessarily indicative of the Company's future results.

The following reflects the pro forma results of operations for the years
ended December 31, 1999 and 1998.

For the year ended
December 31,
----------------------
1999 1998
---------- ----------
(In thousands)

REVENUE:
Telecommunications services ......................... $3,071,553 $2,591,066
Installation and maintenance services................ 334,153 322,017
Incumbent local exchange carrier services............ 729,231 701,935
Corporate and other.................................. 4,960 28,503
---------- ----------
4,139,897 3,643,521
---------- ----------
EXPENSES:
Operating, selling, general and administrative....... 3,433,024 2,807,671
Stock related expense................................ 51,306 39,374
Depreciation and amortization........................ 363,427 262,847
Goodwill amortization................................ 506,928 506,928
Termination of Advisory Services Agreement........... -- 139,669
---------- ----------
4,354,685 3,756,489
---------- ----------
OPERATING LOSS......................................... (214,788) (112,968)
EQUITY IN LOSS OF AFFILIATES........................... (747) (21,180)
MINORITY INTEREST...................................... (1,338) --
OTHER INCOME (EXPENSE):
Interest income...................................... 76,528 42,877
Interest expense..................................... (345,956) (283,984)
Other income, net.................................... 178,931 23,641
---------- ----------
LOSS BEFORE PROVISION FOR INCOME TAXES, EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE............................................. (307,370) (351,614)
Provision for income taxes........................... (155,174) (123,268)
---------- ----------
LOSS BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE........................ (462,544) (474,882)
Preferred stock dividends ........................... (92,171) (38,181)
---------- ----------
LOSS APPLICABLE TO COMMON SHAREHOLDERS BEFORE
EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE.................................. $ (554,715) $ (513,063)
========== ==========
Adjusted EBITDA........................................ $1,150,644 $1,071,969
========== ==========

33

Pro forma revenue--Telecommunications services. Pro forma revenue for the
telecommunications services segment for the years ended December 31, 1999 and
1998 resulted from sales of the following products:

For the year ended
December 31,
-----------------------
1999 1998
----------- -----------
(In thousands, except
minutes)

PRODUCT REVENUE:
Switched Voice....................................... $ 1,386,124 $ 1,416,088
CLEC (Local and LD).................................. 223,021 153,109
----------- -----------
Total Business Voice Products...................... 1,609,145 1,569,197
Data................................................. 1,274,689 782,087
Consumer long distance............................... 187,719 239,782
----------- -----------
TOTAL PRODUCT REVENUE.................................. $ 3,071,553 $ 2,591,066
=========== ===========
MINUTES................................................ 20,472,178 14,481,697
=========== ===========

In North America, data products continued to grow at triple digit rates--
data product revenue (primarily private line) from telecommunication carrier
customers grew 588% for the full year. Frame relay revenue, sales from
dedicated internet and web hosting revenue increased 304%, 159% and 187%,
respectively, over the prior year. Competitive Local Exchange Carrier (CLEC)
revenue increased 46% year-on-year.

Revenue from telecommunication commercial customers increased to $1.27
billion for the year ended December 31, 1999 from $1.26 billion for the year
ended December 31, 1998. Revenue from telecommunication consumer customers
fell to $188 million for the year ended December 31, 1999 from $240 million
for the year ended December 31, 1998. Revenue from telecommunication carrier
customers experienced a 48% increase in revenue year-on-year, from $1.09
billion to $1.61 billion, driven by strong growth in international city to
city circuit activations and an 87% increase in wholesale minutes sold on a
year-on-year basis.

Pro forma revenue--Installation and maintenance services. Pro forma revenue
increased by 4% year-on-year, despite delays in the installation of TAT-14 and
U.S.-Japan cables, which had been scheduled for installation during the fourth
quarter of 1999. Global Marine Systems added three ships to their fleet during
the year to service the Company's growth in subsea cable installations.
Revenue from maintenance increased from $117 million to $139 million, while
revenue from installation decreased from $205 million to $195 million.

Pro forma revenue--ILEC services. The following table provides supplemental
pro forma detail for the ILEC segment:

December
31,
-----------
1999 1998
----- -----
(In
thousands)

ACCESS LINES:
Commercial........................................................ 335 327
Consumer.......................................................... 737 718
----- -----
TOTAL ACCESS LINES.................................................. 1,072 1,045
===== =====

The ILEC segment continued to exceed service metrics required by the New
York State Public Service Commission. Revenue increased by 4% year-on-year.
Market deployment of the consumer ADSL product, Lightning Link, was initiated
in selected markets in the fourth quarter.

Operating, selling, general and administrative. Operating, selling, general
and administrative expenses of $3,433 million for the year ended December 31,
1999 increased by 22% from $2,808 million for the year ended December 31,
1998. This change resulted from costs of new systems being activated, cost of
sales relating to increased revenues, occupancy costs, marketing costs,
commissions paid and overall Company growth and staffing for multiple systems.

34

Non-cash cost of undersea capacity sold, included in operating, selling,
general and administrative expenses, was $292 million and $141 million during
the years ended December 31, 1999 and 1998, respectively. For 1998 and the
first nine months of 1999, the Company calculated costs of undersea capacity
sold based on the ratio of the period's actual revenue to total expected
future revenues given a minimum projected sales capacity multiplied by the
construction cost of the system. Beginning in the fourth quarter of 1999, the
Company began to depreciate the undersea capacity and calculate cost of sales
based on the estimated net book value of the circuit at the time of sale.

Stock related expense. Stock related expense of $51 million for the year
ended December 31, 1999, increased 30% from $39 million for the year ended
December 31, 1998 as a result of additional stock options issued below fair
market value.

Depreciation and amortization. Depreciation and amortization of $363 million
for the year ended December 31, 1999 increased 38% from $263 million for the
year ended December 31, 1998. This increase was primarily due to the
depreciation of subsea and terrestrial systems during 1999.

Operating loss. The Company incurred an operating loss for the year ended
December 31, 1999 of $215 million compared to a loss of $113 million for the
year ended December 31, 1998.

Equity in loss of affiliates. Equity in loss of affiliates of $0.7 million
for the year ended December 31, 1999 compared to a loss of $21 million for the
year ended December 31, 1998. The decrease in the net loss is primarily due to
sales of capacity on certain segments of PC-1 which became available for sale
in 1999.

Interest income and Interest expense. Interest income of $77 million for the
year ended December 31, 1999 compared to $43 million for the year ended
December 31, 1998, due to earnings on investments of additional funds from
financings and operations during the year ended December 31, 1999. Interest
expense of $346 million for the year ended December 31, 1999 compared to
interest expense of $284 million for the year ended December 31, 1998, due to
the merger with Frontier and the acquisition of Global Marine Systems and
Racal Telecom and increases in debt outstanding to support capital spending.

Other income, net. Other income of $179 million for the year ended December
31, 1999 compared to $24 million for the year ended December 31, 1998. The
increase is primarily a result of the receipt of a $210 million payment by US
West, Inc. in connection with the termination of its merger agreement with the
Company, less related expenses.

Provision for income taxes. The income tax provision of $155 million and
$123 million for the years ended December 31, 1999 and 1998, respectively,
provides for taxes on profits earned from telecommunications services,
installation and maintenance, ILEC Services and other income where
subsidiaries of the Company have a presence in taxable jurisdictions.

Preferred stock dividends. Preferred stock dividends of $92 million for the
year ended December 31, 1999 compared to $38 million in 1998. The increase was
attributable to payment of dividends on $1.5 billion of preferred shares
issued during the year ended December 31, 1999.

Adjusted EBITDA. Adjusted EBITDA of $1,151 million for the years ended
December 31, 1999 increased 7% from $1,072 in 1998. The increase was primarily
due to increased capacity sales and other data products, partially off-set by
the Company's increased spending to augment its sales force, add network and
web hosting capacity, add to its fleet of installation and maintenance
vessels, activate new fiber optic systems, and consummate and integrate its
acquisitions.

35

Historical Results of Operations for the Year Ended December 31, 1998 and the
Period from March 19, 1997 (Date of Inception) to December 31, 1997

Revenue. During the year ended December 31, 1998, the Company executed firm
commitments to sell capacity on our systems plus the sale of dark fiber on PEC
totaling $911 million. Of this amount, the Company recognized revenue of $418
million on sales of capacity relating to AC-1 for the year ended December 31,
1998, in addition to revenue from operations and maintenance services of $6
million.

Cost of sales. For the year ended December 31, 1998, the Company recognized
$178 million in cost of capacity sold, resulting in a gross margin on capacity
sales of 57%. Cost of capacity sold for the year ended December 31, 1998 also
includes $38 million relating to terrestrial capacity sold which the Company
had purchased from third parties. The Company calculated undersea cost of
capacity sold for AC-1 based on the ratio of the period's actual revenue to
total expected revenue, assuming minimum projected sales capacity of 512
circuits, multiplied by the construction cost of the system. This calculation
of cost of sales matches costs with the relative value of each sale. There
were no sales or related costs recognized during the period from March 19,
1997 (Date of Inception) to December 31, 1997, as the Company was in our
development stage.

Operations, administration and maintenance ("OA&M"). The Company incurred
OA&M costs of $18 million during the year ended December 31, 1998. The Company
entered into an agreement with TSSL relating to operations, administration and
maintenance of AC-1, which limits our total OA&M expense for the system. The
Company anticipates that our OA&M costs will be largely recovered through
charges to our customers under the terms of CPAs. There were no OA&M costs
during the period from March 19, 1997 (Date of Inception) to December 31,
1997, as the Company was in its development stage.

Sales and marketing. During the year ended December 31, 1998, the Company
incurred sales and marketing expenses of $26 million, including selling
commissions of $20 million incurred on capacity sales recognized during this
period. During the period from March 19, 1997 (Date of Inception) to December
31, 1997, the Company incurred sales and marketing costs of approximately $1
million. The increase from 1997 was due to additions in personnel and
occupancy costs, plus marketing, commissions paid and other promotional
expenses to support our rapid growth.

Network development. The Company incurred network development costs during
the year ended December 31, 1998 of $11 million relating to the development of
systems. During the period from March 19, 1997 (Date of Inception) to December
31, 1997, these costs were $0.1 million. The increase from 1997 was due to
additional personnel, and costs to explore new projects.

General and administrative. General and administrative expenses totaled $26
million during the year ended December 31, 1998 and were comprised principally
of salaries, employee benefits and recruiting fees for staffing of multiple
systems, travel, insurance costs and rent expenses, plus depreciation and
amortization. During the period from March 19, 1997 (Date of Inception) to
December 31, 1997, we incurred general and administrative costs of $2 million.

Termination of Advisory Services Agreement with PCG Telecom Services LLC. In
connection with the development and construction of AC-1, the Company entered
into an Advisory Services Agreement with PCG Telecom Services LLC, an
affiliate, providing for the payment by us of an advisory fee of 2% of the
gross revenue of ACL over a 25 year term. Our Board of Directors also approved
similar advisory fees and authorized us to enter into similar agreements with
respect to other cable systems under development by us. The Company has
acquired the rights of the persons entitled to the fees payable under these
agreements in consideration for the issuance to such persons of shares of our
common stock, which had at the time of issuance an aggregate value of $135
million, and the cancellation of approximately $3 million owed to us under a
related advance agreement. In addition, the Company recognized approximately
$2 million of advisory fees incurred prior to termination of the contract.

36

Stock related expense. Through December 31, 1998, the Company recorded as a
charge to paid-in capital $94 million of unearned compensation relating to
awards under our stock incentive plan plus the grant of certain economic
rights and options to purchase common stock granted to a senior executive. The
unearned compensation is being recognized as an expense over the vesting
period of these options and economic rights.

For the year ended December 31, 1998, the Company recognized as an expense
$31 million of stock related compensation relating to our stock incentive plan
and $6 million for the vested economic rights to purchase common stock and $2
million in respect of shares of common stock issued during the year. The
remaining $57 million of unearned compensation will be recognized as follows:
$28 million in 1999, $21 million in 2000 and $8 million in 2001. Our stock
incentive plan commenced in January 1998, and therefore no issuances were made
during the period from March 19, 1997 (Date of Inception) to December 31,
1997.

Equity in loss of affiliates. During 1998, the Company entered into joint
venture agreements to construct and operate PC-1 and GAL. PC-1 is owned and
operated by PCL. The Company has an economic interest in PCL represented by a
50% direct voting interest and, through one of the joint venture partners, a
further 8% economic non-voting interest. The Company has a 49% interest in
Global Access Ltd., which operates GAL. Our equity in the loss of PC-1 for the
year ended December 31, 1998 was $3 million.

Interest income. The Company reported interest income of $30 million during
the year ended December 31, 1998 and $3 million during the period from March
19, 1997 (Date of Inception) to December 31, 1997. Such interest income
represents earnings on cash raised from financing, the IPO, the issuance of
the GCH Preferred Stock, operations and CPA deposits.

Interest expense. During the year ended December 31, 1998, the Company
incurred $93 million in interest costs, including the amortization of finance
costs and debt discount. Of this amount, the Company capitalized to
construction in progress interest of $50 million and expensed $43 million.
During the period from March 19, 1997 (Date of Inception) to December 31,
1997, the Company incurred interest expense of $10 million, which was
capitalized to construction in progress.

Provision for income taxes. The income tax provision of $33 million for the
year ended December 31, 1998 provides for taxes on profits earned from
capacity sales and OA&M revenue where our subsidiaries have a presence in
taxable jurisdictions. During the period from March 19, 1997 (Date of
Inception) to December 31, 1997, the Company incurred operating losses, which
relate to non-taxable jurisdictions and therefore cannot be applied against
future taxable earnings. Accordingly, no tax provision or deferred tax benefit
was recorded as of December 31, 1997.

Extraordinary item. During May 1998, the Company recognized an extraordinary
loss of $20 million in connection with the repurchase of GTH's outstanding
senior notes ("GTH Senior Notes"), comprising a premium of $10 million and a
write-off of $10 million of unamortized deferred financing costs.

Net loss. The Company incurred a net loss of $88 million for the year ended
December 31, 1998, compared to a net loss of $0.2 million in the period from
March 19, 1997 (Date of Inception) to December 31, 1997. The net loss for the
year ended December 31, 1998 reflects an extraordinary loss on retirement of
the GTH Senior Notes of $20 million and a non-recurring charge of $140 million
relating to the termination of the Advisory Services Agreement. Our net income
before these items was $72 million.

Preferred stock dividends. During the year ended December 31, 1998, the
Company recorded preferred stock dividends of approximately $13 million.
Preferred stock dividends for the period from March 19, 1997 (Date of
Inception) to December 31, 1997 were $13 million. Of the $13 million recorded
in 1998, $4 million relates to the GCH Preferred Stock issued during December
1998.

Redemption of preferred stock. The redemption of GTH's outstanding preferred
stock ("GTH Preferred Stock") occurred in June 1998 and resulted in a $34
million charge against equity. This amount was comprised

37

of a $16 million redemption premium and a write-off of $18 million of
unamortized discount and issuance costs. The redemption premium and write-off
of unamortized discount and issuance costs are treated as a deduction to
arrive at net loss applicable to common shareholders in the consolidated
statements of operations.

Net loss applicable to common shareholders. During the year ended December
31, 1998, the Company reported a net loss applicable to common shareholders of
$135 million. This loss reflects preferred stock dividends of $13 million and
the redemption cost of GTH Preferred Stock of $34 million. During the period
from March 19, 1997 (Date of Inception) to December 31, 1997, the Company
incurred a net loss applicable to common shareholders of $13 million after GTH
Preferred Stock dividends of $13 million.

Liquidity and Capital Resources

On December 15, 1999, Global Crossing issued $650 million aggregate
liquidation preference of 7% cumulative convertible preferred stock. The
preferred stock is convertible into common stock of Global Crossing based upon
a conversion price of $53.25 per share.

On November 24, 1999, the Company entered into a GBP 675 million
(approximately $1,091 million as of December 31, 1999) credit facility to
finance the acquisition of Racal Telecom. As of December 31, 1999, the Company
had an outstanding balance of $646 million under the Racal Term Loan A.

On November 12, 1999, Global Crossing Holdings Ltd. issued $1.1 billion in
aggregate principal amount of its 9 1/2% Senior Notes Due 2009, and $0.9
billion in aggregate principal amount of its 9 1/8% Senior Notes Due 2006. The
proceeds were partially used to pay down the term loans under the Company's
Corporate Credit Facility.

On November 5, 1999, Global Crossing issued $1.0 billion aggregate
liquidation preference of 6 3/8% cumulative convertible preferred stock. The
preferred stock is convertible into common stock of Global Crossing based upon
a conversion price of $45.00 per share.

On July 2, 1999, Global Crossing entered into a $3 billion senior secured
corporate credit facility with a group of several lenders and The Chase
Manhattan Bank as administrative agent. The initial proceeds under the
facility were used to refinance outstanding balances under the AC-1 and MAC
project finance facilities, to refinance balances under a vendor financing
arrangement with Lucent, to refinance debt used for the purchase of the Global
Marine business from Cable and Wireless and for general corporate purposes. As
of December 31, 1999, the Company had a remaining available balance of $308
million under the senior secured corporate credit facility. In connection with
the issuance of the Senior Notes Due 2006 and the Senior Notes Due 2009, a
portion of the proceeds were used to pay down the term loans under the
Corporate Credit Facility.

Global Crossing initially financed the approximately $908 million Global
Marine Systems acquisition, which was completed in July 1999, with
approximately $600 million in committed bank financing and the remainder with
cash on hand. This initial indebtedness was refinanced through borrowings
under Global Crossing's senior secured corporate credit facility.

After giving effect to the financings listed above, as of December 31, 1999,
the Company had $1,865 million of both restricted and unrestricted cash and
cash equivalents. As of December 31, 1999, the Company had $8,051 million of
total liabilities, including $5,056 million in senior indebtedness, of which
$1,295 million was secured. As of such date, Global Crossing Ltd. additionally
had outstanding cumulative convertible preferred stock with a face value of
$1,650 million. Our subsidiary, Global Crossing Holdings, also has mandatorily
redeemable preferred stock outstanding with a face value of $500 million. In
addition, our unconsolidated Pacific Crossing joint venture entered into an
$850 million non-recourse credit facility, under which it had incurred $750
million of indebtedness as of December 31, 1999.

Global Crossing estimates the remaining total cost of developing and
deploying the announced systems on the Global Crossing Network to be
approximately $5 billion, excluding costs of potential future upgrades and

38

the amounts capitalized with respect to warrants issued in exchange for the
rights to construct MAC and PAC. Financing to complete the Global Crossing
Network is expected to be obtained from common stock, preferred stock, bank
financing or through other corporate financing. Some of this financing is
expected to be incurred by wholly-owned subsidiaries or joint venture
companies, as well as by GCL.

The Company has extended limited amounts of financing to customers in
connection with certain capacity sales. The financing terms provide for
installment payments of up to four years. The Company believes that its
extension of financing to its customers will not have a material effect on the
Company's liquidity.

Cash provided by operating activities was $506 million and $209 million for
the years ended December 31, 1999 and 1998, respectively. The balances
principally represent cash received from capacity sales, and interest income
received, less sales and marketing, network development, general and
administrative and interest expenses paid.

Cash used in investing activities was $4,010 million and $431 million for
the years ended December 31, 1999 and 1998, respectively, and represents cash
paid for construction in progress, acquisitions (net of cash acquired),
purchases of property, plant and equipment and cash investments in affiliates.

Cash provided by financing activities was $4,331 million for the year ended
December 31, 1999 and primarily represents borrowings under the senior secured
corporate facility, issuance of senior notes and proceeds from the issuance of
preferred stock, partially offset by repayments of borrowings under long term
debt. Cash provided by financing activities was $1,027 million for the year
ended December 31, 1998 and primarily relates to proceeds from borrowings
under the AC-1 and MAC Credit Facilities, proceeds from the issuance of GCH
Senior Notes, the GCH Preferred Stock and our IPO, less amounts paid for
finance and organization costs, the issuance of common preferred stock, the
repayment of long term debt, the redemption of the GTH Preferred Stock, the
retirement of the GTH Senior Notes and the increase in amounts held in
restricted cash and cash equivalents.

Global Crossing has a substantial amount of indebtedness. Based upon the
current level of operations, management believes that the Company's cash flows
from operations, together with available borrowings under its credit facility,
and its continued ability to raise capital, will be adequate to meet the
Company's anticipated requirements for working capital, capital expenditures,
acquisitions and other discretionary investments, interest payments and
scheduled principal payments for the foreseeable future. There can be no
assurance, however, that the Company's business will continue to generate cash
flow at or above current levels or that currently anticipated improvements
will be achieved. If the Company is unable to generate sufficient cash flow
and raise capital to service the Company's debt, the Company may be required
to reduce capital expenditures, refinance all or a portion of its existing
debt or obtain additional financing.

Inflation

Management does not believe that its business is impacted by inflation to a
significantly different extent than the general economy.

Year 2000 Compliance

Prior to December 31, 1999, the Company took all actions that it believed to
be necessary to insure that its business operations would be Year 2000 ("Y2K")
compliant. In particular, the Company established a Y2K compliance task force,
reviewed the status of the Company's systems, submitted information requests
to third party service providers, received assurances regarding Y2K compliance
from its major suppliers and developed contingency plans to address any
potential Y2K compliance failure. The Company expended approximately $40
million on a pro forma basis through December 31, 1999 on its Y2K readiness
efforts, principally relating to remediation efforts made in the businesses
operated by Frontier Corporation.

39

The Company did not experience any significant malfunctions or errors in its
operating or business systems when the date changed from 1999 to 2000. Based
on operations since January 1, 2000, the Company does not expect any
significant impact to its ongoing business as a result of the Y2K issue. In
addition, the Company is not aware of any significant Y2K issues or problems
that may have arisen for its significant customers and suppliers.

Euro Conversion

On January 1, 1999, a single currency called the Euro was introduced in
Europe. Eleven of the fifteen member countries of the European Union agreed to
adopt the Euro as their common legal currency on that date. Fixed conversion
rates between these countries' existing currencies (legacy currencies) and the
Euro were established as of that date. The legacy currencies are scheduled to
remain legal tender in these participating countries between January 1, 1999
and January 1, 2002 (not later than July 1, 2002). During this transition
period, parties may settle transactions using either the Euro or a
participating country's legacy currency.

Transition to the Euro creates a number of issues for the Company. Business
issues that must be addressed include product pricing policies and ensuring
the continuity of business and financial contracts. Finance and accounting
issues include the conversion of bank accounts and other treasury and cash
management activities. The Company has not yet set conversion dates for
certain of its accounting systems, statutory reporting and tax books, but will
do so during 2000. The financial institutions with which the Company has
relationships have transitioned to the Euro successfully and are issuing
statements in dual currencies.

The Company continues to address these transition issues and does not expect
the transition to the Euro to have a material effect on the results of
operations or financial condition of the Company. The Company does not expect
the cost of system modifications to be material and the Company will continue
to evaluate the impact of the Euro conversion.

40

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The table below provides information about our market sensitive financial
instruments and constitutes a "forward-looking statement." Our major market
risk exposure is changing interest rates. Our policy is to manage interest
rates through use of a combination of fixed and floating rate debt. Interest
rate swaps may be used to adjust interest rate exposures when appropriate,
based upon market conditions, and the Company does not engage in such
transactions for speculative purposes.

Fair Value
---------------------
Expected maturity dates 2000 2001 2002 2003 2004 Thereafter Total 12/31/1999 12/31/1998
----------------------- ------ ------- ------- ------- -------- ---------- ---------- ---------- ----------
(in thousands)

DEBT
9 1/2% Senior Notes due
2009................... -- -- -- -- -- $1,100,000 $1,100,000 $1,086,937 N/A
Average interest
rates--fixed.......... 9.5%
9 1/8% Senior Notes due
2006................... -- -- -- -- -- 900,000 900,000 889,313 N/A
Average interest
rates--fixed.......... 9.1%
9 5/8% Senior Notes due
2008................... -- -- -- -- -- 800,000 800,000 798,000 $834,000
Average interest
rates--fixed.......... 9.6%
Senior Secured Revolving
Credit Facility........ -- -- -- -- $648,597 -- 648,597 648,597 N/A
Average interest
rates--variable....... (1)
Racal Term Loan A....... -- -- -- -- 97,000 549,130 646,130 646,130 N/A
Average interest
rates--variable....... (2)
Medium-Term Notes,
7.51%-9.3%, due 2000 to
2004................... -- $71,500 $40,000 -- 107,500 -- 219,000 219,892 N/A
Average interest
rates--fixed.......... -- 8.9% 7.5% 9.3% 9.0%
7 1/4% Senior Notes due
2004................... -- -- -- -- 300,000 -- 300,000 282,220 N/A
Average interest
rates--fixed.......... 7.3%
6% Dealer Remarketable
Securities (DRS) due
2013................... -- -- -- -- -- 200,000 200,000 187,182 N/A
Average interest
rates--fixed.......... (3)
Other................... $5,496 $49,911 $ 3,618 $38,336 14,158 $ 130,509 242,028 234,926 N/A
Average interest
rates--fixed.......... (4)
DERIVATIVE INSTRUMENTS
Interest rate swap
floating for fixed
Contract notional
amount................. -- -- -- -- $200,000 -- $ 200,000 $ 206,602 N/A
Fixed rate paid by
counterparty.......... 7.3%
Floating rate paid by
GCL................... (5)

- --------
(1) The interest rate is US dollar LIBOR + 2.25% which was 8.4% as of December
31, 1999.
(2) The interest rate is British pound LIBOR + 2.5% which was 8.4% as of
December 31, 1999.
(3) The interest rate is fixed at 6.0% until October 2003. At that time, the
remarketing dealer (J.P. Morgan) has the option to remarket the notes at
prevailing interest rates or tender the notes for redemption.
(4) Includes $58,557 of fixed rate debt with interest rates ranging from 2.0%
to 9.0%. $48,460 of floating rate debt with an interest rate of British
pound LIBOR + 2.5%, which was 8.4% as of December 31, 1999.
(5) The interest rate is US dollar LIBOR + 1.26%, which is set in arrears.

Foreign Currency Risk

For those subsidiaries using the U.S. dollar as their functional currency,
translation adjustments are recorded in the accompanying condensed
consolidated statements of operations. None of the Company's translation
adjustments were material as of and for the years ended December 31, 1999 and
1998.

For those subsidiaries not using the U.S. Dollar as their functional
currency, assets and liabilities are translated at exchange rates in effect at
the balance sheet date and income and expense accounts at average exchange
rates during the period. Resulting translation adjustments are recorded
directly to a separate component of shareholders' equity. As of and for the
year ended December 31, 1999, the Company incurred a foreign currency
translation adjustment of $21 million. For the year ended December 31, 1998,
the translation adjustments were immaterial.

Foreign currency forward transactions are used by the Company to hedge
exposure to foreign currency exchange rate fluctuations. The Euro was the
principal currency hedged by the Company. Changes in the value of forward
foreign exchange contracts, which are designated as hedges of foreign currency
denominated assets and liabilities, are classified in the same manner as
changes in the underlying assets and liabilities.

41

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the index included on page F-1, Index to Consolidated Financial
Statements and Schedule.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

42

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names, ages and positions of the
directors and executive officers of GCL. The Bye-laws of GCL provide for a
Board of Directors consisting of up to 20 members divided into three classes
with terms of three years each. At the 1999 Annual General Meeting of
Shareholders, Messrs. Brown, Casey, Conway, McDonald and Porter were elected
Class A Directors with a term expiring in 2000; Messrs. Annunziata, Cook,
Hippeau, Kent, Lee, Raben and Scanlon were elected Class B Directors with a
term expiring in 2001; and Messrs. Bloom, Clayton, Kehler, McCorkindale, Steed
and Winnick were elected Class C Directors with a term expiring in 2002. Mr.
Hindery was appointed a Class A Director by the Board effective February 9,
2000. Mr. Fok was appointed a Class A Director by the Board effective February
28, 2000.

Name Age Position
---- --- --------

Gary Winnick................... 52 Chairman of the Board and Director
Lodwrick M. Cook............... 71 Co-Chairman of the Board and Director
Leo J. Hindery, Jr. ........... 52 Chief Executive Officer and Director;
Chairman and Chief Executive Officer,
GlobalCenter Inc.
Thomas J. Casey................ 48 Vice Chairman of the Board and Director
David L. Lee................... 50 President, Chief Operating Officer and
Director
Joseph P. Clayton.............. 50 Director; President, Global Crossing
North America
Jack M. Scanlon................ 58 Director; Vice Chairman of the Board,
Asia Global Crossing
Abbott L. Brown................ 56 Senior Vice President and Director
Barry Porter................... 42 Senior Vice President and Director
Dan J. Cohrs................... 47 Senior Vice President and Chief
Financial Officer
John L. Comparin............... 47 Senior Vice President, Human Resources
James C. Gorton................ 38 Senior Vice President and General
Counsel
John A. Scarpati............... 48 Chief Administrative Officer
Robert B. Sheh................. 60 Executive Vice President, Construction
and Operations
Edward Mulligan................ 44 Senior Vice President, Network
Operations
William B. Carter.............. 55 President, Global Crossing Development
Co.; Chief Executive Officer, Global
Marine Systems
S. Wallace Dawson, Jr. ........ 54 President, Atlantic Crossing
Robert Annunziata.............. 52 Director
Jay R. Bloom................... 44 Director
William E. Conway, Jr. ........ 50 Director
Eric Hippeau................... 48 Director
Dean C. Kehler................. 43 Director
Geoffrey J.W. Kent............. 57 Director
Canning Fok Kin-ning........... 48 Director
Douglas H. McCorkindale........ 60 Director
James F. McDonald.............. 60 Director
Bruce Raben.................... 46 Director
Michael R. Steed............... 50 Director

43

Gary Winnick--Mr. Winnick, founder of GCL, has been Chairman of the Board
of GCL since March 1997. Mr. Winnick is the founder and has been the Chairman
and Chief Executive Officer of Pacific Capital Group, Inc. ("PCG"), a leading
merchant bank specializing in telecommunications, media and technology, which
has a substantial equity investment in GCL, since 1985.

Lodwrick M. Cook--Mr. Cook has been Co-Chairman of the Board of GCL since
September 1997 and Vice Chairman and Managing Director of PCG since 1997. He
became Chairman of Global Marine Systems, a wholly-owned subsidiary of GCL, in
1999. Prior to joining PCG, Mr. Cook spent 39 years at Atlantic Richfield Co.,
last serving as Chairman of the Board of Directors from 1986 to 1995, when he
became Chairman Emeritus. Mr.Cook is also a member of the Board of Directors
of Castle & Cooke, Inc., Litex, Inc. and 911Notify.com.

Leo J. Hindery, Jr.--In February 2000, Mr. Hindery was named CEO of GCL.
Mr. Hindery has been a GCL Director since February 2000 and Chairman and Chief
Executive Officer of GCL's GlobalCenter Inc. subsidiary since December 1999.
Prior thereto, he had been President and Chief Executive Officer of AT&T's
Broadband and Internet Services division since March 1999. From March 1997
until March 1999, Mr. Hindery was President of Tele-Communications, Inc., a
cable television and programming company. Prior thereto, he was Managing
General Partner of InterMedia Partners, a cable television operation that he
founded in 1988.

Thomas J. Casey--Mr. Casey has been Vice Chairman and a Director since
December 1998, after having been appointed Managing Director of GCL in
September 1998. Prior to joining GCL, Mr. Casey was co-head of Merrill Lynch &
Co.'s Global Communications Investment Banking Group for three years. From
1990 to 1995, Mr. Casey was a partner and co-head of the telecommunications
and media group of the law firm of Skadden, Arps, Slate, Meagher and Flom. Mr.
Casey also serves as president of PCG.

David L. Lee--Mr. Lee has been President and Chief Operating Officer and a
Director of GCL since March 1997. He has also been a managing director of PCG
since 1989.

Joseph P. Clayton--Mr. Clayton has been a Director of GCL since September
1999. He has also served as President, Global Crossing North America since
that time. Mr. Clayton was Vice-Chairman of GCL from September 1999 to March
2000. Prior to the Merger with Global Crossing, Mr. Clayton was Chief
Executive Officer of Frontier since August 1997 having served as Frontier's
President and Chief Operating Officer from June 1997 to August 1997. Prior
thereto, he was Executive Vice President, Marketing and Sales--Americas and
Asia, Thomson Consumer Electronics, a worldwide leader in the consumer
electronics industry.

Jack M. Scanlon--Mr. Scanlon has been a Director since April 1998 and Vice-
Chairman of Asia Global Crossing since 1999. Mr. Scanlon was Chief Executive
Officer of GCL from April 1998 to March 1999 and Vice Chairman of GCL from
March 1999 to March 2000. Prior to joining GCL, Mr. Scanlon was President and
General Manager of the Cellular Networks and Space Sector of Motorola Inc. and
had been affiliated with Motorola Inc. since 1990.

Abbott L. Brown--Mr. Brown has been a Senior Vice President and a Director
of GCL since 1997. He had been a managing director and Chief Financial Officer
of PCG from 1994 to 1998. From 1990 through 1994, Mr. Brown was Executive Vice
President, Chief Financial Officer and a member of the board of directors of
Sony Pictures Entertainment, Inc., a subsidiary of Sony Corporation.

Barry Porter--Mr. Porter has been a Senior Vice President and a director of
GCL since 1997. He has also been a managing director of PCG since 1993. Prior
thereto, Mr. Porter had been a Senior Managing Director in the investment
banking department of Bear, Stearns & Co., Inc.

Dan J. Cohrs--Mr. Cohrs has been Senior Vice President and Chief Financial
Officer of GCL since May 1998. From 1993 to 1998, Mr. Cohrs was affiliated
with GTE Corporation, rising to the position of Vice President and Chief
Planning and Development Officer in 1997.

John L. Comparin--Mr. Comparin has been Senior Vice President, Human
Resources of GCL since August 1999. Prior thereto, Mr. Comparin had been
Senior Vice President--Human Resources of ALLTEL Corporation, an information
technology company that provides wireline and wireless communications and
information services.

44

James C. Gorton--Mr. Gorton has been Senior Vice President and General
Counsel of GCL since July 1998, and also served as Secretary of GCL from
August 1998 through September 1999. From 1994 to 1998, Mr. Gorton was a
partner in the New York law firm of Simpson Thacher & Bartlett.

John A. Scarpati--Mr. Scarpati was appointed Chief Administrative Officer
of GCL in December 1999. He previously served as Vice President and Chief
Financial Officer at AT&T Business Services Group from 1998 to 1999. Prior
thereto, Mr. Scarpati served since 1984 in various executive officer positions
for the Teleport Communications Group, including Senior Vice President and
Chief Financial Officer.

Robert B. Sheh--Mr. Sheh has been Executive Vice President, Construction
and Operations since February 1999. From 1992 to 1998, Mr. Sheh served as
President and Chief Executive Officer of International Technology Corporation,
an environmental management services firm, and as Chairman and Chief Executive
of Air & Water Technologies, an environmental management services firm. From
1989 to 1992 Mr. Sheh served as President of The Ralph M. Parsons Company, a
worldwide engineering and construction company. Mr. Sheh held positions of
increasing responsibility at Parsons over a period of 20 years.

Edward Mulligan--Mr. Mulligan joined Global Crossing Ltd. in November 1999
as Senior Vice President for Engineering and Operations. In July 1973, Mr.
Mulligan began his career with AT&T. In 1990 he joined Teleport Communications
Group ("TCG") and rose within the organization to head the Product Lines-of-
Business. In 1998 he rejoined AT&T when TCG was acquired by AT&T.

William B. Carter--Mr. Carter has served as President of Global Crossing
Development Co., a subsidiary of GCL since September 1997. Since July 1999, he
has served as CEO of the Global Marine Systems subsidiary of GCL. Prior to
joining GCL, he was president and chief executive officer of AT&T Submarine
Systems, Inc., overseeing the research and development, planning,
negotiations, engineering, implementation, and integration of their
international cable and satellite facilities. Mr. Carter previously served as
director of international network operations for AT&T.

S. Wallace Dawson, Jr.--Mr. Dawson joined GCL in September 1997 and was
appointed Chief Executive Officer, Atlantic Crossing Ltd. in August 1998. He
joined Bell Laboratories in 1968 and subsequently became associated with AT&T
Long Lines, where he was responsible for AT&T Packet Switched Services and
Data Networking Services. At AT&T Submarine Systems, Inc., he had overall
delivery responsibility for implementation of all submarine cable projects.

Robert Annunziata--Mr. Annunziata, a Director of GCL since March 1999, was
Chief Executive Officer of GCL from February 1999 through March 2000. From
September 1998 to February 1999, Mr. Annunziata was President of AT&T's
business services group, responsible for the AT&T global network. Prior
thereto, Mr. Annunziata was Chairman and Chief Executive Officer of the
Teleport Communications Group, a competitive local exchange carrier, from 1983
to 1998.

Jay R. Bloom--Mr. Bloom, a Director of GCL since March 1997, is a managing
director of CIBC World Markets Corp. and co-head of its Leveraged Finance
Group. In addition, Mr. Bloom is a member of CIBC's U.S. Management Committee;
co-head of CIBC World Markets High Yield Merchant Banking Funds; and a
managing director of Caravelle Advisors, L.L.C., the investment advisor to
Caravelle Investment Fund, L.L.C., an entity that owns shares of Global
Crossing common stock. Mr. Bloom is also a managing director and member of
Trimaran Fund II, L.L.C., Trimaran Fund Management, L.L.C., and Trimaran
Investments II, L.L.C. Prior to joining CIBC World Markets in 1995, Mr. Bloom
was a founder and managing director of The Argosy Group L.P. Mr. Bloom also
serves as a director of CIBC World Markets Corp., Heating Oil Partners, L.P.,
Consolidated Advisers Limited, L.L.C., Argosy Heating Partners, Inc., Dominos,
Inc., IASIS Healthcare Corporation and Morris Material Handling, Inc.

William E. Conway, Jr.--Mr. Conway, a Director of GCL since August 1998,
has been a managing director of The Carlyle Group, a private global investment
firm, since 1987. Prior thereto, Mr. Conway had been Senior Vice President and
Chief Financial Officer of MCI Communications Corporation. Mr. Conway also
serves as director of Nextel Communications, Inc.

45

Eric Hippeau--Mr. Hippeau, a Director of GCL since September 1999, is
Chairman and Chief Executive Officer of Ziff-Davis Inc., a publicly-listed
company whose majority shareholder is Softbank, Corp. Ziff-Davis Inc. is a
leading integrated media and marketing company focused on computing and
internet-related technology. Mr. Hippeau has held this position since December
1993, prior to which he held other senior executive positions within Ziff-
Davis. He is also a director of Ziff-Davis Inc., Yahoo!, Inc., and Starwood
Hotels and Resorts Worldwide, Inc.

Dean C. Kehler--Mr. Kehler, a Director of GCL since March 1997, is a
managing director of CIBC World Markets Corp. and co-head of its Leveraged
Finance Group. In addition, Mr. Kehler is a member of CIBC's U.S. Management
Committee; co-head of CIBC World Markets High Yield Merchant Banking Funds;
and a managing director of Caravelle Advisors, L.L.C., the investment advisor
to Caravelle Investment Fund, L.L.C., an entity that owns shares of Global
Crossing common stock. Mr. Kehler is also a managing director and member of
Trimaran Fund II, L.L.C., Trimaran Fund Management, L.L.C., and Trimaran
Investments II, L.L.C. Prior to joining CIBC World Markets in 1995, Mr. Kehler
was a founder and managing director of The Argosy Group L.P. Mr. Kehler also
serves as a director of CIBC World Markets Corp., Booth Creek Group, Inc. and
Heating Oil Partners, L.P.

Geoffrey J.W. Kent--Mr. Kent, a Director of GCL since August 1998, is
Chairman and Chief Executive Officer of the Abercrombie & Kent group of
companies in the travel-related services industry, and has been associated
with these companies since 1967.

Canning Fok Kin-ning--Mr. Fok has been a Director of GCL since February
2000. He has served as Group Managing Director of Hutchison Whampoa Limited
("Hutchison") since August 1993. Hutchison, part of the Li Ka-shing group of
companies, is a large multi-national conglomerate based in Hong Kong. In
January 2000, Hutchison formed a joint venture with GCL to pursue fixed-line
telecommunications and internet opportunities in the Hong Kong Special
Administrative Region, China. Mr. Fok is the Chairman of Hutchison
Telecommunications (Australia) Limited and Partner Communications Company Ltd.
and Deputy Chairman of Cheung Kong Infrastructure Holdings Limited and
Hongkong Electric Holdings Limited. He is also a director of Cheung Kong
(Holdings) Limited and VoiceStream Wireless Corporation.

Douglas H. McCorkindale--Mr. McCorkindale, a Director of GCL since
September 1999, is Vice Chairman and President of Gannett Co., Inc., a
nationwide diversified communications company, and has held that position
since September 1997. Prior thereto, he was Gannett's Vice Chairman and Chief
Financial and Administrative Officer. Mr. McCorkindale is also a director of
Gannett and Continental Airlines and a director or trustee of a number of
investment companies in the family of Prudential Mutual Funds.

James F. McDonald--Mr. McDonald, a Director of GCL since September 1999,
has been President and Chief Executive Officer of Scientific-Atlanta, Inc., a
leading supplier of broadband communications systems, satellite-based video,
voice and data communications networks and world-wide customer service and
support, since 1993. He is also a director of Scientific-Atlanta and
Burlington Resources, Inc.

Bruce Raben--Mr. Raben, a Director of GCL since March 1997, is a managing
director of CIBC Oppenheimer. Prior to joining CIBC Oppenheimer in January
1996, Mr. Raben was a founder, managing director and co-head of the Corporate
Finance Department of Jefferies & Co., Inc. since 1990. Mr. Raben also serves
as a director of Optical Security, Inc., Evercom, Inc., Terex Corporation and
Equity Marketing, Inc.

Michael R. Steed--Mr. Steed, a Director of GCL since March 1997, has been a
managing director of PCG since December 1999. Prior thereto, Mr. Steed had
been Senior Vice President of Investments for the Union Labor Life Insurance
Company, ULLICO Inc. ("ULLICO") and its family of companies and President of
Trust Fund Advisors, ULLICO's investment management subsidiary, since 1992.
Mr. Steed also serves as a director of Value America and VR-1.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under the federal securities laws, our directors, executive officers and 10%
shareholders are required within a prescribed period of time to report to the
Securities and Exchange Commission transactions and holdings in

46

Global Crossing's common stock. Based solely on a review of the copies of such
forms received by us and on written representations from certain reporting
persons that no annual corrective filings were required for those persons, we
believe that during fiscal year 1999 all these filing requirements were timely
satisfied, with the exception of one Form 4 relating to a single transaction
in Global Crossing common stock which was filed late by Lodwrick Cook.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Committee Report

Compensation Philosophy

Global Crossing's compensation philosophy is to relate the compensation of
Global Crossing's executive officers to measures of company performance that
contribute to increased value for Global Crossing's shareholders.

To assure that compensation policies are appropriately aligned with the
value Global Crossing creates for shareholders, Global Crossing's compensation
philosophy for executive officers takes into account the following goals:

. enhancing shareholder value;

. representing a competitive and performance-oriented environment that
motivates executive officers to achieve a high level of individual,
business unit and corporate results in the business environment in which
they operate;

. relating incentive-based compensation to the performance of each
executive officer, as measured by financial and strategic performance
goals; and

. enabling Global Crossing to attract and retain top quality management.

The Compensation Committee of the board of directors, which we will refer to
as the "Committee," periodically reviews the components of compensation for
Global Crossing's executive officers on the basis of this philosophy and
periodically evaluates the competitiveness of its executive officer
compensation program relative to comparable companies. When the Committee
determines that executive officer compensation adjustments or bonus awards are
necessary or appropriate, it makes such modifications as it deems appropriate.
However, the board of directors has sole authority to modify the compensation
of the Chairman, the Co-Chairman and the Chief Executive Officer ("CEO"),
although the Committee makes recommendations to the board in this regard.

Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility
of certain annual compensation payments in excess of $1 million to a company's
executive officers. It is the objective of the Compensation Committee to
administer compensation plans in compliance with the provisions of Section
162(m) where feasible and where consistent with Global Crossing's compensation
philosophy as stated above. In that connection, at the 2000 Annual General
Meeting of Shareholders, the Company intends to recommend the adoption of an
annual bonus plan meeting the requirements of Section 162(m). The Company
already has in place a stock incentive plan pursuant to which stock-based
incentives may be awarded in compliance with Section 162(m).

Executive Compensation Components

The major components of compensation for executive officers, including the
CEO, are base salary, annual bonuses and stock option grants. Each component
of the total executive officer compensation package emphasizes a different
aspect of Global Crossing's compensation philosophy.

. Base Salary. Base salaries for executive officers are initially set upon
hiring by the Committee (or, in the case of the Chairman, the Co-
Chairman and the CEO, by the board of directors upon the Committee's
recommendation) based on recruiting requirements (i.e., market demand),
competitive pay practices, individual experience and breadth of
knowledge, internal equity considerations and other objective and
subjective factors. Increases to base salary are also determined by the
Committee or the board of directors, as applicable. Increases are
determined primarily on an evaluation of competitive

47

data, the individual's performance and contribution to Global Crossing,
and Global Crossing's overall performance. Base salaries are
periodically reviewed by the Compensation Committee.

. Target Annual Bonuses. Global Crossing relies to a large degree on
annual bonus compensation to attract, retain and reward executives of
outstanding abilities and to motivate them to perform to the full extent
of their abilities. Target bonuses for executive officers, including the
CEO, are determined on the basis of competitive bonus levels, level of
responsibility, ability to influence results on a corporate or business
unit level and, on occasion, subjective factors. Target annual bonuses
for the Chairman, the Co-Chairman and the CEO are determined by the
board of directors upon recommendation by the Compensation Committee.
Target annual bonuses for other executive officers are determined by the
Committee.

. Stock Option Grants. The only current long-term incentive opportunity
for executive officers, including the CEO, is the award of stock option
grants under the 1998 Global Crossing Ltd. Stock Incentive Plan. In
contrast to bonuses that are paid for prior year accomplishments, stock
option grants represent incentives tied to future stock appreciation.
They are intended to provide executive officers with a direct incentive
to enhance shareholder value. Options generally vest over a three-year
period with a maximum term of ten years. Option grants are awarded at
the discretion of the Committee primarily based on an evaluation of
competitive data and the anticipated contribution that the executive
officer will make to Global Crossing.

The Committee conducts annually a full review of the performance of Global
Crossing and its executive officers in assessing compensation levels. The
Committee considers various qualitative and quantitative indicators of both
Global Crossing and the individual performance of its executive officers. This
review evaluates Global Crossing's performance both on a short- and long-term
basis. The Committee may consider such quantitative measures as Total
Shareholder Return ("TSR"), Return on Shareholder's Equity ("ROSE"), Return on
Capital Employed ("ROCE"), revenue growth, and growth in Adjusted EBITDA and
other measures of profitability. The Committee may also consider qualitative
measures such as leadership, experience, strategic direction and overall
contribution to Global Crossing.

In addition, the Committee evaluates compensation in light of the
compensation practices of other companies in the telecommunications industry
and peer group companies as may be determined by the Committee. These
companies are used as a reference standard for establishing levels of base
salary, bonus and stock options. For 1999, executive officer compensation was
targeted at the 75th percentile relative to peer group companies in the
telecom industry.

2000 Executive Compensation Review

Based on the factors set forth above, the Committee approved (or, in the
case of the Chairman, Co-Chairman and CEO, recommended that the board of
directors approve) salary increases and 1999 bonus awards for all executive
officers. In addition, the Committee approved approximately 11,000,000
additional stock options grants to executive officers during 1999.

Robert Annunziata was appointed CEO in February 1999. Jack Scanlon held the
position of CEO from the beginning of 1999 through February 1999. In
determining salary increases and 1999 bonus awards for Messrs. Annunziata and
Scanlon, the Committee reviewed the performance of Global Crossing against its
goals. During 1999, annual revenue increased from $420 million to $1.7 billion
as a result of internal growth and acquisitions completed during the year.
Global Crossing's market capitalization grew from $10 billion to $43 billion
or 330%. In addition, Mr. Annunziata was a key member of the team that
completed the successful merger with Frontier Corporation, and the
acquisitions of Racal Telecom and Global Marine Systems.

THE COMPENSATION COMMITTEE
James F. McDonald, Chairman
Geoffrey J.W. Kent
Douglas McCorkindale

48

Summary Compensation Table

The table below sets forth information concerning compensation paid to
certain executive officers during the last fiscal year.

Annual Compensation Long Term Compensation
----------------------------------------- -----------------------------------------------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Year Salary Bonus(1) Compensation(2) Award(s) Options/SARs Payouts Compensation(3)
---- -------- ----------- --------------- ---------- ------------ ------- ---------------

Gary Winnick............ 1999 $169,615 $ 785,000 $ 94,097 -- -- -- --
Chairman
Robert Annunziata*...... 1999 464,679 11,000,000 -- -- 7,500,000 -- --
Former Chief
Executive Officer
Jack M. Scanlon*........ 1999 622,500 504,000 -- -- -- -- $ 5,000
Vice Chairman, Asia 1998 450,000 480,000 $213,569 -- 3,600,000 -- --
Global Crossing
Thomas J. Casey......... 1999 925,000 625,000 -- -- 1,600,000 -- --
Vice Chairman 1998 266,667 533,333 -- -- 2,000,000 -- --
John A. Scarpati........ 1999 36,217 2,000,000 -- -- 1,000,000 -- 222,222
Chief Administrative
Officer
William B. Carter....... 1999 622,500 395,000 -- -- -- -- 5,000
President, Global 1998 600,000 1,050,000 -- -- 3,000,000 -- $ 5,000
Crossing Development 1997 $200,000 $ 750,000 -- -- -- -- --
Co.; Chief Executive
Officer, Global Marine
Systems

- --------
* Mr. Annunziata became Chief Executive Officer in February 1999 and Mr.
Scanlon resigned the position in February 1999. Mr. Scanlon is still one of
the four most highly compensated officers of Global Crossing other than the
CEO.
(1) The amounts in this column represent annual bonuses, except that Mr.
Annunziata's amount reflects a $10,000,000 signing bonus and a $1,000,000
annual bonus; and Mr. Scarpati's amount reflects a $2,000,000 signing
bonus.
(2) Mr. Winnick received imputed income for the personal use of corporate
aircraft in 1999.
(3) Messrs. Scanlon and Carter received matching company contributions on
their 401(k) plan deferrals. Mr. Scarpati is to receive an $8,000,000
bonus upon the completion of 3 years of service, of which 1/36th was
accrued in 1999.

Certain Compensation Arrangements

The 1998 Global Crossing Ltd. Stock Incentive Plan (the "1998 Plan")
provides that, unless otherwise provided in the specific award agreement, upon
a "change in control," certain awards granted under the 1998 Plan may, in the
sole discretion of the Compensation Committee, be deemed to vest immediately.
The award agreements generally provide for accelerated vesting upon a change
in control. A "change in control" is defined under the 1998 Plan in general as
the occurrence of any of the following: (1) any person or entity, other than
certain of our affiliates, becomes the "beneficial owner," as defined under
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, of
securities of Global Crossing representing 30% or more of the combined voting
power of our then outstanding securities; (2) during any period of 24 months,
individuals who at the beginning of such period constituted the board of
directors and any new director (other than any directors who meet certain
exceptions specified in the 1998 Plan) whose election was approved in advance
by a vote of at least two-thirds of the directors then still in office cease
for any reason to constitute at least a majority of the board; (3) our
shareholders approve any transaction pursuant to which Global Crossing is
merged or consolidated with any other company, other than a merger or
consolidation which would result in our shareholders immediately prior thereto
continuing to own more than 65% of the combined voting power of the voting
securities of the surviving entity outstanding after such transaction; or (4)
our shareholders approve a plan of complete liquidation of Global Crossing or
an agreement for the sale or disposition by Global Crossing of all or
substantially all of our assets, other than the liquidation of Global Crossing
into a wholly owned subsidiary.

49

In January 2000, the board of directors authorized Global Crossing to enter
into change in control agreements with our executive officers and certain of
our other key executives. These agreements provide for certain benefits upon
actual or constructive termination of employment in the event of a "Change in
Control" (as defined below). With respect to the executive officers named in
the Summary Compensation Table above, if, within 24 months of the month in
which a Change in Control occurs, his employment is terminated by us (other
than for cause or by reason of death or disability), or he terminates
employment for "good reason" (generally, an unfavorable change in employment
status, compensation or benefits or a required relocation), he shall be
entitled to receive (i) a lump sum payment equal to three times the sum of his
annual base salary plus guideline bonus opportunity (reduced by any cash
severance benefit otherwise paid to the executive under any applicable
severance plan or other severance arrangement), (ii) a prorated annual target
bonus for the year in which the Change in Control occurs, (iii) continuation
of his life and health insurance coverages for three years and (iv) payment of
any excise taxes due in respect of the foregoing benefits and of any other
payments made to the executive as a result of the Change in Control. The term
of each of these agreements will continue through December 31, 2001, after
which it will be automatically extended for additional one-year terms subject
to termination by either party on one year's prior notice. There is an
automatic 24-month extension following any Change in Control. A Change in
Control generally is deemed to occur if: (1) any person or entity, other than
certain of our affiliates, becomes the "beneficial owner" of securities of
Global Crossing representing 20% or more of the combined voting power of our
then outstanding securities; (2) during any period of 24 months, individuals
who at the beginning of such period constituted the board of directors and any
new director (other than any directors who meet certain exceptions specified
in the change in control agreement) whose election was approved in advance by
a vote of at least two-thirds of the directors then still in office cease for
any reason to constitute at least a majority of the board; (3) any transaction
is consummated pursuant to which Global Crossing is merged or consolidated
with any other company, other than a merger or consolidation which would
result in our shareholders immediately prior thereto continuing to own more
than 65% of the combined voting power of the voting securities of the
surviving entity outstanding after such transaction; or (4) Global Crossing is
completely liquidated or we sell or dispose of all or substantially all of our
assets, other than the liquidation of Global Crossing into a wholly owned
subsidiary.

In December 1999, we entered into an employment agreement with Leo J.
Hindery, Jr. providing for Mr. Hindery's employment as Chairman and Chief
Executive Officer of our GlobalCenter subsidiary for an initial term of three
years. The employment agreement provided for a base annual salary of not less
than $500,000 and a guaranteed bonus of not less than $500,000. Mr. Hindery
also received stock options to purchase 500,000 shares of Global Crossing
common stock at an exercise price of $45 per share. These stock options vest
34% on Mr. Hindery's first date of employment and the balance in 22%
increments on each of the first, second and third anniversaries of such date.
Pursuant to the employment agreement, Mr. Hindery is also entitled to receive
stock options covering 5.5% of the common stock of our GlobalCenter subsidiary
or of a tracking stock designed to reflect the performance of the GlobalCenter
business. Such GlobalCenter stock options will have an aggregate exercise
price of $110 million and will vest 34% immediately and the balance in 22%
increments on each of the first, second and third anniversaries of Mr.
Hindery's employment start date. In March 2000, Mr. Hindery's compensation
arrangements were changed to reflect his new responsibilities as CEO of Global
Crossing Ltd. At that time, Mr. Hindery's annual base salary was increased to
$995,000 and he received an additional 2,000,000 Global Crossing Ltd. stock
options at an exercise price of $54.375 per share, such options to vest
ratably over three years. Upon a "change in control" or upon the actual or
constructive discharge of Mr. Hindery without "cause" (as defined in Mr.
Hindery's agreement), all of his options will immediately vest in full, and
Mr. Hindery will be entitled to receive a lump sum payment equal to the sum of
his annual base salary and bonus through the end of the term of the agreement.

In February 1999, we entered into an employment agreement with Robert
Annunziata providing for Mr. Annunziata's employment as Chief Executive
Officer of Global Crossing for an initial term of three years. The employment
agreement provided for a base annual salary of not less than $500,000 and a
target annual bonus of not less than $500,000. In addition, Mr. Annunziata was
provided a $10 million signing bonus, subject to partial repayment in certain
circumstances, as well as a $5 million fully recourse loan facility to be used
to purchase

50

shares of Global Crossing common stock to the extent Mr. Annunziata used a
like amount of his own funds for such purpose. Mr. Annunziata did not elect to
make use of this loan facility. Mr. Annunziata also received stock options to
purchase 4,000,000 (after giving effect to the March 9, 1999 stock split)
shares of Global Crossing common stock at a split-adjusted exercise price of
$19.81 per share. These stock options were to vest in 25% increments starting
on February 19, 1999 and on February 22 of each of the first three years of
Mr. Annunziata's employment. Under the employment agreement, Mr. Annunziata
was given the right, for a period of six months following the initial term of
the agreement, to require the Company to purchase from him any shares of the
Company's common stock held by him as a result of the exercise of the
4,000,000 stock options at a purchase price equal to $49.625 per share.
Pursuant to the employment agreement, Mr. Annunziata also received stock
options to purchase an aggregate of 500,000 (post-split) shares of Global
Crossing common stock, at a split-adjusted exercise price of $24.81 per share,
all of which became vested on Mr. Annunziata's first day of employment. Upon
Mr. Annunziata's resignation as CEO on March 2, 2000, all of Mr. Annunziata's
then unvested stock options granted under the agreement became immediately
vested and Mr. Annunziata became entitled to receive a lump sum payment equal
to two times his then annual base salary and bonus.

Global Crossing entered into an employment agreement, dated as of April 1,
1998, with Jack Scanlon, providing for Mr. Scanlon's employment as Global
Crossing's Chief Executive Officer for an initial term of two years. The
employment agreement provided for a base annual salary of not less than
$600,000 and a guaranteed bonus of not less than $400,000. In addition, Mr.
Scanlon was issued options to purchase a total of 3,600,000 (after adjusting
for subsequent stock splits) shares of Global Crossing common stock at a
split-adjusted exercise price of $0.835 per share. These options vest in 25%
increments on Mr. Scanlon's first day of employment and on each of the first
three anniversaries of that date. Upon a "change in control" of Global
Crossing, as defined in the 1998 Plan, all of these options will immediately
vest, and Mr. Scanlon will be entitled to terminate the agreement and receive
a lump sum payment equal to two times his then annual base salary and bonus.
Mr. Scanlon will also be entitled to such lump sum payment if he is actually
or constructively discharged without "cause" (as defined in the agreement).
Mr. Scanlon voluntarily resigned as Chief Executive Officer of Global Crossing
in February 1999 to become Vice Chairman of Global Crossing. His employment
agreement was extended for one additional year at that time but otherwise was
left substantially unchanged.

In September 1998, Mr. Thomas Casey was hired by Pacific Capital Group as
its President. At such time, it was also agreed among Pacific Capital Group,
Global Crossing and Mr. Casey that, in addition to Mr. Casey's role as
President of Pacific Capital Group, Mr. Casey would also serve as Managing
Director of Global Crossing. In connection with such employment, Mr. Casey
received economic rights to 2,000,000 shares of the Global Crossing common
stock at an effective price of $2.00 per share. Such rights vest in 33%
increments on the first day of Mr. Casey's employment and on each of the first
and second anniversaries of the first day of Mr. Casey's employment. In
connection with Mr. Casey's dual employment, Global Crossing and Pacific
Capital Group established an arrangement whereby each entity would be
responsible for a portion of Mr. Casey's salary and long-term compensation
based upon the relative amount of time spent by Mr. Casey on matters
pertaining to such entity. Initially, 80% of Mr. Casey's salary and long-term
compensation was allocated to Global Crossing and 20% of such amounts was
allocated to Pacific Capital Group, subject to adjustment and re-allocation on
an annual basis. On March 18, 1999, in recognition of the time spent by Mr.
Casey on Global Crossing matters to such date and his expected ongoing
responsibilities with Global Crossing, the Global Crossing board of directors
elected to assume Mr. Casey's employment agreement, including the full amount
of Mr. Casey's salary and long-term compensation, with Mr. Casey serving full
time in his role with Global Crossing as Managing Director and Vice Chairman
of the board of directors.

In December 1999, Global Crossing entered into an employment agreement with
John A. Scarpati providing for Mr. Scarpati's employment as Chief
Administrative Officer of Global Crossing for an initial term of three years.
The employment agreement provides for a base salary of not less than $500,000
and a target annual bonus of 100% of his base annual salary. In addition, Mr.
Scarpati was provided a $2 million signing bonus, subject to partial repayment
in certain circumstances, as well as the right to an $8 million payment in the
event he remains employed by Global Crossing for three years or is actually or
constructively discharged without "cause" (as defined in the agreement). In
connection with his employment, Mr. Scarpati received stock options to
purchase

51

1,000,000 shares of Global Crossing common stock at an exercise price of $53
per share. These stock options vest in 25% increments on the date Mr. Scarpati
commenced employment with the Company and on each of the first three
anniversaries thereof. Upon a "change in control" (as defined in the 1998
Plan) or upon the actual or constructive discharge of Mr. Scarpati without
"cause" (as defined in the agreement), these options will immediately vest in
full, and Mr. Scarpati will be entitled to terminate the agreement and receive
a lump sum payment equal to the sum of his then annual base salary and bonus.

Compensation of Outside Directors

Each director who is not an employee of Global Crossing receives cash
compensation of $2,500 for each meeting of the board of directors attended and
$1,500 for each attended meeting of a committee of the board of which he or
she is a member. In addition, each non-employee chairman of a board committee
also receives an annual retainer of $5,000. During 1999, each non-employee
director commencing service on the board received options to purchase 120,000
shares of Global Crossing common stock at an exercise price equal to the fair
market value of Global Crossing common stock on the date of grant. Each such
option has a term of 10 years, became exercisable immediately with respect to
the first 30,000 shares, and will become exercisable with respect to the
remaining 90,000 shares in two equal installments on each of the first and
second anniversaries of the date of grant, in each case so long as such
director continues to be a director of Global Crossing on such date.
Commencing in 2000, the board of directors adjusted the level of initial stock
option grants such that new non-employee directors now receive 40,000 option
shares (subject to adjustment in the event of a stock split) on the date on
which they commence board service.

Option Grants in Last Fiscal Year

The table below sets forth information concerning options granted to certain
executive officers during the last fiscal year.

Potential Realizable Value At
Assorted Annual Rates of Stock Price
Individual Grants Appreciation for Option Term
----------------------------------------------------------- -------------------------------------
Number of % of Total
Securities Options Market Price
Underlying Granted to of Common
Options Employees in Exercise or Stock on Expiration
Name Granted Fiscal Year Base Price Grant Date Date 0% 5% 10%
- ---- ---------- ------------ ----------- ------------ ---------- ----------- ----------- ------------

Gary Winnick........... -- -- -- -- -- -- -- --
Chairman
Robert Annunziata...... 4,000,000 11.16% $19.813 $24.812 2/22/09 $19,996,000 $82,412,534 $178,171,752
Former Chief Executive 500,000 1.40% 24.812 24.812 2/22/09 -- 7,802,067 19,771,969
Officer 3,000,000 8.37% 45.000 45.000 12/3/09 -- 84,900,775 215,155,232
Jack M. Scanlon........ -- -- -- -- -- -- -- --
Vice Chairman, Asia
Global Crossing
Thomas J. Casey........ 300,000 0.84% 61.375 61.375 5/16/09 -- 11,579,522 29,344,783
Vice Chairman 300,000 0.84% 25.000 25.000 9/24/09 -- 4,716,710 11,953,068
1,000,000 2.79% 45.000 45.000 12/3/09 -- 28,300,258 71,718,411
John A. Scarpati....... 1,000,000 2.79% $53.000 $45.000 12/3/09 $(8,000,000) $20,300,258 $ 63,718,411
Chief Administrative
Officer
William B. Carter...... -- -- -- -- -- -- -- --
President, Global
Crossing Development
Co.; Chief Executive
Officer, Global
Marine Systems

52

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

The table below sets forth information concerning exercises of stock options
by certain executive officers during the last fiscal year and the fiscal year-
end value of such executive officers' unexercised options.

Number of Securities
Underlying Unexercised Value of Unexercised
Options In-The-Money Options(2)
------------------------- -------------------------
Shares Acquired Value
Name On Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ----------- ----------- ------------- ----------- -------------

Gary Winnick............ -- -- 1,200,000 600,000 $58,998,000 $ 29,499,000
Chairman
Robert Annunziata....... 81,576 $ 2,243,340 1,500,000 6,000,000 42,781,000 105,561,000
Former Chief Executive
Officer
Jack M. Scanlon......... 345,680 12,525,410 1,334,560 1,800,000 65,613,642 88,497,000
Vice Chairman, Asia
Global Crossing
Thomas J. Casey......... -- -- 1,006,666 1,926,666 33,699,968 42,799,968
Vice Chairman
John A. Scarpati........ -- -- 333,334 666,666 -- --
Chief Administrative
Officer
William B. Carter....... 174,144 4,860,345 1,706,096 1,000,000 83,880,210 49,165,000
President, Global
Crossing Development
Co., Chief Executive
Office Global Marine

- --------
(1) Amounts indicated are based upon the difference between the exercise price
and the closing market price on the exercise date.
(2) Amounts indicated are based upon the difference between the exercise price
and the closing market price per share of the common stock of $50.00 on
December 31, 1999.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee of the Global Crossing board of directors
consists of Messrs. McDonald, Kent and McCorkindale, none of whom had any
relationships with Global Crossing requiring disclosure under Securities and
Exchange Commission rules. However, prior to November 4, 1999, the
Compensation Committee consisted of Lodwrick M. Cook, Michael R. Steed and Jay
R. Levine (an employee of an affiliate of Canadian Imperial Bank of Commerce),
who were involved in certain transactions described in Item 13 below.

53

Comparison of Cumulative Total Returns

The graph below compares the cumulative total shareholder return on Global
Crossing common stock for the period from August 14, 1998, the initial date of
trading of Global Crossing common stock, to December 31, 1999 with the
cumulative total return of the Standard & Poor's 500 Stock Index and the
NASDAQ Telecom Index over the same period. The graph assumes $100 invested on
August 14, 1998 in Global Crossing common stock and $100 invested on such date
in each of the Standard & Poor's 500 Stock Index and the NASDAQ Telecom Index,
with dividends reinvested. In the proxy statement provided to shareholders in
connection with our 1999 Annual General Meeting of Shareholders, we used a
peer group of fiber optic cable providers comprised of Qwest, Level 3
Communications, Inc., Metromedia Fiber Network, Inc., IXC Communications, Inc.
and Equant NV (the "Old Peer Group"). We have decided to replace the Old Peer
Group index with the NASDAQ Telecom Index because we believe the latter index
to be readily accessible to our Shareholders and more representative of the
industries in which we now compete. In accordance with SEC rules, the graph
below also illustrates the cumulative total shareholder return of the Old Peer
Group over the relevant period.

Stock Performance
[LINE GRAPH]

S&P 500 NASDAQ
GBLX Stock Index Telecom Index Old Peer Group
------ ----------- ------------- --------------
08/14/1998 100 100 100 100
09/30/1998 81.86 95.7 91.16 83.51
12/31/1998 176.96 115.67 125.6 124.49
03/31/1999 362.75 121.04 155.04 178.48
06/30/1999 334.31 129.17 164.27 175.77
09/30/1999 207.84 120.7 156.67 151.07
12/31/1999 392.16 138.25 254.61 230.11

At 12/31/99, a $100 initial investment is worth:
GBLX $392.16
S&P 500 Stock Index $138.25
NASDAQ Telecom Index $254.61
Old Peer Group $230.11

54

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 3, 2000, certain information
regarding the beneficial ownership of our common stock by (i) each person or
entity who is known by us to own beneficially 5% or more of our voting common
stock, (ii) each of our directors and executive officers and (iii) all of our
directors and executive officers as a group. To our knowledge, each such
shareholder has sole voting and investment power with respect to the shares
shown, unless otherwise noted. For purposes of this table, an individual is
deemed to have sole beneficial ownership of securities owned jointly with such
individual's spouse. Amounts appearing in the table below include (i) all
shares of common stock outstanding as of March 3, 2000, (ii) all shares of
common stock issuable upon the exercise of options within 60 days of March 3,
2000 and (iii) all shares of common stock issuable upon the exercise of
warrants within 60 days of March 3, 2000. The warrants designated below as
"New PCG Warrants" and "GCL Warrants" each represent the right to immediately
purchase shares of GCL common stock at an exercise price of $9.50 per share.

Beneficial Ownership of Common Stock
------------------------------------------------------
Shares Shares
Subject to Subject Shares
Number of New PCG to GCL Subject to Percentage
Shares(1) Warrants Warrants Options(2) of Class
----------- ---------- --------- ---------- ----------

Pacific Capital Group,
Inc.(3)................ 85,861,172 6,050,004 2,515,788 0 11.98%
360 North Crescent
Drive
Beverly Hills,
California 90210

Canadian Imperial Bank
of Commerce(4)......... 75,297,827 0 0 240,000 9.69%
161 Bay Street, 8th
Floor--BCE Place
P.P. Box 500
M5J258, Toronto, Canada

Gary Winnick(5)......... 87,301,383 6,050,004 2,515,788 1,800,000 12.36%
Lodwrick M. Cook........ 3,443,929 950,002 0 362,240 *
Leo J. Hindery, Jr...... 0 0 0 170,000 *
Thomas J. Casey(6)...... 630,412 0 0 1,006,666 *
Abbott L. Brown(7)...... 10,386,029 1,450,002 367,666 900,000 1.68%
Joseph Clayton.......... 542,396 0 0 1,640,000 *
Dan J. Cohrs............ 10,000 0 0 708,668 *
John Comparin........... 5,000 0 0 0 *
James C. Gorton......... 15,000 0 0 709,606 *
David L. Lee(8)......... 18,559,028 1,825,002 663,456 900,000 2.80%
Barry Porter............ 17,063,809 1,825,002 610,266 900,000 2.60%
John M. Scanlon......... 363,748 0 0 2,234,560 *
John A. Scarpati........ 900 0 0 333,334 *
Robert Sheh............. 0 0 0 583,685 *
William B. Carter....... 239,520 0 0 1,706,096 *
Wallace S. Dawson....... 108,958 0 0 530,400 *
Edward Mulligan......... 6,012 0 0 50,000 *
Robert Annunziata....... 0 0 0 5,438,424 *
Jay R. Bloom(9)......... 13,993,966 0 0 128,533 1.81%
William E. Conway,
Jr.(10)................ 2,247,640 0 0 75,000 *
Canning Fok Kin-ning.... 0 0 0 8,898,889 1.13%
Eric Hippeau............ 35,895 0 0 42,300 *
Dean C. Kehler(9)....... 14,848,648 0 0 128,533 1.92%
Geoffrey J.W. Kent...... 0 0 0 75,000 *
Douglas McCorkindale.... 38,855 0 0 87,400 *
James McDonald.......... 5,351 0 0 40,932 *
Bruce Raben............. 0 0 0 120,000 *
Michael R. Steed........ 0 0 0 120,000 *
All Directors and
Executive Officers as a
Group.................. 158,157,917 12,100,012 4,157,176 29,690,266 24.72%

- --------
* Percentage of shares beneficially owned does not exceed one percent.
(1) As of March 3, 2000, 779,714,470 shares of common stock were issued and
outstanding.
(2) Represents stock options issued under stock option plans of Global
Crossing, except that Mr. Fok's amount includes 8,888,889 shares of
common stock issuable upon conversion of the 400,000 shares of
convertible preferred stock issued to Hutchison Whampoa in connection
with the formation of the Hutchison Global Crossing joint venture. As
Managing Director of Hutchison Whampoa, Mr. Fok may be deemed to share
investment and voting control over these shares.

55

(3) Includes 70,107,766 shares of common stock and common stock warrants
owned or managed by GKW Unified Holdings, a company formed for the
benefit of Gary Winnick and members of his family and managed by Pacific
Capital Group, which thereby shares investment and voting power over
such shares. Also includes 25,133 shares of common stock owned by Casey
Pacific Holdings LLC for the benefit of Thomas J. Casey and managed by
Pacific Capital Group, which thereby shares investment and voting power
over such shares.
(4) These share amounts, which are effective as of March 9, 2000, include
11,453,529 shares held by certain affiliates of Canadian Imperial Bank
of Commerce in such a manner that CIBC shares investment power over such
shares. The indicated options have been assigned to CIBC by CIBC
employees who previously served on the GCL board of directors.
(5) Includes (a) all shares of common stock beneficially owned by Pacific
Capital Group, a company controlled by Mr. Winnick, and (b) 1,440,211
shares held by The Winnick Family Foundation, a non-profit organization
over whose portfolio securities Mr. Winnick shares investment and voting
power.
(6) Includes 605,279 shares of common stock owned by Casey Global Holdings
LLC and 25,133 shares of common stock owned by Casey Pacific Holdings
LLC, which companies are managed by GCL and Pacific Capital Group,
respectively, in such a manner that Mr. Casey shares investment and
voting power over such shares.
(7) Includes (a) 75,350 shares of common stock held by the Ridgestone
Foundation, a non-profit organization of which Mr. Brown is trustee and
(b) 150,000 shares of common stock held by the Abbott and Linda Brown
Family Foundation, a non-profit organization of which Mr. Brown is
trustee.
(8) Includes (a) all 9,900,822 shares of common stock and 513,156 shares of
common stock issuable upon the exercise of warrants owned by San Pasqual
Corp., a corporation of which Mr. Lee and his family are the sole
shareholders and over whose portfolio securities Mr. Lee shares
investment and voting power and (b) all 3,988,242 shares of common stock
and 150,300 shares of common stock issuable upon the exercise of
warrants owned by the David and Ellen Lee Family Trust, of which Mr. Lee
is a trustee and in such capacity shares investment and voting power
over such shares.
(9) Includes (a) 11,453,529 shares held by certain affiliates of Canadian
Imperial Bank of Commerce in such a manner that Messrs. Bloom and Kehler
have shared investment and voting power over such shares and (b) 218,434
shares held by Caravelle Investment Fund, LLC, for whose investment
advisor Messrs. Bloom and Kehler serve as managing directors.
(10) Includes 2,239,640 shares of common stock beneficially owned by the
Carlyle Group, of which Mr. Conway is managing director and in such
capacity shares voting and investment control over such shares.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During 1999, we entered into the transactions described below with certain
of our directors, executive officers and affiliates.

Transactions with Pacific Capital Group and its Affiliates

Prior to 1999, Global Crossing entered into certain transactions with
affiliates of Pacific Capital Group ("PCG"), including the acquisition of
development rights to certain of the Company's fiber optic cable systems. PCG
is controlled by Gary Winnick, Chairman of the Board of the Company, and some
other officers and directors of Global Crossing either currently are or at one
time were affiliated with PCG, including Messrs. Cook, Casey, Lee, Porter and
Brown. During 1999, Global Crossing subleased from PCG two suites in an office
building in Beverly Hills, California for payments aggregating approximately
$287,000 over the year. In October 1999, Global Crossing consolidated its
Beverly Hills offices into approximately 87,000 square feet of office space at
its present headquarters building at 360 North Crescent Drive. Global Crossing
leases this space from North Crescent Realty V, LLC, which is managed by and
affiliated with PCG, for an aggregate monthly cost of approximately $400,000.
North Crescent Realty V, LLC paid approximately $7.5 million to improve the
360 North Crescent property to meet Global Crossing's specifications and was
reimbursed approximately $3.2 million of this amount by Global Crossing.
Global Crossing engaged an independent real estate consultant to review the
terms of Global Crossing's occupancy of the 360 North Crescent building, which
terms were found by the consultant to be consistent with market terms and the
product of an arm's length negotiation. Global Crossing

56

subleases approximately 12,000 square feet of the building to PCG for an
aggregate monthly cost of approximately $53,000.

PCG has fractional ownership interests in respect of four aircraft used by
Global Crossing during 1999. Global Crossing reimburses PCG for PCG's cost of
maintaining these ownership interests such that PCG realizes no profit from
the relationship. During 1999, PCG billed Global Crossing approximately $2
million in aggregate under this arrangement.

In March 2000, Global Crossing intends to enter into an approximately ten
year lease of an aircraft that is currently owned by WINCO Aviation, a company
controlled by Gary Winnick (through PCG) and Lodwrick Cook. It is anticipated
that a commercial equipment financing company will purchase the aircraft from
WINCO Aviation and then lease the aircraft to Global Crossing on standard
commercial terms. The purchase price of the aircraft will be approximately
$12.5 million, which is the amount WINCO Aviation paid for the aircraft,
before transactions costs, when WINCO Aviation first acquired the aircraft in
August 1999. As supported by two independent appraisals obtained by Global
Crossing, the fair market value of the aircraft is in excess of the proposed
purchase price.

Relationship to Crescent Wireless Ltd.

In January 2000, Crescent Wireless Ltd. ("Crescent Wireless") was formed for
the purpose of participating in the spectrum auctions being held in the United
Kingdom to provide "third generation" wireless telecommunications services.
Crescent Wireless is controlled by Gary Winnick, David Lee and Barry Porter,
each a director and executive officer of the Company. In connection with the
performance by Crescent Wireless of its business operations, the Company has
made available to Crescent Wireless on a consultancy basis certain of the
Company's personnel. In consideration for these services, the shareholders of
Crescent Wireless have granted to the Company an option to purchase any or all
of the equity ownership of Crescent Wireless owned by those shareholders.

Relationship with NextWave Telecom Inc.

In December 1999, we entered into an agreement with NextWave Telecom Inc.
pursuant to which we agreed to make a minority investment in NextWave through
the purchase of its convertible preferred stock, subject to certain conditions
relating to the status of NextWave's PCS licenses. NextWave's goal is to
deploy a state-of-the-art wireless telecommunications network specifically
designed to provide next-generation wireless services. We also entered into a
Strategic Services Agreement pursuant to which we are to be the preferred
provider of backhaul, long distance backbone, web-hosting, and other
communications services to NextWave. PCG and CIBC both also committed to
purchase shares of NextWave's convertible preferred stock, subject to
essentially the same conditions relating to the status of NextWave's PCS
licenses. As of March 3, 2000, the conditions relating to NextWave's PCS
licenses have not been satisfied, and none of Global Crossing, PCG or CIBC has
consummated an equity investment in NextWave.

Transactions with Canadian Imperial Bank of Commerce and its affiliates

During 1999, Canadian Imperial Bank of Commerce and its affiliates ("CIBC")
entered into certain financing transactions with Global Crossing. In
particular, CIBC: (1) acted as an arranger for the $600 million ten-day demand
note issued by Global Marine Systems in July, (2) acted as an arranger for the
$3 billion senior secured credit facility entered into by Global Crossing
Holdings Ltd. in July, (3) was an initial purchaser of the $2 billion
aggregate principal amount of unsecured senior notes issued by Global Crossing
Holdings in November, and (4) was an initial purchaser of Global Crossing
Ltd.'s $650 million aggregate liquidation preference 7% cumulative convertible
preferred stock issued in December. During 1999, Global Crossing paid CIBC
approximately $5.6 million in fees in connection with these transactions. CIBC
has a substantial beneficial ownership interest in Global Crossing, and
Messrs. Bloom, Kehler and Raben, directors of Global Crossing, are employees
of an affiliate of CIBC.

57

Relationship to Ziff-Davis Inc. and Affiliates

Eric Hippeau, a director of Global Crossing, is the chairman and chief
executive officer of Ziff-Davis Inc., a majority of the common stock of which
is beneficially owned by Softbank Corp. Softbank is a party to the Asia Global
Crossing joint venture established to provide advanced network-based
telecommunications services to businesses and consumers throughout Asia.
Global Crossing, which is responsible for the management and operation of the
network, contributed to the venture its 57.75% share of the Pacific Crossing
cable system and its development rights in East Asia Crossing. Softbank and
Microsoft each contributed $175 million in cash to Asia Global Crossing and
also committed to make a total of at least $200 million in Global Crossing
Network capacity purchases over a three-year period, expected to be utilized
primarily on the Pacific Crossing system and East Asia Crossing. Softbank and
Microsoft also agreed to use Asia Global Crossing's network in the region.
Global Crossing currently owns 93% of Asia Global Crossing, with Softbank and
Microsoft each owning 3.5%. When the fair market value of Asia Global Crossing
is determined to exceed $5 billion, the ownership interest of Softbank and
Microsoft will increase to a maximum of 19% each at a valuation of $7.5
billion and above. Mr. Hippeau is Softbank's representative on the Asia Global
Crossing board of directors. In addition, Ziff-Davis is one of the largest
web-hosting customers of our GlobalCenter subsidiary.

Relationship to Hutchison Whampoa Limited

Canning Fok Kin-ning, managing director of Hutchison Whampoa Limited
("Hutchison"), was recently appointed a director of Global Crossing. In
November 1999, Hutchison and Global Crossing entered into an agreement to form
a 50/50 joint venture to pursue fixed-line telecommunications and Internet
opportunities in the Hong Kong Special Administrative Region, China. The joint
venture, the formation of which was completed in January 2000, combines
Hutchison's existing territory-wide, building-to-building fixed-line fiber
optic telecommunications network and certain Internet-related assets in Hong
Kong with Global Crossing's international fiber optic broadband cable capacity
and web hosting, Internet applications and data services. For its 50% share,
Global Crossing provided to Hutchison $400 million in Global Crossing
convertible preferred stock. Additionally, Global Crossing committed to
contribute to the joint venture international telecommunications capacity
rights on its global fiber optic network and data center related capabilities
which together are valued at $350 million, as well as $50 million in cash.

Agreements with Global Crossing Stockholders

In August 1998, PCG, GKW Unified Holdings (an affiliate of Gary Winnick and
PCG), affiliates of CIBC, Global Crossing and some of our other shareholders,
including some of our officers and directors and their affiliates, entered
into a Stockholders Agreement and a Registration Rights Agreement. Under the
Stockholders Agreement, Global Crossing has been granted a right of first
refusal on specified private transfers by these shareholders during the first
two years after the consummation of our initial public offering on August
14,1998. In addition, subject to the exceptions in the Stockholders Agreement,
some of these shareholders have rights, which are referred to as tag-along
rights, permitting these shareholders to participate, on the same terms and
conditions, in some transfers of shares by any other of these shareholders as
follows: (1) PCG, GKW Unified Holdings and CIBC and their affiliates and
permitted transferees have the right to participate in any transaction
initiated by any of them to transfer 5% or more of our outstanding securities;
and (2) PCG, GKW Unified Holdings, CIBC and their affiliates and permitted
transferees have the right to participate in any transaction initiated by any
of them to transfer any of our securities if that transaction would result in
a change of control of Global Crossing. Under the Registration Rights
Agreement, our shareholders who are parties to that agreement and a number of
their transferees have demand and piggyback registration rights and will
receive indemnification and, in some circumstances, reimbursement for expenses
from us in connection with an applicable registration.

Principal shareholders of Global Crossing representing at that time over a
majority of the voting power of our common stock entered into a Voting
Agreement with Frontier Corporation in March 1999 in connection with the
Frontier merger. These Global Crossing shareholders reaffirmed their voting
obligations under the Voting

58

Agreement in connection with subsequent amendments made to the merger
agreement during 1999. Pursuant to the Second Reaffirmation of Voting
Agreement and Share Transfer Restriction Agreement dated September 2, 1999,
the Global Crossing shareholders that are parties to the Voting Agreement also
agreed, from September 2, 1999 until March 28, 2000, not to transfer record or
beneficial ownership of any shares of Global Crossing common stock held by
such shareholders, other than transfers to charities, transfers made with the
consent of the Company and other limited exceptions, and to work in good faith
toward implementing a program with the purpose that, if the Global Crossing
shareholders that are parties to the Voting Agreement wish to sell or transfer
their shares after March 28, 2000, these sales or transfers would be completed
in a manner that would provide for an orderly trading market for the shares of
Global Crossing common stock.

Also on September 2, 1999, fourteen of our executive officers and three
executive officers of Frontier entered into a Share Transfer Restriction
Agreement with Global Crossing. Under this agreement, the Global Crossing
executive officers agreed not to sell or transfer shares of our common stock,
and the Frontier executive officers agreed not to sell or transfer shares of
Frontier common stock and the shares of Global Crossing common stock they
would receive in exchange for their Frontier common stock in the merger, until
March 28, 2000, subject in each case to substantially the same exceptions as
are applicable to the Second Reaffirmation of Voting Agreement and Share
Transfer Restriction Agreement described in the immediately preceding
paragraph.

Loan to Executive Officer

In May 1998, Dan J. Cohrs, an executive officer of the Company, received an
interest-free relocation loan in the aggregate principal amount of $250,000.
This loan is repayable in full on May 18, 2001.

59

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 10-K

(a) List of documents filed as part of this report:

1. Financial Statements-Included in Part II of this Form 10-K:

Consolidated Balance Sheets as of December 31, 1999 and 1998

Consolidated Statements of Operations for the years ended December
31, 1999 and 1998 and period from March 19, 1997 (Date of
Inception) to December 31, 1997.

Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999 and 1998 and period from March 19, 1997 (Date of
Inception) to December 31, 1997.

Consolidated Statements of Cash Flows for the years ended December
31, 1999 and 1998 and period from March 19, 1997 (Date of
Inception) to December 31, 1997.

Consolidated Statements of Comprehensive Income for the years ended
December 31, 1999 and 1998 and period from March 19, 1997 (Date of
Inception) to December 31, 1997.

Notes to Consolidated Financial Statements

2. Financial Statement Schedules--Included in Part II of this Form 10-K:

Schedule II--Valuation and Qualifying Accounts

3. Exhibit Index:

Exhibit
Number Exhibit
------- -------

2.1 Agreement and Plan of Merger, dated as of March 16, 1999 (the
"Frontier Merger Agreement"), among the Registrant, Frontier
Corporation and GCF Acquisition Corp. (incorporated by reference to
Exhibit 2 to the Registrant's Current Report on Form 8-K filed on
March 19, 1999 (the "March 19, 1999 8-K")).

2.2 Consent and Amendment No. 1 to the Frontier Merger Agreement, dated as
of May 16, 1999, among the Registrant, GCF Acquisition Corp. and
Frontier Corporation (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on May 18, 1999 (the
"May 18, 1999 8-K")).

2.3 Amendment No. 2 to the Frontier Merger Agreement, dated as of
September 2, 1999, among the Registrant, GCF Acquisition Corp. and
Frontier Corporation (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on September 3, 1999
(the "September 3, 1999 8-K")).

2.4 Sale and Purchase Agreement, dated as of April 26, 1999, between Cable
& Wireless plc and the Registrant (incorporated by reference to
Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on
July 16, 1999 (the "July 16, 1999 8-K")).

2.5 Amendment to the Sale and Purchase Agreement, dated as of June 25,
1999, between Cable & Wireless plc and the Registrant (incorporated by
reference to Exhibit 2.2 to the July 16, 1999 8-K).

2.6 Agreement and Plan of Merger, dated as of May 16, 1999, between the
Registrant and U S West, Inc. (incorporated by reference to Exhibit 2
to the Registrant's Current Report on Form 8-K filed on May 21, 1999
(the "May 21, 1999 8-K")).

2.7 Letter Agreement, dated as of May 16, 1999, between the Registrant and
U S West, Inc. (incorporated by reference to Exhibit 99 to the May 21,
1999 8-K).

2.8 Termination Agreement, dated as of July 18, 1999, between the
Registrant and U S West, Inc. (incorporated by reference to Exhibit
10.1 to the Registrant's Current Report on Form 8-K filed on July 20,
1999 (the "July 20, 1999 8-K")).

60

Exhibit
Number Exhibit
------- -------

2.9 Sale Agreement, made on October 10, 1999, between Controls and
Communications Limited, The Racal Corporation, Racal Electronics Plc
and the Registrant (incorporated by reference to Exhibit 2.1 to the
Registrant's Current Report on Form 8-K filed on October 21, 1999 (the
"October 21, 1999 8-K")).

2.10 Agreement and Plan of Merger, dated as of February 22, 2000, among the
Registrant, Georgia Merger Sub Corporation, IPC Communications, Inc.,
IPC Information Systems, Inc., Idaho Merger Sub Corporation and IXnet,
Inc. (incorporated by reference to Exhibit 2.1 to the Registrant's
Current Report on Form 8-K filed on March 2, 2000 (the "March 2, 2000
8-K")).

3.1 Memorandum of Association of the Registrant (incorporated by reference
to Exhibit 3.1 to the Registrant's Registration Statement on Form S-
1/A filed on July 2, 1998 (the "July 2, 1998 S-1/A")).

3.2 Certificate of Incorporation of Change of Name of the Registrant dated
April 30, 1998 (incorporated by reference to Exhibit 3.3 to the
Registrant's Registration Statement on Form S-1/A filed on July 23,
1998 (the "July 23, 1998 S-1/A")).

3.3 Memorandum of Increase of Share Capital of the Registrant dated July
9, 1998 (incorporated by reference to Exhibit 3.4 to the July 23, 1998
S-1/A).

3.4 Memorandum of Increase of Share Capital of the Registrant dated
September 27, 1999 (incorporated by reference to Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q filed on November 15, 1999
(the "November 15, 1999 10-Q")).

3.5 Bye-laws of the Registrant as in effect on October 14, 1999
(incorporated by reference to Exhibit 3.2 to the November 15, 1999 10-
Q).

3.6 Certificate of Designations of 6 3/8% Cumulative Convertible Preferred
Stock of the Registrant dated November 5, 1999 (incorporated by
reference to Exhibit 3.3 to the November 15, 1999 10-Q).

3.7 Memorandum of Association of Global Crossing Holdings Ltd.
(incorporated by reference to Exhibit 3.1 of Global Crossing Holdings
Ltd.'s Registration Statement on Form S-4 (File No. 333-61457)).

3.8 Bye-laws of Global Crossing Holdings Ltd. (incorporated by reference
to Exhibit 3.2 to Global Crossing Holdings Ltd.'s Registration
Statement on Form S-4 (File No. 333-61457)).

3.9 Certificate of Designations of 7% Cumulative Convertible Preferred
Stock of the Registrant, dated December 15, 1999 (incorporated by
reference to Exhibit 3.2 to Global Crossing Holdings Ltd.'s
Registration Statement on Form S-4 (File No. 333-61457)).

3.10 Certificate of Designations of 6 3/8% Cumulative Convertible Preferred
Stock, Series B of the Registrant, dated January 12, 2000 (filed
herewith).

4.1 Certificate of Designations of 10 1/2% Senior Exchangeable Preferred
Stock Due 2008 of Global Crossing Holdings Ltd. dated December 1, 1998
(incorporated by reference to Schedule A to Exhibit 3.2 to the Global
Crossing Holdings Ltd. Registration Statement on Form S-4 filed on
December 22, 1998).

4.2 Indenture, dated as of May 18, 1998, between Global Crossing Holdings
Ltd. and United States Trust Company of New York, as Trustee
(incorporated by reference to Exhibit 4.2 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on December 22,
1998).

4.3 Supplemental Indenture, dated as of June 25, 1999, between Global
Crossing Holdings Ltd. and United States Trust Company of New York, to
the Indenture dated as of May 18, 1998 (incorporated by reference to
Exhibit 4.4 to the Registrant's Registration Statement on Form S-4
filed on July 12, 1999).

4.4 Credit Agreement, dated as of July 2, 1999, among the Registrant,
Global Crossing Holdings Ltd., the Lenders party thereto and The Chase
Manhattan Bank as Administrative Agent (incorporated by reference to
Exhibit 10.7 to the Registrant's Registration Statement on Form S-4/A
filed on August 5, 1999).

61

Exhibit
Number Exhibit
------- -------

4.5 Indenture, dated as of November 19, 1999, among the Registrant.,
Global Crossing Holdings Ltd. and United States Trust Company of New
York (i ncorporated by reference to Exhibit 4.5 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on January 11,
2000 (File No. 333-94449)).

Except as hereinabove provided, there is no instrument with respect to long-
term debt of the Registrant and its consolidated subsidiaries under which the
total authorized amount exceeds 10 percent of the total consolidated assets of
the Registrant. The Registrant agrees to furnish to the SEC upon its request a
copy of any instrument relating to long-term debt.

10.1 Project Development and Construction Contract, dated as of March 18,
1997, among AT&T Submarine Systems, Inc. and Atlantic Crossing Ltd.
(formerly Global Telesystems Ltd.) (incorporated by reference to
Exhibit 10.2 to the July 23, 1998 S-1/A).

10.2 Project Development and Construction Contract, dated as of April 21,
1998, among Tyco Submarine Systems, Ltd. and Pacific Crossing Ltd.
(incorporated by reference to Exhibit 10.3 to the July 23, 1998 S-
1/A).

10.3 Project Development and Construction Contract, dated as of June 2,
1998, among Alcatel Submarine Networks and Mid-Atlantic Crossing Ltd.
(incorporated by reference to Exhibit 10.4 to the July 23, 1998 S-
1/A).

10.4 Project Development and Construction Contract, dated as of July 21,
1998, among Tyco Submarine Systems, Ltd. and Pan American Crossing
Ltd. (incorporated by reference to Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q filed on November 16, 1998).

10.5 Project Development and Construction Contract, dated as of July 30,
1999, among Alcatel Submarine Networks and South American Crossing
Ltd. (incorporated by reference to Exhibit 10.5 to the Global Crossing
Holdings Registration Statement on Form S-4 filed on January 11, 2000
(File No. 333-94449)) (portions have been omitted pursuant to a
request for confidential treatment).

10.6 Lease made as of October 1, 1999 between North Crescent Realty V, LLC
and Global Crossing Development Company (incorporated by reference to
Exhibit 10.1 to the November 15, 1999 10-Q).

10.7 Form of Stockholders Agreement dated as of August 12, 1998 among the
Registrant and the investors named therein (incorporated by reference
to Exhibit 9.1 to the July 23, 1998 S-1/A).

10.8 Form of Registration Rights Agreement dated as of August 12, 1998
among the Registrant and the investors named therein (incorporated by
reference to Exhibit 4.4 to the July 23, 1998 S-1/A).

10.9 Voting Agreement, dated as of March 16, 1999, among certain
shareholders of the Registrant parties thereto, Frontier Corporation
and, for certain purposes only, the Registrant (incorporated by
reference to Exhibit 10.2 to the March 19, 1999 8-K).

10.10 Second Reaffirmation of Voting Agreement and Share Transfer
Restriction Agreement, dated as of September 2, 1999 (incorporated by
reference to Annex S-B to the joint proxy statement/prospectus
supplement included in the Registrant's Registration Statement on Form
S-4 filed on September 8, 1999 (the "September 8, 1999 S-4").

10.11 Share Transfer Restriction Agreement, dated as of September 2, 1999,
among certain shareholders of Global Crossing Ltd., certain
shareholders of Frontier Corporation and Global Crossing Ltd.
(incorporated by reference to Annex S-C to the joint proxy
statement/prospectus supplement included in the September 8, 1999 S-
4).

10.12 Tender Offer and Purchase Agreement, dated as of May 16, 1999, between
the Registrant and U S WEST, Inc. (incorporated by reference to
Exhibit (c)(2) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21,
1999).

62

Exhibit
Number Exhibit
------- -------

10.13 Standstill Agreement dated as of May 16, 1999 between U S WEST, Inc.
and the Registrant (incorporated by reference to Exhibit (c)(4) to U S
WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).

10.14 Voting Agreement dated as of May 16, 1999 between U S WEST, Inc. and
the Registrant (incorporated by reference to Exhibit (c)(3) to U S
WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).

10.15 Tender and Voting Agreement dated as of May 16, 1999 among U S WEST,
Inc., the Registrant and the shareholders party thereto (incorporated
by reference to Exhibit (c)(5) to U S WEST, Inc.'s Schedule 14D-1
filed on May 21, 1999).

10.16 Agreement dated as of May 16, 1999 among the Registrant and the
shareholders party thereto (incorporated by reference to Exhibit
(c)(6) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).

10.17 Transfer Agreement dated as of May 16, 1999 among the Registrant and
the shareholders party thereto (incorporated by reference to Exhibit
(c)(8) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).

10.18 Amendment No. 1 dated as of July 18, 1999 to Tender Offer and Purchase
Agreement dated as of May 16 1999 between the Registrant and U S WEST,
Inc. (incorporated by reference to Exhibit 10.2 to the July 20, 1999
8-K).

10.19 Agreement, dated as of July 18, 1999, between Qwest Communications
International Inc. and the Registrant (incorporated by reference to
Exhibit 10.3 to the July 20, 1999 8-K).

10.20 Agreement, dated as of July 18, 1999, between Global Crossing Holdings
Ltd. and Qwest Communications International Inc. (incorporated by
reference to Exhibit 10.4 to the July 20, 1999 8-K).

10.21 Registration Rights Agreement dated as of November 5, 1999 among the
Registrant and the initial purchasers of the Registrant's 6-3/8%
Cumulative Convertible Preferred Stock named therein (incorporated by
reference to the Registrant's Registration Statement on Form S-3 filed
on January 18, 2000 relating to such securities).

10.22 Registration Rights Agreement dated as of November 5, 1999 among the
Registrant and the initial purchasers of the Registrant's 7%
Cumulative Convertible Preferred Stock named therein (incorporated by
reference to the Registrant's Registration Statement on Form S-3 filed
on January 18, 2000 relating to such securities).

10.23 1998 Global Crossing Ltd. Stock Incentive Plan as amended and restated
effective December 7, 1999 (incorporated by reference to Exhibit 10.21
to the Global Crossing Holdings Ltd. Registration Statement on Form S-
4 filed on January 11, 2000 (File No. 333-94449).

10.24 Form of Non-Qualified Stock Option Agreement as in effect on September
30, 1999 (incorporated by reference to Exhibit 10.2 to the November
15, 1999 10-Q).

10.25 Frontier Corporation Supplemental Retirement Savings Plan as amended
and restated effective January 1, 1996 (incorporated by reference to
Exhibit 10.13 to Frontier Corporation's Annual Report on Form 10-K
filed March 28, 1997).

10.26 Amendment No. 1, effective March 16, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.2 to Frontier Corporation's Quarterly Report on Form 10-Q
filed August 3, 1999).

10.27 Amendment No. 2, dated September 21, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.5 to the November 15, 1999 10-Q).

10.28 Employment Agreement dated as of February 19, 1999 between the
Registrant and Robert Annunziata (incorporated by reference to Exhibit
10.8 to the Registrant's Quarterly Report on Form 10-Q filed on May
10, 1999).

63

Exhibit
Number Exhibit
------- -------

10.29 Executive Contract dated March 25, 1996 between Robert L. Barrett and
Frontier Corporation (incorporated by reference to Exhibit 10.25 to
Frontier Corporation's Quarterly Report on Form 10-Q filed May 14,
1996).

10.30 Amendment dated May 1, 1999 to Executive Contract between Robert L.
Barrett and Frontier Corporation (incorporated by reference to Exhibit
10.7 to the November 15, 1999 10-Q).

10.31 Executive Contract dated January 1, 1998 between Joseph P. Clayton and
Frontier Corporation (incorporated by reference to Exhibit 10.22 to
Frontier Corporation's Annual Report on Form 10-K filed March 26,
1998).

10.32 Amendment dated May 1, 1999 to Executive Contract between Joseph P.
Clayton and Frontier Corporation (incorporated by reference to Exhibit
10.9 to the November 15, 1999 10-Q).

10.33 Employment Agreement dated as of December 5, 1999 between the
Registrant and Leo J. Hindery, Jr. (filed herewith).

10.34 Form of Change in Control Agreement between the Registrant and
Executive Officers of the Registrant approved by the Board of
Directors in January 2000 (filed herewith).

10.35 Subscription and Sale and Purchase Agreement, dated November 15, 1999,
among Hutchison Whampoa Limited, Hutchison Telecommunications Limited,
the Registrant and HCL Holdings Limited (incorporated by reference to
Exhibit 10.33 to the Global Crossing Holdings Ltd. Registration
Statement on Form S-4 filed on January 11, 2000 (File No. 333-94449)).

10.36 Employment Agreement dated as of December 3, 1999 between the
Registrant and John A. Scarpati (filed herewith).

12.1 Computation of Ratio of Earnings to Fixed Charges (filed herewith).

21.1 Subsidiaries of the Registrant (filed herewith).

23.1 Consent of Arthur Andersen (filed herewith).

27.1 Financial Data Schedule (filed herewith).

(b) Reports on Form 8-K.

During the quarter ended December 31, 1999, the following reports on Form 8-
K were filed by the Registrant:

1. Current Report on Form 8-K dated October 11, 1999 (date of earliest
event reported), filed on October 12, 1999, for the purpose of
reporting, under Item 5, the execution of an agreement to acquire
Racal Telecom.

2. Current Report on Form 8-K dated October 11, 1999 (date of earliest
event reported), filed on October 21, 1999, for the purpose of
filing, under Item 2, the agreement governing the acquisition of
Racal Telecom.

3. Current Report on Form 8-K dated October 29, 1999 (date of earliest
event reported), filed on December 8, 1999, for the purpose of
reporting, under Item 5, recent issuances by Global Crossing Ltd. of
unregistered securities.

4. Current Report on Form 8-K dated November 24, 1999 (date of earliest
event reported), filed on December 3, 1999, for the purpose of
reporting, under Item 2, the acquisition of Racal Telecom.

(c) See Item 14(a)(3) above.

(d) See Item 14(a)(2) above.

64

GLOBAL CROSSING LTD. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

Page
----

Report of Independent Public Accountants................................... F-2

Consolidated Balance Sheets as of December 31, 1999 and 1998............... F-3

Consolidated Statements of Operations for the years ended December 31, 1999
and 1998 and for the period March 19, 1997 (Date of Inception) to December
31, 1997.................................................................. F-4

Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1999 and 1998 and for the period March 19, 1997 (Date of
Inception) to December 31, 1997........................................... F-5

Consolidated Statements of Cash Flows for the years ended December 31, 1999
and 1998 and for the period March 19, 1997 (Date of Inception) to December
31, 1997.................................................................. F-6

Consolidated Statements of Comprehensive Income for the years ended
December 31, 1999 and 1998 and for the period March 19, 1997 (Date of
Inception) to December 31, 1997........................................... F-8

Notes to Consolidated Financial Statements................................. F-9

Schedule:
Schedule II--Valuation and Qualifying Accounts........................... F-42

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Global Crossing Ltd.:

We have audited the accompanying consolidated balance sheets of Global
Crossing Ltd. (a Bermuda company) and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of operations, shareholders'
equity, cash flows and comprehensive income for the years ended December 31,
1999 and 1998 and for the period March 19, 1997 (Date of Inception) to
December 31, 1997. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Global Crossing Ltd. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years ended December 31, 1999 and 1998
and for the period March 19, 1997 (Date of Inception) to December 31, 1997, in
conformity with accounting principles generally accepted in the United States.

As explained in the Notes to the consolidated financial statements,
effective January 1, 1999, the Company changed its method of accounting for
start-up costs.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Consolidated Financial Statements and Schedule is presented for purposes of
complying with the Securities and Exchange Commission's rules and regulations
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.

/s/ Arthur Andersen
_____________________________________
Arthur Andersen

Hamilton, Bermuda
February 23, 2000

F-2

GLOBAL CROSSING LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share information)

December 31, 1999 December 31, 1998
----------------- -----------------

ASSETS:
Current assets:
Cash and cash equivalents................. $ 1,633,499 $ 806,593
Restricted cash and cash equivalents...... 93,294 77,190
Accounts receivable, net.................. 966,973 71,195
Other assets and prepaid costs............ 252,767 21,637
----------- ----------
Total current assets...................... 2,946,533 976,615
Restricted cash and cash equivalents...... 138,118 367,600
Accounts receivable....................... 52,052 43,315
Capacity available for sale............... -- 574,849
Property and equipment, net............... 6,026,053 433,707
Goodwill and intangibles, net............. 9,557,422 --
Investment in and advances to/from
affiliates, net.......................... 323,960 177,334
Other assets.............................. 661,442 65,757
----------- ----------
Total assets.............................. $19,705,580 $2,639,177
=========== ==========
LIABILITIES:
Current liabilities:
Accrued construction costs................ $ 275,361 $ 129,081
Accounts payable.......................... 509,866 2,018
Accrued cost of access.................... 154,285 --
Accrued liabilities....................... 280,629 29,972
Accrued interest and preferred dividends.. 66,745 14,428
Deferred revenue.......................... 127,367 44,197
Income taxes payable...................... 140,034 15,604
Current portion of long term debt......... 5,496 6,393
Other current liabilities................. 292,810 14,572
----------- ----------
Total current liabilities................. 1,852,593 256,265
Long-term debt............................ 5,018,544 1,066,093
Deferred revenue.......................... 383,287 25,325
Deferred credits and other................ 796,606 34,174
----------- ----------
Total liabilities......................... 8,051,030 1,381,857
----------- ----------
MINORITY INTEREST.......................... 351,338 --
----------- ----------
MANDATORILY REDEEMABLE AND CUMULATIVE
CONVERTIBLE PREFERRED STOCK:
10 1/2% Mandatorily Redeemable Preferred
Stock, 5,000,000 shares issued and
outstanding as of December 31, 1999 and
1998, $100 liquidation preference per
share.................................... 485,947 483,000
----------- ----------
6 3/8% Cumulative Convertible Preferred
Stock, 10,000,000 and 0 shares issued and
outstanding as of December 31, 1999 and
1998, respectively, $100 liquidation
preference per share..................... 969,000 --
----------- ----------
7% Cumulative Convertible Preferred Stock,
2,600,000 and 0 shares issued and
outstanding as of December 31, 1999 and
1998, $250 liquidation preference per
share.................................... 629,750 --
----------- ----------
SHAREHOLDERS' EQUITY:
Common stock, 3,000,000,000 shares
authorized, par value $.01, 799,137,142
and 432,776,246 shares issued as of
December 31, 1999 and 1998, respectively. 7,992 4,328
Treasury stock, 22,033,758 shares......... (209,415) (209,415)
Additional paid-in capital and other
shareholders' equity..................... 9,578,927 1,067,470
Accumulated deficit....................... (158,989) (88,063)
----------- ----------
9,218,515 774,320
----------- ----------
Total liabilities and shareholders'
equity................................... $19,705,580 $2,639,177
=========== ==========

See accompanying notes.

F-3

GLOBAL CROSSING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share information)

Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------

REVENUE................. $ 1,664,824 $ 419,866 $ --
----------- ----------- -----------
EXPENSES:
Cost of sales.......... 850,483 178,492 --
Operations,
administration and
maintenance........... 133,202 18,056 --
Sales and marketing.... 149,119 26,194 1,366
Network development.... 26,153 10,962 78
General and
administrative........ 210,107 26,303 1,618
Stock related expense.. 51,306 39,374 --
Depreciation and
amortization.......... 124,294 541 39
Goodwill and
intangibles
amortization.......... 127,621 -- --
Termination of advisory
services agreement.... -- 139,669 --
----------- ----------- -----------
1,672,285 439,591 3,101
----------- ----------- -----------
OPERATING LOSS.......... (7,461) (19,725) (3,101)
EQUITY IN INCOME (LOSS)
OF AFFILIATES.......... 15,708 (2,508) --
MINORITY INTEREST....... (1,338) -- --
OTHER INCOME (EXPENSE):
Interest income........ 67,407 29,986 2,941
Interest expense....... (139,077) (42,880) --
Other income, net...... 180,765 -- --
----------- ----------- -----------
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAXES, EXTRAORDINARY
ITEM AND CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE... 116,004 (35,127) (160)
Provision for income
taxes................. (126,539) (33,067) --
----------- ----------- -----------
LOSS BEFORE
EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE.............. (10,535) (68,194) (160)
Extraordinary loss on
retirement of debt.... (45,681) (19,709) --
----------- ----------- -----------
LOSS BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE... (56,216) (87,903) (160)
Cumulative effect of
change in accounting
principle, net of
income tax benefit of
$1,400................ (14,710) -- --
----------- ----------- -----------
NET LOSS................ (70,926) (87,903) (160)
Preferred stock
dividends............. (66,642) (12,681) (12,690)
Redemption of preferred
stock................. -- (34,140) --
----------- ----------- -----------
LOSS APPLICABLE TO
COMMON SHAREHOLDERS.... $ (137,568) $ (134,724) $ (12,850)
=========== =========== ===========
NET LOSS PER COMMON
SHARE:
Loss applicable to
common shareholders
before extraordinary
item and cumulative
effect of change in
accounting principle,
basic and diluted..... $ (0.15) $ (0.32) $ (0.04)
----------- ----------- -----------
Extraordinary item,
basic and diluted..... (0.09) (0.06) --
----------- ----------- -----------
Cumulative effect of
change in accounting
principle,
basic and diluted..... (0.03) -- --
----------- ----------- -----------
Net loss applicable to
common shareholders,
basic and diluted..... $ (0.27) $ (0.38) $ (0.04)
=========== =========== ===========
Shares used in
computing basic and
diluted loss per
share................. 502,400,851 358,735,340 325,773,934
=========== =========== ===========

See accompanying notes.

F-4

GLOBAL CROSSING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share information)

Other Shareholders'
Common Stock Treasury Stock Equity
------------------- -------------------- --------------------
Additional Total
Paid-in Accumulated Shareholders'
Shares Amount Shares Amount Capital(a) Other Deficit Equity
----------- ------ ---------- --------- ---------- -------- ----------- -------------

Issuance of common stock
for cash in March 1997
(Date of Inception),
net of $1,264 issuance
costs................. 325,773,934 $3,258 -- $ -- $ 83,713 $ -- $ -- $ 86,971
Preferred stock
dividends............. -- -- -- -- (12,690) -- -- (12,690)
Net loss for the
period................ (160) (160)
----------- ------ ---------- --------- ---------- -------- --------- ----------
Balance, December 31,
1997................... 325,773,934 3,258 -- -- 71,023 -- (160) 74,121
Issuance of common
stock for cash........ 1,575,000 16 -- -- 2,772 -- -- 2,788
Cash reimbursement to
certain shareholders.. -- -- -- -- (7,047) -- -- (7,047)
Unearned compensation.. -- -- -- -- 93,758 (93,758) -- --
Amortization of
compensation expense.. -- -- -- -- -- 37,111 -- 37,111
PCG Warrants........... 24,406,340 244 -- -- 275,054 -- -- 275,298
Issuance of common
stock in exchange for
termination of
advisory services
agreement............. 14,210,526 142 -- -- 134,858 -- -- 135,000
Preferred stock
dividends............. -- -- -- -- (12,681) -- -- (12,681)
Premium on redemption
of preferred stock.... -- -- -- -- (34,140) -- -- (34,140)
Common stock
transactions with
certain shareholders.. 21,733,758 217 22,033,758 (209,415) 209,198 -- -- --
Issuance of common
stock in connection
with initial public
offering, net of
$30,916 issuance
costs................. 44,420,000 444 -- -- 390,630 -- -- 391,074
Issuance of common
stock from exercise of
stock options......... 656,688 7 -- -- 692 -- -- 699
Net loss............... -- -- -- -- -- -- (87,903) (87,903)
----------- ------ ---------- --------- ---------- -------- --------- ----------
Balance, December 31,
1998................... 432,776,246 4,328 22,033,758 (209,415) 1,124,117 (56,647) (88,063) 774,320
Issuance of common
stock from exercise of
stock options......... 10,058,073 101 -- -- 111,263 -- -- 111,364
Income tax benefit from
exercise of stock
options............... -- -- -- -- 9,368 -- -- 9,368
Unearned compensation.. -- -- -- -- 55,066 (55,066) -- --
Amortization of
compensation expense.. -- -- -- -- -- 51,306 -- 51,306
Issuance of common
stock in exchange for
non-compete rights and
licenses.............. 2,239,632 22 -- -- 19,978 -- -- 20,000
Cancellation of shares
issued in connection
with terminated merger
with US West.......... (2,231,076) (22) -- -- (103,362) -- -- (103,384)
Preferred stock
dividends............. -- -- -- -- (66,642) -- -- (66,642)
Shares issued in
connection with
Frontier acquisition.. 355,263,135 3,553 -- -- 8,503,974 -- -- 8,507,527
Shares issued for
retirement of debt.... 1,031,132 10 -- -- 5,290 -- -- 5,300
Foreign currency
translation
adjustment............ -- -- -- -- -- (20,698) -- (20,698)
Unrealized gain on
securities............ -- -- -- -- -- 980 -- 980
Net loss............... -- -- -- -- -- -- (70,926) (70,926)
----------- ------ ---------- --------- ---------- -------- --------- ----------
Balance, December 31,
1999................... 799,137,142 $7,992 22,033,758 $(209,415) $9,659,052 $(80,125) $(158,989) $9,218,515
=========== ====== ========== ========= ========== ======== ========= ==========

- --------
(a) Additional Paid-in-Capital has been charged retroactively for the par
value of the shares issued as a result of the 2-for-1 stock split effected
in the form of a stock dividend effective on March 9, 1999.

See accompanying notes.

F-5

GLOBAL CROSSING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Period From
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------

CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
Net loss............... $ (70,926) $ (87,903) $ (160)
Adjustments to
reconcile net loss to
net cash provided by
operating activities:
Extraordinary loss on
retirement of senior
notes................. 45,681 19,709 --
Cumulative effect of
change in accounting
principle............. 14,710 -- --
Non-cash portion of US
West termination
agreement............. (103,384) -- --
Stock related expenses. 51,306 39,374 --
Termination of advisory
services agreement.... -- 135,000 --
Equity in (income) loss
of affiliates......... (15,708) 2,508 --
Depreciation and
amortization.......... 251,915 541 39
Provision for doubtful
accounts.............. 37,157 4,233 --
Deferred income taxes.. 35,274 9,654 --
Capacity available for
sale excluding cash
expenditures for
investing activities.. -- 123,329 (21,200)
Other.................. 7,726 -- --
Changes in operating
assets and
liabilities........... 252,333 (37,718) 26,442
---------- --------- --------
Net cash provided by
operating activities. 506,084 208,727 5,121
---------- --------- --------
CASH FLOWS USED IN
INVESTING ACTIVITIES:
Cash paid for
construction in
progress and capacity
available for sale.... (1,577,044) (413,996) (428,743)
Acquisitions, net of
cash acquired......... (2,456,811) -- --
Proceeds from sale of
unconsolidated
subsidiary............ 379,086 -- --
Purchases of property
and equipment......... (193,871) -- --
Investments in and
advances to
affiliates............ (161,337) (16,701) --
---------- --------- --------
Net cash used in
investing activities. (4,009,977) (430,697) (428,743)
---------- --------- --------
CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES:
Proceeds from issuance
of common stock, net.. 111,364 392,298 73,736
Proceeds from issuance
of preferred stock,
net................... 1,598,750 483,000 92,470
Proceeds from issuance
of senior notes....... 2,000,000 796,495 150,000
Proceeds from long-term
debt.................. 3,544,083 290,556 162,325
Repayment of long-term
debt.................. (3,351,732) (176,890) --
Retirement of 1997
issued senior notes... -- (159,750) --
Redemption of 1997
issued preferred
stock................. -- (134,372) --
Finance costs incurred. (141,027) (37,665) (28,181)
Cash reimbursement to
certain shareholders.. -- (7,047) --
Minority interest
investment in
subsidiary............ 350,000 -- --
Preferred dividends.... (52,429) -- --
Decrease (increase) in
restricted cash and
cash equivalents...... 271,790 (419,515) (25,275)
---------- --------- --------
Net cash provided by
financing activities. 4,330,799 1,027,110 425,075
---------- --------- --------
NET INCREASE IN CASH AND
CASH EQUIVALENTS....... 826,906 805,140 1,453
CASH AND CASH
EQUIVALENTS, beginning
of period.............. 806,593 1,453 --
---------- --------- --------
CASH AND CASH
EQUIVALENTS, end of
period................. $1,633,499 $ 806,593 $ 1,453
========== ========= ========

F-6

GLOBAL CROSSING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
(In thousands)

Period From
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------

SUPPLEMENTAL INFORMATION
ON NON-CASH FINANCING
ACTIVITIES:
Common stock issued to
holders of preferred
stock................. $ -- $ -- $ 13,325
=========== ========= ========
Common stock issued
upon conversion of
debt.................. $ 5,300 $ -- $ --
=========== ========= ========
SUPPLEMENTAL INFORMATION
ON NON-CASH INVESTING
ACTIVITIES:
Costs incurred for
construction in
progress and capacity
available for sale.... $ 1,704,258 $ 607,865 $497,319
Increase in accrued
construction costs.... (119,405) (77,077) (52,414)
Increase in accrued
interest.............. -- (8,412) (1,641)
Amortization of
deferred finance
costs................. (7,809) (7,883) (2,223)
(Increase) decrease in
obligations under
capital leases........ -- 11,660 (12,298)
PCG Warrants........... -- (112,157) --
----------- --------- --------
Cash paid for
construction in
progress and capacity
available for sale.... $ 1,577,044 $ 413,996 $428,743
=========== ========= ========
Non-cash purchases of
property and
equipment............. $ 38,300 $ -- $ --
=========== ========= ========
Transfer of capacity
available for sale to
property and
equipment............. $ 574,849 $ -- $ --
=========== ========= ========
Common stock issued for
non-compete rights.... $ 20,000 $ -- $ --
=========== ========= ========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Changes in operating
assets and
liabilities:
Accounts receivable.... $ (296,467) $(118,743) $ --
Other current assets... (47,915) (46,662) (1,032)
Other Long-Term Assets. (98,029) -- --
Deferred revenue....... 331,475 64,197 5,325
Accounts payable and
accrued liabilities... 258,739 30,332 1,249
Income taxes payable... 73,650 15,604 --
Obligations under
inland services
agreement............. (21,994) 17,554 20,900
Deferred credits and
other................. 52,874 -- --
----------- --------- --------
$ 252,333 $ (37,718) $ 26,442
=========== ========= ========
Detail of acquisitions:
Assets acquired........ $11,120,676 $ -- $ --
Liabilities assumed.... (2,613,149) -- --
----------- --------- --------
Common stock issued.... $ 8,507,527 $ -- $ --
=========== ========= ========
Net cash paid for
acquisitions.......... $ 2,456,811 $ -- $ --
Cash acquired in
acquisitions.......... 123,855 -- --
----------- --------- --------
Cash paid for
acquisition, including
transaction fees...... $ 2,580,666 $ -- $ --
=========== ========= ========
Investments in
Affiliates:
Cost of investments in
affiliates............ $ (161,337) $(179,842) $ --
PCG Warrants........... -- 163,141 --
=========== ========= ========
$ (161,337) $ (16,701) $ --
=========== ========= ========
Cash paid for interest
and income taxes:
Interest paid and
capitalized........... $ 219,289 $ 39,424 $ 8,136
=========== ========= ========
Interest paid (net of
capitalized interest). $ 141,230 $ 33,854 $ --
=========== ========= ========
Cash paid for taxes.... $ 14,589 $ 7,809 $ --
=========== ========= ========

See accompanying notes.

F-7

GLOBAL CROSSING LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------

Net loss................ $(70,926) $(87,903) $(160)
Foreign currency
translation
adjustment............ (20,698) -- --
Unrealized gain on
securities............ 980 -- --
-------- -------- -----
Comprehensive loss...... $(90,644) $(87,903) $(160)
======== ======== =====

See accompanying notes.

F-8

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BACKGROUND AND ORGANIZATION

Global Crossing Ltd. (a Bermuda company, together with its consolidated
subsidiaries, "GCL" or the "Company") is building and offering services over
the world's first independent global fiber optic network, consisting of
101,000 announced route miles and serving five continents, 27 countries and
more than 200 major cities. Upon completion of our currently announced
systems, our network and our telecommunications and Internet product offerings
will be available in markets constituting over 80% of the world's
international communications traffic.

The Company's strategy is to be the premier provider of global broadband
Internet Protocol ("IP") and data services for both wholesale and retail
customers. The Company is building a state-of-the-art fiber optic network that
management believes to be of unprecedented global scope and scale to serve as
the backbone for this strategy. Management believes that the Company's network
will enable it to be the low cost service provider in most of its addressable
markets.

Asia Global Crossing, a joint venture with Softbank Corp. and Microsoft
Corporation intends to become the first truly pan-Asian carrier to offer
worldwide bandwidth and data communications. The Asia Global Crossing joint
venture was established on November 24, 1999.

GlobalCenter, a wholly-owned subsidiary of GCL, will expand its product set
to become a single-source e-commerce service solution that will provide web-
centric businesses with the high availability, flexibility and scalability
necessary to compete in the rapidly expanding digital economy.

Global Crossing Ltd. serves as a holding company for its subsidiaries'
operations, including Global Marine Systems (acquired July 2, 1999), Frontier
Corporation (acquired September 28, 1999), and Racal Telecom (acquired
November 24, 1999).

In February 1999, the Company's Board of Directors declared a 2-for-1 split
of the Company's common stock in the form of a stock dividend which was
effective on March 9, 1999. All share information presented in these
consolidated financial statements gives retroactive effect to the 100-for-1
stock split in January 1998, 1.5-for-1 stock dividend in August 1998 and 2-
for-1 stock dividend on March 9, 1999.

2. SIGNIFICANT ACCOUNTING POLICIES

These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States. The
significant accounting policies are summarized as follows:

a) Principles of Consolidation

The consolidated financial statements include the accounts of GCL and its
wholly-owned subsidiaries. All significant intercompany transactions have been
eliminated.

As described in Note 3, the Company completed the acquisitions of Global
Marine Systems, Frontier and Racal Telecom during 1999. These acquisitions
have had a major impact on the comparability of the Company's financial
statements. To assist the reader of these financial statements and related
notes, the Company has disclosed certain financial information in Note 3
including the pro forma impact of these acquisitions.

b) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenue and expenses during the
reporting period. Actual amounts and results could differ from those
estimates.

F-9

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company's operations and ability to grow may be affected by numerous
factors, including changes in customer requirements, new laws and governmental
regulations and policies, technological advances, entry of new competitors and
changes in the willingness of financial institutions and other lenders to
finance acquisitions and operations. The Company cannot predict which, if any,
of these or other factors might have a significant impact on the
telecommunications industry in the future, nor can it predict what impact, if
any, the occurrence of these or other events might have on the Company's
operations.

c) Development Stage Company

The Company was in its development stage until May 1998 when the United
States to United Kingdom segment of the AC-1 system was placed into service,
and the Company began generating significant amounts of revenue.

d) Revenue Recognition

Services

Revenue recognized as services, including sales of capacity under operating
type leases, are provided, net of an estimate for uncollectible accounts.
Payments received from customers before the relevant criteria for revenue
recognition are satisfied are included in deferred revenue in the accompanying
consolidated balance sheets.

Sales-Type Leases

Revenue from Capacity Purchase Agreements ("CPAs") that meet the criteria of
sales-type lease accounting are recognized in the period that the rights and
obligations of ownership transfer to the purchaser, which occurs when (i) the
purchaser obtains the right to use the capacity, which can only be suspended
if the purchaser fails to pay the full purchase price or fulfill its
contractual obligations, (ii) the purchaser is obligated to pay Operations,
Administration and Maintenance ("OA&M") costs and (iii) the segment of a
system related to the capacity purchased is available for service. Certain
customers who have entered into CPAs for capacity have paid deposits toward
the purchase price which have been included as deferred revenue in the
accompanying consolidated balance sheets.

Prior to July 1, 1999, substantially all CPAs were treated as sales-type
leases as described in Statement of Financial Accounting Standards No. 13,
"Accounting for Leases" ("SFAS 13"). On July 1, 1999, the Company adopted
Financial Accounting Standards Board Interpretation No. 43, "Real Estate
Sales, an interpretation of FASB Statement No. 66" ("FIN 43"), which requires
prospective transactions to meet the criteria set forth in Statement of
Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate"
("SFAS 66") to qualify for sales-type lease accounting. Since sales of
terrestrial capacity did not meet the new criteria, the terrestrial portion of
CPAs executed subsequent to June 30, 1999 were recognized over the terms of
the contracts, as services.

Percentage-of-Completion

Revenues and estimated profits under long-term contracts for undersea
telecommunication installation by Global Marine Systems are recognized under
the percentage-of-completion method of accounting.

e) Cost of Sales

Services

Costs of the network relating to capacity contracts accounted for as
operating leases are treated as fixed assets and, accordingly, are depreciated
over the estimated useful life of the capacity.

F-10

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Sales-Type Leases

Prior to October 1, 1999, the effective date of the Frontier merger, cost of
sales for subsea circuits was calculated based on the ratio of capacity
revenue recognized in the period to total expected capacity revenue over the
life of the network system, multiplied by the total remaining costs of
constructing the network system. This calculation of cost of sales matches
costs with the value of each sale relative to total expected revenue. Until
the entire system was completed, for purposes of calculating cost of sales,
the total system costs incurred included an estimate of remaining costs to be
incurred to complete the entire system plus the cost of system upgrades that
management had the intent and ability to complete, provided the need for such
upgrades was supported by a third party consultant's independent revenue
forecast.

Beginning October 1, 1999, the Company initiated service contract accounting
and therefore began depreciating all of its systems; however, certain
contracts still qualified for sales-type lease accounting. For these
transactions, the Company's policy provided for recording cost of sales in the
period in which the related revenue was recognized, in addition to the
depreciation charge described below (see Property and Equipment and
Construction in Progress). Under service contract accounting, the amount
charged to cost of sales relating to subsea capacity was calculated by
determining the estimated net book value of the specific subsea capacity at
the time of the sale. The estimated book value includes expected costs of
capacity the Company has the intent and ability to add through upgrades of
that system, provided the need for such upgrades is supported by a third-party
consultant's independent revenue forecast.

f) Commissions and Advisory Services Fees

The Company's policy is to record sales commissions and advisory fee
expenses and related payables upon the recognition of revenue so as to
appropriately match these costs with the related revenue. Under the Advisory
Services Agreement ("ASA"), which was terminated by December 31, 1998, the
Company paid PCG Telecom Services LLC ("PCG Telecom") and its affiliates 2% of
revenue for advisory services performed. Under the Sales Agency Agreement, the
Company paid Tyco Submarine Systems Ltd. ("TSSL") a commission based on a
percentage of revenue from the sale of capacity on certain of the Company's
systems.

g) Cash and Cash Equivalents, Restricted Cash and Cash Equivalents (Current
and Long Term)

The Company considers cash in banks and short term highly liquid investments
with an original maturity of three months or less at the date of purchase to
be cash equivalents. Cash and cash equivalents and restricted cash and cash
equivalents are stated at cost which approximates fair value.

h) Property and Equipment and Construction in Progress

Property and equipment, which includes capitalized leases, are stated at
cost, net of depreciation and amortization. Major enhancements are
capitalized, while expenditures for repairs and maintenance are expensed when
incurred. Costs incurred prior to a segment's completion are reflected as
construction in progress in the accompanying consolidated balance sheets and
recorded as property and equipment at the date each segment of the applicable
system becomes operational.

Construction in progress includes direct expenditures for construction of
network systems and is stated at cost. Capitalized costs include costs
incurred under the construction contract; advisory, consulting and legal fees;
interest; and amortized finance costs incurred during the construction phase.
Once it is probable that a cable system will be constructed, costs directly
identifiable with the cable system under development are capitalized. Costs
relating to the evaluation of new projects incurred prior to the date the
development of the network system becomes probable are expensed as incurred.

In connection with the construction of the Global Crossing network, the
Company has entered into various agreements to sell or exchange dark fiber,
ducts, rights of ways, and certain capacity. These non-monetary exchanges are
recorded at the cost of the asset transferred or, if applicable, the fair
value of the asset received.

F-11

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Interest incurred, which includes the amortization of deferred finance fees
and issuance discount ("interest cost"), are capitalized to construction in
progress. Total interest cost incurred and interest capitalized to
construction in progress during the periods presented were:

For the period
March 31, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------
(In thousands)

Interest cost incurred.. $217,136 $92,813 $9,777
======== ======= ======
Interest cost
capitalized to
construction in
progress............... $ 78,059 $49,933 $9,777
======== ======= ======

Depreciation is provided on a straight-line basis over the estimated useful
lives of the assets, with the exception of leasehold improvements and assets
acquired through capital leases, which are depreciated over the lesser of the
estimated useful lives or the term of the lease. Estimated useful lives are as
follows:

Buildings...................................................... 10-40 years
Leasehold improvements......................................... 2-25 years
Furniture, fixtures and equipment.............................. 2-30 years
Transmission equipment......................................... 3-25 years

Beginning October 1, 1999, the Company commenced service contract
accounting. Carrying amounts related to completed subsea systems were
reclassified from capacity available for sale to depreciable assets, and are
being depreciated over their remaining economic useful lives.

When property or equipment is retired or otherwise disposed of, the cost and
accumulated depreciation are relieved from the accounts, and resulting gains
or losses are reflected in the determination of current net income.

The Company reviews the carrying value of property and equipment for
impairment whenever events and circumstances indicate that the carrying value
of an asset may not be recoverable from the estimated future cash flows
expected to result from its use and eventual disposition. In cases where
undiscounted expected future cash flows are less than the carrying value, an
impairment loss would be recognized equal to an amount by which the carrying
value exceeds the fair value of the assets.

i) Goodwill and Intangibles

Costs in excess of net assets of acquired businesses are amortized on the
straight-line method over 3 to 25 years. In cases where undiscounted expected
future cash flows are less than the carrying value, the impairment loss would
be included in the determination of current net income. Subsequent to
acquisitions, the Company continually evaluates whether later events and
circumstances have occurred which indicate that the remaining estimated useful
life of intangible assets may warrant revision or that the remaining balance
of such assets may not be recoverable. When factors indicate that intangible
assets should be evaluated for possible impairment, the Company uses an
estimate of the undiscounted operating income over the remaining life of the
intangible assets in measuring whether the intangible assets are recoverable.

j) Deferred Finance Costs

Costs incurred to obtain financing through the issuance of senior notes and
long-term debt have been reflected as an asset included in other assets in the
accompanying consolidated balance sheets. Costs incurred to obtain financing
through the issuance of preferred stock have been reflected as a reduction in
the carrying value

F-12

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
of the issued preferred stock. The financing costs relating to the debt are
amortized over the lesser of the term of the related debt agreements or the
expected payment date of the debt obligation. In 1998, certain preferred stock
was redeemed at which time the remaining balance of unamortized discount and
offering costs was charged against additional paid-in capital. In 1999 and
1998, certain long-term debt was extinguished, at which time the remaining
balance of unamortized discount and offering costs was written off and
included in extraordinary loss on retirement of debt.

During the construction period, the amortized portion of deferred financing
costs relating to the senior notes and the long-term debt are included in
construction in progress as a component of interest capitalized or recorded as
interest expense in accordance with Statement of Financial Accounting
Standards (SFAS) No. 34, "Capitalization of Interest Cost". The amortized
portion of the deferred financing costs relating to the preferred stock is
included as a component of preferred stock dividends.

k) Investments

Investments in which the Company does not have significant influence or in
which the Company holds an ownership interest of less than 20% are recorded
using the cost method of accounting. The equity method of accounting is
applied for investments in affiliates, if the Company owns an aggregate of 20%
to 50% of the affiliate and if the Company exercises significant influence
over the affiliate. The equity method is also applied for entities in which
the Company's ownership is in excess of 50% but over which the Company is
unable to exercise effective control. If the Company holds more than 50% of
the ownership and is able to exercise effective control, the owned entity's
financial statements and the appropriate deductions for minority interest are
included in the accompanying consolidated financial statements.

l) Financial Instruments

The Company uses derivative financial instruments to reduce its exposure to
adverse fluctuations in interest rates and foreign currency exchange rates.
The Company has established policies and procedures for risk assessment and
the approval, reporting and monitoring of derivative financial instrument
activities. The Company does not enter into financial instruments for trading
or speculative purposes. Accordingly, they are presented on the accompanying
consolidated balance sheet at their carrying values, which approximates their
fair values. Fair values are based on market quotes, current interest rates or
management estimates, as appropriate.

The Company has entered into forward currency contracts, hedging the
exchange risk on committed foreign currency transactions. Gains and losses on
these contracts are recognized at the time the underlying transaction is
completed.

As discussed in Note 15, the Company has entered into an interest rate swap
agreement to hedge its variable interest-rate exposure on debt. Hedge
accounting was applied in respect of these instruments; accordingly, the net
cash amounts to be paid or received on the agreement are accrued and
recognized as an adjustment to interest expense on the related debt.

m) Income Taxes

The Company recognizes current and deferred income tax assets and
liabilities based upon all events that have been recognized in the
consolidated financial statements as measured by the enacted tax laws.

n) Effect of Foreign Currencies

For those subsidiaries using the U.S. Dollar as their functional currency,
transaction loss is recorded in the accompanying consolidated statements of
operations. The Company's foreign transaction loss was $26.9 million

F-13

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
for the year ended December 31, 1999. The effect of foreign currency
transactions in all periods prior to the year ended December 31, 1999 were
immaterial.

For those subsidiaries not using the U.S. Dollar as their functional
currency, assets and liabilities are translated at exchange rates in effect at
the balance sheet date and income and expense accounts are translated at
average exchange rates during the period. Resulting translation adjustments
are recorded directly to a separate component of shareholders' equity. For the
year ended December 31, 1999, the Company incurred a foreign currency
translation loss of $20.7 million. For all periods prior to December 31, 1999,
the translation adjustments were immaterial.

o) Stock Option Plan

The Company accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), and, accordingly, recognizes compensation expense for stock option
grants to the extent that the estimated fair value of the stock exceeds the
exercise price of the option at the measurement date. The compensation expense
is charged against operations ratably over the vesting period of the options.

p) Concentration of Credit Risk

The Company has some concentration of credit risk among its customer base.
The Company performs ongoing credit evaluations of its larger customer's
financial condition. As of and for the year ended December 31, 1999, five
customers represented 14% and 29% of the Company's receivables and revenue,
respectively.

q) Change in Accounting Policy

The Company adopted Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5") in the first quarter of 1999. Accordingly, a
one-time charge of $15 million (net of tax benefit), representing start-up
costs incurred and capitalized during previous periods, was charged against
net income.

r) Pending Accounting Standards

In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of SFAS No.
133", which deferred SFAS No. 133's effective date to fiscal quarters
beginning after June 15, 2000. This statement standardizes the accounting for
derivatives and hedging activities and requires that all derivatives be
recognized in the statement of financial position as either assets or
liabilities at fair value. Changes in the fair value of derivatives that do
not meet the hedge accounting criteria are to be reported in earnings. The
impact of the adoption of this standard has not been quantified.

s) Reclassifications

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

3. MERGERS AND ACQUISITIONS

The following mergers and acquisitions occurred during 1999 and have been
accounted for in the accompanying consolidated financial statements under the
purchase method of accounting for business combinations. The purchase price
was allocated based on the estimated fair value of acquired assets and
liabilities at the date of acquisition.

F-14

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Global Marine Systems Acquisition

On July 2, 1999, the Company acquired the Global Marine business of Cable &
Wireless Plc for approximately $908 million, consisting of a combination of
cash and assumed indebtedness. This resulted in an excess of purchase price
over net assets acquired of $693 million, which was allocated to goodwill and
other intangible assets and are being amortized on the straight-line method
over 3-25 years. Global Marine Systems provides services, including
maintenance under a number of long-term contracts, to cables built by carriers
and is the world's largest undersea cable installation and maintenance
company. The Company initially financed the acquisition with committed bank
financing in the amount of $600 million and the remainder with cash on hand.

Frontier Corporation Merger

On September 28, 1999, the Company completed its merger with Frontier
Corporation, resulting in Frontier becoming a wholly owned subsidiary of the
Company.

Frontier shareholders received 2.05 shares of the Company's common stock for
each outstanding share of common stock of Frontier Corporation, for a total of
355 million shares of Global Crossing common stock, including outstanding and
unexercised stock options. The purchase price of $10.3 billion reflects a
Global Crossing stock price of $22 15/16 per share, the average closing price
of Global Crossing common stock from September 1, 1999 through September 3,
1999, and includes long term debt and Frontier stock options assumed by Global
Crossing. For accounting purposes, the merger with the Company is deemed to
have occurred as of the close of business on September 30, 1999. The excess of
purchase price over net assets acquired of $7.7 billion was allocated to
goodwill and other intangible assets; goodwill and intangible assets are being
amortized on the straight-line method over 6-25 years

Racal Telecom Acquisition

On November 24, 1999, the Company acquired Racal Telecom for approximately
$1.6 billion in cash. The Company entered into a (Pounds)675 million
(approximately $1,091 million as of December 31, 1999) credit facility to
finance the acquisition. The excess of purchase price over net assets acquired
of $1.6 billion was allocated to goodwill and is being amortized on the
straight-line method over 6-25 years. Racal Telecom owns one of the most
extensive fiber telecommunications networks in the United Kingdom. For
accounting purposes, the acquisition is deemed to have occurred as of the
close of business on November 30, 1999.

Asia Global Crossing

On November 24, 1999, the Asia Global Crossing joint venture was
established. In exchange for a majority interest, the Company contributed to
the joint venture its development rights in East Asia Crossing ("EAC") and its
58% interest in Pacific Crossing ("PC-1"). Softbank Corp. and Microsoft
Corporation each contributed $175 million in cash to Asia Global Crossing. In
addition, Softbank and Microsoft committed to make a total of at least $200
million in capacity purchases on our network over a three-year period,
expected to be utilized primarily on PC-1 and EAC. Softbank and Microsoft have
also agreed to use Asia Global Crossing's network in the region, subject to
specified conditions. Minority interest of $351 million was recorded in 1999
in connection with this joint venture.

Hutchison Global Crossing

On November 15, 1999, the Company entered into an agreement with Hutchison
Whampoa Limited ("Hutchison") to form a joint venture called Hutchison Global
Crossing, which began operations on January 12, 2000. The joint venture is
owned in equal parts by the Company and Hutchison. In exchange for its 50
percent interest, the Company will contribute certain assets and services to
the joint venture and, in January 2000, issued to Hutchison $400 million
aggregate liquidation preference of its 6 3/8% cumulative convertible
preferred stock, series B, convertible into its common stock.

F-15

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The initial purchase price allocations for the 1999 business combinations
are based on current estimates. The Company will make final purchase price
allocations based upon final values for certain assets and liabilities. As a
result, the final purchase price allocation may differ from the presented
estimate.

The following unaudited pro forma condensed combined financial information
of Global Crossing, Global Marine Systems, Frontier, Racal Telecom and the
Hutchison Global Crossing joint venture demonstrates the results of operations
had the merger and acquisitions related transactions been completed at the
beginning of the periods presented.

December 31,
--------------------------
1999 1998
------------ ------------
(unaudited)
(In thousands, except
share and per share data)

Revenue......................................... $ 4,139,897 $ 3,643,521
============ ============
Net loss before extraordinary items and
cumulative effect of change in accounting
principles..................................... $ (462,544) $ (474,882)
============ ============
Net loss........................................ $ (522,935) $ (496,346)
============ ============
Loss applicable to common shareholders before
extraordinary items and cumulative effect of
change in accounting principles................ $ (554,715) $ (513,063)
============ ============
Loss applicable to common shareholders.......... $ (614,986) $ (568,487)
============ ============
Loss per common share:
Loss applicable to common shareholders
Basic and diluted............................. $ (0.80) $ (0.80)
============ ============
Loss applicable to common shareholders before
extraordinary items and cumulative effect of
change in accounting principles
Basic and diluted............................. $ (0.72) $ (0.72)
============ ============
Shares used in computing loss per share
Basic and diluted............................. 767,355,151 708,518,640
============ ============

4. RESTRICTED CASH AND CASH EQUIVALENTS

Current and long term restricted cash and cash equivalents include the
following:

December 31,
-----------------
1999 1998
-------- --------
(In thousands)

Funds restricted for PC-1 construction.................... $138,118 $231,790
Funds restricted under the AC-1 Credit Facility........... -- 89,000
Funds restricted for MAC construction..................... -- 65,000
Funds restricted for dividends payments to parent company. 76,202 --
Funding for future interest on senior notes............... -- 38,000
Other..................................................... 17,092 21,000
-------- --------
$231,412 $444,790
======== ========

Under the Open Market Plan, dividend payments to the parent company are
temporarily prohibited until Frontier Telephone of Rochester, Inc. ("FTR")
receives clearance from the New York State Public Service Commission that
service requirements are being met. Cash restricted for dividend payments by
FTR, as of December 31, 1999, was approximately $76.2 million.

F-16

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5. ACCOUNTS RECEIVABLE

Current and long term accounts receivable are comprised of:

December 31,
--------------------
1999 1998
---------- --------
(In thousands)

Accounts receivable.................................... $1,114,135 $118,743
Allowance for doubtful accounts........................ (95,110) (4,233)
---------- --------
Accounts receivable, net............................... $1,019,025 $114,510
========== ========

6. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

December 31,
--------------------
1999 1998
---------- --------
(In thousands)

Land................................................... $ 14,886 $ --
Buildings.............................................. 184,827 --
Leasehold improvements................................. 29,096 774
Furniture, fixtures and equipment...................... 771,585 5,306
Transmission equipment................................. 2,544,903 --
---------- --------
3,545,297 6,080
Accumulated depreciation............................... (124,874) (580)
---------- --------
3,420,423 5,500
Construction in progress............................... 2,605,630 428,207
---------- --------
Total property and equipment, net...................... $6,026,053 $433,707
========== ========

Depreciation and amortization expense for the year ended December 31, 1999
was approximately $124 million. Depreciation expense for December 31, 1998 and
for the period ended March 19, 1997 (date of inception) to December 31, 1997
was insignificant.

7. GOODWILL AND INTANGIBLES

The Company acquired three companies in 1999 as described in Note 3. All
companies acquired have been accounted for as purchases with the excess of the
purchase price over the estimated fair value of the net assets acquired
recorded as goodwill.

Goodwill and intangibles are as follows:

December 31,
--------------------
1999 1998
---------- --------
(In thousands)

Goodwill and intangibles............................... $9,685,043 $ --
Accumulated amortization............................... (127,621) --
---------- --------
Goodwill and intangibles, net.......................... $9,557,422 $ --
========== ========

F-17

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8. INVESTMENT IN AND ADVANCES TO/FROM AFFILIATES

Investment in Pacific Crossing Ltd. ("PCL")

In April 1998, the Company entered into a joint venture to construct the PC-
1 cable system which is owned and operated by PCL. The Company has an economic
interest in PCL represented by a 50% direct voting interest and, through one
of the joint venture partners, owns a further 8% economic non-voting interest.

Investment in Global Access Ltd.

In December 1998, the Company entered into a joint venture, Global Access
Ltd., to construct and operate GAL, a terrestrial cable system connecting
Tokyo, Osaka and Nagoya with PC-1. The Company has a 49% interest in Global
Access Ltd.

The Company's investments in PCL and GAL are accounted for as interest in
affiliates under the equity method because the Company is not able to exercise
effective control over their operations.

The Company's investment in affiliates consists of the following:

December 31,
-----------------
1999 1998
-------- --------
(In thousands)

Investment in Pacific Crossing Ltd........................ $266,068 $160,639
Investment in Global Access Ltd........................... 22,693 16,695
Other investments and advances to/from affiliates......... 35,199 --
-------- --------
Investment in and advances to/from affiliates............. $323,960 $177,334
======== ========

9. TAXES

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes" ("SFAS 109"). The provision for income taxes is
comprised of the following:

December 31,
-----------------
1999 1998
-------- -------
(In thousands)

Current................................................... $144,906 $23,413
Deferred.................................................. (18,367) 9,654
-------- -------
Total income tax expense.................................. $126,539 $33,067
======== =======

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes.

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 which impose
income taxes.

F-18

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following is a summary of the significant items giving rise to
components of the Company's deferred tax assets and liabilities:

December 31,
------------------------------------------
1999 1998
--------------------- --------------------
Assets Liabilities Assets Liabilities
-------- ----------- -------- -----------
(In thousands) (In thousands)

Bad debt reserve................. $ 11,199 $ -- $ -- $ --
Research and development costs... -- (41,018) -- --
Depreciation..................... -- (380,893) -- (4,042)
Basis adjustment to purchased
companies....................... -- (9,282) -- --
Employee benefits obligation..... -- (32,918) -- --
Net operating loss (NOL)
carryforwards................... 58,865 -- -- --
Deferred and stock related
compensation.................... 11,066 -- 504 --
Other............................ 35,156 (15,235) -- (6,116)
-------- --------- -------- --------
116,286 (479,346) 504 (10,158)
Valuation allowance.............. (54,780) -- -- --
-------- --------- -------- --------
$ 61,506 $(479,346) $ 504 $(10,158)
======== ========= ======== ========

The Company established a valuation allowance of $54,780 as of December 31,
1999. The valuation allowance is related to deferred tax assets due to the
uncertainty of realizing the full benefit of the NOL carryforwards. In
evaluating the amount of valuation allowance needed, the Company considers the
acquired companies' prior operating results and future plans and expectations.
The utilization period of the NOL carryforwards and the turnaround period of
other temporary differences are also considered. The Company's NOLs begin to
expire in 2004.

10. LONG-TERM DEBT

Outstanding debt consists of the following:

December 31,
----------------------
1999 1998
---------- ----------
(In thousands)

9 1/2% Senior Notes due 2009......................... $1,100,000 $ --
9 1/8% Senior Notes due 2006......................... 900,000 --
9 5/8% Senior Notes due 2008......................... 800,000 800,000
Senior Secured Revolving Credit Facility............. 648,597 --
Racal Telecom Term Loan A............................ 646,130 --
Medium-Term Notes, 7.51%--9.3%, due 2000 to 2004..... 219,000 --
7 1/4% Senior Notes due 2004......................... 300,000 --
6% Dealer Remarketable Securities (DRS) due 2013..... 200,000 --
AC-1 Credit Facility................................. -- 266,799
Other................................................ 242,028 9,192
---------- ----------
Total debt........................................... 5,055,755 1,075,991
Less: discount on long-term debt, net................ (31,715) (3,505)
Less: current portion of long-term debt.............. (5,496) (6,393)
---------- ----------
Long-term debt....................................... $5,018,544 $1,066,093
========== ==========

F-19

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Maturities of long-term debt are as follows (in thousands):

Year Ending December 31,

2000.......................................................... $ 5,496
2001.......................................................... 121,411
2002.......................................................... 43,618
2003.......................................................... 38,336
2004.......................................................... 1,167,256
Thereafter.................................................... 3,679,638
----------
Total......................................................... $5,055,755
==========

Senior Notes

On November 12, 1999, Global Crossing Holdings Ltd. ("GCH"), a wholly-owned
subsidiary of GCL, issued two series of senior unsecured notes ("New Senior
Notes"). The 9 1/8% senior notes are due November 15, 2006 with a face value
of $900 million and the 9 1/2% senior notes are due November 15, 2009 with a
face value of $1.1 billion. The New Senior Notes are guaranteed by GCL.
Interest will be paid on the notes on May 15 and November 15 of each year,
beginning on May 15, 2000.

On May 18, 1998, GCH also issued 9 5/8% senior notes due May 15, 2008, with
a face value of $800 million ("9 5/8% Senior Notes"). The 9 5/8% Senior Notes
are guaranteed by GCL. Interest will be paid on the notes on May 15 and
November 15 of each year.

The 12% senior notes issued by Global Telesystems Holdings Ltd. ("GTH"), now
known as Atlantic Crossing Holdings Ltd., with a face value of $150 million,
due March 31, 2004 ("Old Senior Notes"), were repurchased in May 1998 with the
proceeds from the issuance of the 9 5/8% Senior Notes. The Company recognized
an extraordinary loss of approximately $20 million on repurchase comprised of
a premium of approximately $10 million and a write-off of approximately $10
million of unamortized deferred financing costs during 1998.

Senior Secured Revolving Credit Facility

On July 2, 1999, the Company, through GCH, entered into a $3 billion senior
secured corporate credit facility ("Corporate Credit Facility") with several
lenders. The proceeds from the Corporate Credit Facility were used to repay
existing indebtedness and fund capital expenditures. The Corporate Credit
Facility consisted of two term loans and a revolving credit facility, which
matures on July 2, 2004. The term loans were paid in full during fiscal year
1999. Unused credit under the revolving credit facility is approximately $350
million as of December 31, 1999. Interest is payable at LIBOR plus 2.25
percent (8.44 percent at December 31, 1999).

During 1999, the Company recognized an extraordinary loss resulting from the
payoff of existing debt in connection with the issuance of the Corporate
Credit Facility, comprised of a write-off of $15 million of unamortized
deferred financing costs.

On November 12, 1999, the proceeds from the issuance of the New Senior Notes
were used to pay down the fixed term portion of the Corporate Credit Facility,
resulting in a write-off of $31 million of unamortized deferred financing
costs.

AC-1 Credit Facility

During 1997, the Company's wholly-owned subsidiary, Atlantic Crossing Ltd.
("ACL"), entered into a $482 million aggregate senior secured non-recourse
loan facility (the "AC-1 Credit Facility") with a group of banks led by CIBC
and Deutsche Bank AG, for the construction and financing costs of AC-1. The
AC-1 Credit Facility was paid in full in July 1999.

F-20

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

MAC Credit Facility

During November 1998, the Company's wholly-owned subsidiary, Mid-Atlantic
Crossing Ltd. ("MACL"), entered into a $260 million aggregate senior secured
non-recourse loan facility (the "MAC Credit Facility"). As of December 31,
1998, the outstanding balance was $9 million. The MAC Credit Facility was paid
in full in July 1999.

6% Dealer Remarketable Securities

The 6% DRS were issued by Frontier Corporation and were outstanding at the
date of acquisition. The 6% DRS are due on October 15, 2013. Interest will be
paid on April 15 and October 15 each year. These notes may be put back to the
Company in October 2003, depending on the interest rate environment at that
time.

7 1/4% Senior Notes

The 7 1/4% Senior Notes were issued by Frontier Corporation and were
outstanding at the date of acquisition. The 7 1/4% Senior Notes are due May
14, 2004. Interest will be paid on May 15 and November 15 each year.

In December 1997, the Company entered into an interest rate hedge agreement
that effectively converts $200 million of the Company's 7.25% fixed-rate notes
due May 2004 into a floating rate based on the US dollar London Interbank
Offered Rate ("LIBOR") index rate plus 1.26%. The agreement expires in May
2004. Interest expense and the related cash flows under the agreement are
accounted for on an accrual basis. The Company periodically enters into such
agreements to balance its floating rate and fixed rate obligations to insulate
against interest rate risk and minimize interest expense.

Racal Telecom Term Loan A

On November 24, 1999, the Company entered into a GBP 675 million
(approximately $1,091 million as of December 31, 1999) credit facility to
finance the acquisition of Racal Telecom. The facility consists of two term
loans due November 24, 2007. Interest is payable at LIBOR plus 2.5 percent
(8.44 percent at December 31, 1999).

Medium Term Notes

The Medium Term Notes were issued by Frontier Corporation and were
outstanding at the date of acquisition. The Company intends to refinance the
notes due in fiscal 2000 with proceeds from the other available debt
facilities.

Certain of the debt facilities mentioned above contain various financial and
non financial restrictive covenants and limitations, including, among other
things, the satisfaction of tests of "consolidated cash flow", as defined.
Additionally, certain ILEC assets are pledged as security.

11. OBLIGATIONS UNDER INLAND SERVICES AGREEMENT, CAPITAL LEASES AND OPERATING
LEASES

The Company has capitalized the minimum lease payment of property and
equipment under leases that qualify as capital leases.

F-21

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

At December 31, 1999, future minimum payments under these capital leases are
as follows (in thousands) and are included in Deferred credits and other in
the accompanying Consolidated Balance Sheet:

Year Ending December 31,
2000.............................................................. $ 53,235
2001.............................................................. 43,279
2002.............................................................. 38,390
2003.............................................................. 36,486
2004.............................................................. 53,195
Thereafter........................................................ 436,580
---------
Total minimum lease payments...................................... 661,165
Less: Amount representing maintenance payments.................... (133,240)
Less: Amount representing interest................................ (272,358)
---------
Present value of minimum lease payments........................... $ 255,567
=========

The Company has commitments under various non-cancelable operating leases.
Estimated future minimum lease payments on operating leases are approximately
as follows (in thousands):

Year Ending December 31,
2000.............................................................. $ 131,569
2001.............................................................. 79,932
2002.............................................................. 77,646
2003.............................................................. 70,678
2004.............................................................. 65,908
Thereafter........................................................ 347,924
---------
Total............................................................. $ 773,657
=========

Rental expense for the years December 31, 1999 and 1998 and period from
March 19, 1997 (Date of Inception) to December 31, 1997 is $74,249, $754 and
none, respectively (in thousands).

12. COMMITMENTS, CONTINGENCIES AND OTHER

As of December 31, 1999, ACL was committed under contracts with Tyco
Submarine Systems Ltd. ("TSSL") for AC-1 upgrades totaling approximately $59
million and is committed under the OA&M contract with TSSL to quarterly
payments, over the next eight years, totaling approximately $247 million which
will be borne by the Company's customers or by the Company to the extent there
is unsold capacity.

ACL was committed to paying TSSL commissions ranging from 3% to 7% on
revenue received until 2002, subject to certain reductions. The Company also
had a commission sharing agreement with TSSL whereby GCL had primary
responsibility for the marketing and sale of capacity of AC-1 and PC-1 and
shared a percentage of commissions payable to TSSL as consideration for
assuming primary responsibility for the sales effort and marketing of the
Company's projects. The Sales Agency Agreement with TSSL will terminate in
March 2002 with an option by the Company to extend it until March 2005. The
Company provided TSSL with a notice of termination with respect to these
agreements effective February 22, 2000.

As of December 31, 1999, the Company was committed under the contracts to
construct its Mid-Atlantic Crossing, Pan American Crossing, South American
Crossing, Pan European Crossing and East Asia Crossing systems for future
construction costs totaling approximately $2 billion.

F-22

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In addition, as of December 31, 1999, the Company was committed to make
future equity contributions to PCL in the amount of $240 million.

The Company and a number of its subsidiaries in the normal course of
business are party to a number of judicial, regulatory and administrative
proceedings. The Company's management does not believe that any material
liability will be imposed as a result of any of these matters.

13. PREFERRED STOCK

Cumulative Convertible Preferred Stock

In September 1999, GCL authorized 20,000,000 shares of preferred stock on
terms and conditions to be established from time to time at the discretion of
the Board of Directors.

In December 1999, GCL issued 2,600,000 shares of 7% cumulative convertible
preferred stock at a liquidation preference of $250.00 per share for net
proceeds of $630 million. Each share of preferred stock is convertible into
4.6948 shares of common stock based on a conversion price of $53.25. Dividends
on the preferred stock are cumulative from the date of issue and will be
payable on February 1, May 1, August 1 and November 1 of each year, beginning
on February 1, 2000, at the annual rate of 7%. Dividends accrued as of
December 31, 1999 were $1.9 million.

In November 1999, GCL issued 10,000,000 shares of 6 3/8% cumulative
convertible preferred stock at a liquidation preference of $100.00 per share
for net proceeds of approximately $969 million. Each share of preferred stock
is convertible into 2.2222 shares of common stock, based on a conversion price
of $45.00. Dividends on the preferred stock are cumulative from the date of
issue and will be payable on February 1, May 1, August 1 and November 1 of
each year, beginning on February 1, 2000, at the annual rate of 6 3/8%.
Dividends accrued as of December 31, 1999 were $9.7 million.

The convertible preferred stock ranks junior to each other class of capital
stock other than common stock of GCL with respect to dividend rights, rights
of redemption or rights on liquidation and on a parity with any future
preferred stock of GCL. The convertible preferred stock is junior in right of
payment of all indebtedness of GCL and its subsidiaries. The preferred stock
is non-voting unless the accumulation of unpaid dividends on the outstanding
preferred stock is an amount equal to six quarterly dividend payments. The
preferred stock can be redeemed, at the Company's option, starting in 2004 at
specified premiums declining to par in 2009. Holders of preferred stock have
the right to require the Company to repurchase shares of the preferred stock
at par following the occurrence of certain change of control transactions.

10 1/2% Mandatorily Redeemable Preferred Stock

In December 1998, GCH authorized the issuance of 7,500,000 shares of
preferred stock ("GCH Preferred Stock") at a liquidation preference of $100.00
per share plus accumulated and unpaid dividends. In December 1998, 5,000,000
shares of GCH Preferred Stock were issued for $500 million in cash. The
Company reserved for future issuances up to 2,500,000 shares to pay dividends.
Dividends accrued as of December 31, 1999 and 1998 were $4 million.
Unamortized issuance costs were $14.1 million and $17 million as of December
31, 1999 and 1998, respectively.

The holders of the GCH Preferred Stock are entitled to receive cumulative,
semi-annual compounding dividends at an annual rate of 10 1/2% of the $100
liquidation preference per share. At the Company's option, accrued dividends
may be paid in cash or paid by issuing additional preferred stock (i.e. pay-
in-kind) until June 1, 2002, at which time they must be paid in cash. As of
December 31, 1999, all dividends had been paid in cash.

F-23

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Dividends are payable semi-annually in arrears on each June 1 and December 1.
The preferred stock ranks senior to all common stock of GCH with respect to
dividend rights, rights of redemption or rights on liquidation and on a parity
with any future preferred stock of GCH. The preferred stock is junior in right
of payment of all indebtedness of GCH and its subsidiaries. The preferred
stock is non-voting unless the accumulation of unpaid dividends (or if,
beginning on June 1, 2002, such dividends are not paid in cash) on the
outstanding preferred stock is an amount equal to three semi-annual dividend
payments.

The preferred stock has a mandatory redemption on December 1, 2008 at a
price in cash equal to the then effective liquidation preference thereof, plus
all accumulated and unpaid dividends thereon to the date of redemption. The
preferred stock can be redeemed, in whole or in part, at the Company's option
at redemption prices starting at 105.25% of the liquidation preference in
2003, declining to 103.5% in 2004, 101.75% in 2005 and 100% thereafter.

The certificate of designation governing the preferred stock imposes certain
limitations on the ability of the Company to, among other things, (i) incur
additional indebtedness and (ii) pay certain dividends and make certain other
restricted payments and investments, which limitations are in part based upon
satisfaction of tests of "consolidated cash flow," as defined.

14% Mandatorily Redeemable Preferred Stock

In March 1997, GTH authorized and issued 500,000 shares of preferred stock
("GTH Preferred Stock") at a liquidation preference of $1,000 per share.

In June 1998, proceeds from the issuance of the 9 5/8% Senior Notes were
used to redeem this preferred stock. The redemption resulted in a $34 million
charge against additional paid-in capital comprised of a $16 million
redemption premium and $18 million of unamortized discount and issuance cost
on the preferred stock on the date of the redemption. The redemption premium
and write-off of unamortized discount and issuance costs on the preferred
stock were treated as a deduction to arrive at the net loss applicable to
common shareholders in the consolidated statement of operations.

Preferred stock dividends included the following:

December 31,
---------------
1999 1998
------- -------
(In thousands)

Preferred stock dividends................................. $63,742 $11,712
Amortization of discount on preferred stock............... -- 618
Amortization of preferred stock issuance costs............ 2,900 351
------- -------
$66,642 $12,681
======= =======

F-24

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

14. NET LOSS PER SHARE

Losses per share are calculated in accordance with SFAS No. 128, "Earnings
Per Share." Share and per share data presented reflects all stock dividends
and stock splits.

The following is a reconciliation of the numerators and the denominators of
the basic and diluted loss per share:

For the period
December 31, March 31, 1997
-------------------------------- (Date of Inception)
1999 1998 to December 31, 1997
--------------- --------------- --------------------------
(In thousands, except share and per share data)

Loss before
extraordinary item and
cumulative effect of
change in accounting
principle.............. $ (10,535) $ (68,194) $ (160)
Preferred stock
dividends.............. (66,642) (12,681) (12,690)
Redemption of preferred
stock.................. -- (34,140) --
--------------- --------------- ---------------
Loss applicable to
common shareholders
before extraordinary
item and cumulative
effect of change in
accounting principle... $ (77,177) $ (115,015) $ (12,850)
=============== =============== ===============
Weighted average share
outstanding:
Basic and diluted..... 502,400,851 358,735,340 325,773,934
=============== =============== ===============
Loss applicable to
common shareholders
before extraordinary
items and cumulative
effect of change in
accounting principle
Basic and diluted..... $ (0.15) $ (0.32) $ (0.04)
=============== =============== ===============

Dilutive options and warrants did not have an effect on the computation of
diluted loss per share in 1999 and 1998 since they were anti-dilutive. The
impact of dilutive options and warrants increases the weighted average shares
outstanding to 552,466,665 shares as of December 31, 1999.

15. FINANCIAL INSTRUMENTS

The carrying amounts for cash and cash equivalents, restricted cash and cash
equivalents, accounts receivable, accrued construction costs, accounts payable
and accrued liabilities, accrued interest, obligations under inland services
agreements and capital leases and long term debt approximate their fair value.
The fair value of the senior notes (the New Senior Notes and 9 5/8% Senior
Notes), mandatorily redeemable preferred stock, cumulative convertible
preferred stock and the interest rate swap are based on market quotes and the
fair values are as follows:

December 31, 1999 December 31, 1998
-------------------------- --------------------------
Carrying Amount Fair Value Carrying Amount Fair Value
--------------- ---------- --------------- ----------
(In thousands) (In thousands)

Senior notes............. $3,135,000 $3,090,294 $796,495 $834,000
Mandatorily redeemable
preferred stock......... 485,947 498,750 483,000 480,000
Cumulative convertible
preferred stock......... 1,598,750 1,975,300 -- --
Interest rate swap....... $ -- $ 6,602 $ -- $ 26

F-25

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16. STOCK OPTION PLAN

GCL maintains a stock option plan under which options to acquire shares may
be granted to directors, officers, employees and consultants of the Company.
The Company accounts for this plan under APB Opinion No. 25, under which
compensation cost is recognized only to the extent that the market price of
the stock exceeds the exercise price. Terms and conditions of the Company's
options, including exercise price and the period in which options are
exercisable, generally are at the discretion of the Compensation Committee of
the Board of Directors; however, no options are exercisable more than ten
years after date of grant.

Prior to its merger with the Company, Frontier maintained stock option plans
for its directors, executives and certain employees. The exercise price for
options under all Frontier plans was the fair market value of the stock on the
date of the grant. The stock options expire ten years from the date of the
grant and vest over a period from one to three years. The Frontier plans
provided for discretionary grants of stock options which were subject to the
passage of time and continued employment restrictions.

In connection with the Frontier merger, the Company exchanged all of the
outstanding Frontier stock options for 25.3 million Global Crossing stock
options which vested immediately at the date of the merger. As of December 31,
1999, 17.7 million stock options under the Frontier plans remained vested and
outstanding.

Additional information regarding options granted and outstanding for the
years ended December 31, 1998 and 1999 are summarized below:

Weighted
Options Number of Average
Available Options Exercise
For Grant Outstanding Price
----------- ----------- --------

Balance as of December 31, 1997........... -- -- --
Authorized.............................. 33,215,730
Granted................................. (30,762,466) 30,762,466 $ 2.85
Exercised............................... (656,688) 1.06
Cancelled............................... 3,253,000 (3,253,000) 1.11
----------- ----------- ------
Balance as of December 31, 1998........... 5,706,264 26,852,778 3.11
Authorized.............................. 82,010,014 -- --
Granted................................. (65,019,955) 65,019,955 24.20
Exercised............................... (10,058,073) 11.07
Cancelled............................... 3,175,154 (3,175,154) 22.17
----------- ----------- ------
Balance as of December 31, 1999........... 25,871,477 78,639,506 $18.76
=========== =========== ======

F-26

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following tables summarize information concerning outstanding and
exercisable options:

December 31, 1999
------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------------------------- ----------------------------
Weighted Average Weighted Average Weighted Average Weighted Average
Range of Number Remaining Contractual Exercise Price Number Exercise Price
Exercise Prices Outstanding Life (in years) per Share Exercisable per Share
--------------- ---------------- --------------------- ---------------- ----------- ----------------

$ 0.35 to $ 1.43 14,153,480 7.79 $ 0.83 7,871,980 $ 0.83
2.00 to 9.00 7,157,036 8.18 3.14 3,635,345 3.29
9.30 to 13.80 12,539,297 7.71 11.61 10,207,026 11.60
13.96 to 19.82 11,961,988 8.54 17.15 8,961,988 16.26
20.60 to 23.44 19,975,778 9.65 25.82 1,175,228 24.48
$33.00 to $61.38 12,851,927 9.73 44.68 1,741,334 46.15
---------------- ---------------- --------------------- ---------------- ----------- ----------------
Total 78,639,506 8.73 $18.76 33,592,901 $11.66
================ ===================== ================ =========== ================

December 31, 1998
------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------------------------- ----------------------------
Weighted Average Weighted Average Weighted Average Weighted Average
Range of Number Remaining Contractual Exercise Price Number Exercise Price
Exercise Prices Outstanding Life (in years) per Share Exercisable per Share
--------------- ---------------- --------------------- ---------------- ----------- ----------------

$0.35 to $0.83 15,717,280 9.2 $ 0.83 4,803,833 $ 0.83
2.00 to 3.33 6,844,598 9.5 3.13 1,625,000 3.33
9.50 to 13.26 4,290,900 9.7 11.44 302,834 11.34
--------------- ---------------- --------------------- ---------------- ----------- ----------------
Total 26,852,778 9.3 $ 3.11 6,731,667 $ 1.91
================ ===================== ================ =========== ================

During the years ended December 31, 1999 and 1998, the Company recorded in
additional paid-in capital $55 million and $94 million, respectively, of
unearned compensation, relating to awards under the stock incentive plan plus
the grant of certain economic rights and options to purchase common stock.
During 1999 and 1998 the Company recognized expense of $51 million and $39
million, respectively, of stock related compensation relating to the stock
incentive plan and the vested economic rights to purchase common stock. The
remaining $60 million of unearned compensation will be recognized as follows:
$36 million in 2000, $20 million in 2001 and $4 million in 2002.

The Company entered into an employment arrangement with a key executive, and
granted him economic rights to purchase two million shares of common stock at
$2.00 per share. One-third of these economic rights vested immediately and the
balance vests over two years. The Company recorded the excess of the fair
market value of these options and rights over the purchase price as unearned
stock compensation in the amount of $15 million during the year ended December
31, 1998. The unearned compensation is being recognized as expense over the
vesting period of the economic right.

F-27

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"), the Company accounted for employee stock options under APB 25
and is recognizing compensation expense over the vesting period to the extent
that the fair value of the stock on the date the options were granted exceeded
the exercise price. Had compensation cost for the Company's stock-based
compensation plans been determined consistent with the SFAS 123 fair value
approach, the impact on the Company's loss applicable to common shareholders
and loss per share would be as follows:

Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------
(In thousands, except per share information)

Net loss applicable to
common shareholders:
As reported........... $(137,568) $(134,724) $(12,850)
Pro forma............. $(236,184) $(141,585) $(12,850)
Basic and diluted net
loss per share:
As reported........... $ (0.27) $ (0.38) $ (0.04)
Pro forma............. $ (0.47) $ (0.39) $ (0.04)

Under SFAS 123, the fair value of each option is estimated on the date of
grant using the Black-Scholes option-pricing model assuming the following
weighted average assumptions used for the year ended December 31, 1999; zero
dividend yield, expected volatility of 40.00, weighted average risk free rate
of return of 6.56% and expected life of 4 years. For the year ended December
31, 1998; zero dividend yield, expected volatility of 0% to 42%, weighted
average risk free rate of return of 5.45% and expected life of 4 years.

17. EMPLOYEE BENEFIT PLANS

401(k) Plan

Beginning in 1998, the Company offered its qualified employees the
opportunity to participate in a defined contribution retirement plan
qualifying under the provisions of Section 401(k) of the Internal Revenue
Code. Each eligible employee may contribute on a tax-deferred basis a portion
of their annual earnings not to exceed certain limits. The Company matches
one-half of individual employee contributions up to a maximum level not to
exceed 7.5% of the employee's compensation. The Company's contributions to the
plan vest immediately. Expenses recorded by the Company relating to its 401(k)
plan were approximately $0.6 million and $0.2 million for the years ended
December 31, 1999 and 1998, respectively.

The Company also sponsors a number of defined contribution plans for
Frontier employees. The most significant plan covers non-bargaining employees,
who can elect to make contributions through payroll deduction. The Company
provides a contribution of .5 percent of gross compensation in common stock
for every employee eligible to participate in the plan. The common stock used
for matching contributions is purchased on the open market by the plan's
trustee. The Company also provides one hundred percent matching contributions
in its common stock up to three percent of gross compensation, and may, at the
discretion of the Management Benefit Committee, provide additional matching
contributions based upon Frontier's financial results. The total cost
recognized for all defined contribution plans was $2.6 million from the date
of the merger through December 31, 1999.

Pension Plan

As a result of the merger with Frontier, the Company has noncontributory
plans which have been frozen, providing for service pensions and certain death
benefits for substantially all Frontier employees. The assets and

F-28

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
liabilities related to these plans were recorded at fair market value at the
date of the merger. In 1995 and 1996, these defined benefit plans were frozen.
On an annual basis, contributions are remitted to the trustees to ensure
proper funding of the plans.

The majority of the Company's pension plans have plan assets that exceed
accumulated benefit obligations. There are certain plans, however, with
accumulated benefit obligations which exceed plan assets. The following table
summarizes the funded status of the Company's pension plans and the related
amounts that are included in "Other assets" in the Consolidated Balance Sheet
of the Company as of December 31, 1999 (in thousands):

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at September 30, 1999........................ $451,600
Service cost.................................................... 14
Interest cost................................................... 8,397
Actuarial gain.................................................. (11,025)
Benefits paid................................................... (9,151)
--------
Benefit obligation at December 31, 1999......................... $439,835
========
CHANGE IN PLAN ASSETS
Fair value of plan assets at September 30, 1999................. $621,100
Actual return on plan assets.................................... 86,516
Employer contribution........................................... 550
Benefits paid................................................... (9,151)
--------
Fair value of plan assets at December 31, 1999.................. $699,015
========
Funded status................................................... $259,180
Unrecognized net gain........................................... (83,192)
--------
Prepaid benefit cost, net....................................... $175,988
========

The net periodic pension cost consists of the following for the three month
period ended December 31, 1999 (in thousands):

Service cost...................................................... $ 14
Interest cost on projected benefit obligation..................... 8,397
Return on plan assets............................................. (14,349)
--------
Net periodic pension benefit...................................... $ (5,938)
========

The following rates and assumptions were used to calculate the projected
benefit obligation as of December 31, 1999:

Weighted average discount rate.................................... 8.00%
Rate of salary increase........................................... 5.00%
Expected return on plan assets.................................... 9.50%

The Company's policy is to make contributions for pension benefits based on
actuarial computations which reflect the long-term nature of the pension plan.
However, under SFAS No. 87, "Employers' Accounting for Pensions," the
development of the projected benefit obligation essentially is computed for
financial reporting purposes and may differ from the actuarial determination
for funding due to varying assumptions and methods of computation.

F-29

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Postretirement Benefit Other Than Pensions

The Company provides postretirement health care and life insurance benefits,
which have been frozen, to most of its employees. Plan assets consist
principally of life insurance policies and money market instruments. In 1996,
Frontier amended its healthcare benefits plan to cap the cost absorbed by the
Company for healthcare and life insurance for its bargaining employees who
retire after December 31, 1996. The assets and liabilities related to these
plans were recorded at fair market value at the date of the merger.

The following table summarizes the funded status of the plan (in thousands)
and the related amounts included in "Deferred credits and other" in the
Consolidated Balance Sheet of the Company as of December 31, 1999 (in
thousands):

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at September 30, 1999....................... $ 114,305
Service cost................................................... 135
Interest cost.................................................. 2,134
Actuarial gain................................................. (2,970)
Benefits paid.................................................. (2,016)
---------
Benefit obligation at December 31, 1999........................ $ 111,588
=========
CHANGE IN PLAN ASSETS
Fair value of plan assets at September 30, 1999................ $ 2,989
Actual return on plan assets................................... 180
Employer contribution.......................................... 1,902
Benefits paid.................................................. (2,016)
---------
Fair value of plan assets at December 31, 1999................. $ 3,055
=========
Funded status.................................................. $(108,533)
Unrecognized net loss.......................................... (2,133)
---------
Accrued benefit cost, net...................................... $(110,666)
=========

The components of the estimated postretirement benefit cost are as follows
for the three month period ended December 31, 1999 (in thousands):

Service cost..................................................... $ 135
Interest cost on projected benefit obligation.................... 2,134
Expected return on plan assets................................... (67)
---------
Net periodic pension cost (benefit).............................. $ 2,202
=========

The following rates and assumptions were used to calculate the projected
benefit obligation as of December 31, 1999:

Weighted average discount rate................................... 8.00%
Rate of salary increase.......................................... 5.00%
Expected return on plan assets................................... 9.50%
Assumed rate of increase in cost of covered health care benefits. 6.17%

Increases in health care costs were assumed to decline consistently to a
rate of 5.0% by 2006 and remain at that level thereafter. If the health care
cost trend rates were increased by one percentage point, the accumulated

F-30

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
postretirement benefit health care obligation as of December 31, 1999 would
increase by $8.2 million while the sum of the service and interest cost
components of the net postretirement benefit health care costs for 1999 would
increase by $191,000. If the health care cost trend rates were decreased by
one percentage point, the accumulated postretirement benefit health care
obligations as of December 31, 1999 would decrease by $7.3 million while the
sum of the service interest cost components of the net postretirement benefit
health care cost for 1999 would decrease by $168,000.

18. RELATED PARTY TRANSACTIONS

Transactions with Global Access Ltd. and Pacific Crossing Ltd.

During 1999, Global Crossing entered into certain transactions with GAL and
PCL to purchase $101.4 million of terrestrial and subsea capacity.

Transactions with Pacific Capital Group and its Affiliates

Prior to 1999, Global Crossing entered into certain transactions with
affiliates of Pacific Capital Group ("PCG"), including the acquisition of
development rights to certain of the Company's fiber optic cable systems. PCG
is controlled by certain officers and directors of Global Crossing who either
currently are or at one time were affiliated with PCG. During 1999, Global
Crossing subleased from PCG two suites of offices in Beverly Hills for
payments aggregating approximately $287,000 over the year. In October 1999,
Global Crossing entered into a lease with North Crescent Realty V, LLC, which
is managed by and affiliated with PCG, for an aggregate monthly cost of
approximately $400,000. North Cresent Realty, LLC paid approximately $7.5
million to improve the property to meet Global Crossing's specifications and
was reimbursed approximately $3.2 million of this amount by Global Crossing.
Global Crossing engaged an independent real estate consultant to review the
terms of Global Crossing's occupancy of the building, which terms were found
by the consultant to be consistent with market terms and conditions and the
product of an arm's length negotiation. Global Crossing subleases
approximately 12,000 square feet of the building to PCG for an aggregate
monthly cost of approximately $53,000.

PCG has fractional ownership interests in aircrafts used by Global Crossing
during 1999. Global Crossing reimburses PCG for PCG's cost of maintaining
these ownership interests such that PCG realizes no profit from the
relationship. During 1999, PCG billed Global Crossing approximately $2 million
in aggregate under this arrangement.

In 1997, the Company paid $7 million in fees to PCG and certain of its key
executives, who are shareholders of GCL, and another shareholder for services
provided in respect of obtaining the AC-1 Credit Facility, Old Senior Notes
and the GTH Preferred Stock financing. Of the fees paid, $5 million was
allocated to the AC-1 Credit Facility and Old Senior Notes and recorded as
deferred finance costs, $1 million was allocated to the GCH Preferred Stock
and recorded as a reduction in the carrying value of the preferred stock and
$1 million was recorded as common stock issuance costs.

Transactions with Canadian Imperial Bank of Commerce and its affiliates

During 1999, Canadian Imperial Bank of Commerce and its affiliates ("CIBC")
entered into certain financing transactions with Global Crossing. In
particular, CIBC: (1) acted as an arranger for the $600 million ten-day demand
note issued by Global Marine Systems in July, (2) acted as an arranger for the
$3 billion senior secured credit facility entered into by GCH in July, (3) was
an initial purchaser of the $2 billion aggregate principal amount of unsecured
senior notes issued by GCH in November, and (4) was an initial purchaser of
GCL's $650 million aggregate liquidation preference 7% cumulative convertible
preferred stock issued in December. During 1999, Global Crossing paid CIBC
approximately $5.6 million in fees in connection with these transactions. CIBC
has a substantial beneficial ownership interest in Global Crossing, and
certain directors of Global Crossing are employees of an affiliate of CIBC.

F-31

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In 1998, CIBC was one of the initial purchasers of the New Senior Notes and
GCH Preferred Stock, a member of the PC-1 and MAC credit facility syndicates,
and was also one of the underwriters of the Company's initial public offering
("IPO"). CIBC was paid $19 million in fees and credit facility interest during
the year ended December 31, 1998. In 1997, GCL paid CIBC approximately $25
million in fees related to the financing obtained under the Old Senior Notes,
the AC-1 Credit Facility, and the issuance of the GTH Preferred Stock. Of the
fees incurred, approximately $6 million related to underwriting and commitment
fees pertaining to the issuance of the GTH Preferred Stock and was recorded as
a reduction in the carrying value of the GTH Preferred Stock, approximately $9
million related to underwriting, commitment and advisory fees in connection
with the issuance of the Old Senior Notes and approximately $10 million
related to fees associated with obtaining the AC-1 Credit Facility which was
recorded as deferred finance costs.

Relationship to Ziff-Davis Inc. and Affiliates

A director of Global Crossing is the chairman and chief executive officer of
Ziff-Davis Inc., a majority of the common stock of which is beneficially owned
by Softbank Corp. Softbank is a party to the Asia Global Crossing joint
venture established to provide advanced network-based telecommunications
services to businesses and consumers throughout Asia. Global Crossing, which
is responsible for the management and operation of the network, contributed to
the venture its 57.75% share of the Pacific Crossing system and its
development rights in East Asia Crossing. Softbank and Microsoft each
contributed $175 million in cash to Asia Global Crossing and also committed to
make a total of at least $200 million in Global Crossing Network capacity
purchases over a three-year period, expected to be utilized primarily on the
Pacific Crossing system and East Asia Crossing. Softbank and Microsoft also
agreed to use Asia Global Crossing's network in the region. Global Crossing
currently owns 93% of Asia Global Crossing, with Softbank and Microsoft each
owning 3.5%. When the fair market value of Asia Global Crossing is determined
to exceed $5 billion, the ownership interest of Softbank and Microsoft will
increase to a maximum of 19% each at a valuation of $7.5 billion and above.
The Global Crossing director is Softbank's representative on the Asia Global
Crossing board of directors. In addition, Ziff-Davis is one of the largest
web-hosting customers of our GlobalCenter subsidiary.

Relationship to Hutchison Whampoa Limited

The managing director of Hutchison was recently appointed a director of
Global Crossing. In November 1999, Hutchison and Global Crossing entered into
an agreement to form a 50/50 joint venture to pursue fixed-line
telecommunications and Internet opportunities in the Hong Kong Special
Administrative Region, China. The joint venture, the formation of which was
completed in January 2000, combines Hutchison's existing territory-wide,
building-to-building fixed-line fiber optic telecommunications network and
certain Internet-related assets in Hong Kong with Global Crossing's
international fiber optic broadband cable capacity and web hosting, Internet
applications and data services. For its 50% share, Global Crossing provided to
Hutchison $400 million in Global Crossing 6 3/8% cumulative convertible
preferred stock. Additionally, Global Crossing committed to contribute to the
joint venture international telecommunications capacity rights on its global
fiber optic network and data center related capabilities which together are
valued at $350 million, as well as $50 million in cash.

Agreements with Global Crossing Stockholders

In August 1998, PCG, GKW Unified Holdings (an affiliate of PCG), affiliates
of CIBC, Global Crossing and some other Global Crossing shareholders,
including some officers and directors and their affiliates, entered into a
Stockholders Agreement and a Registration Rights Agreement. Under the
Stockholders Agreement, Global Crossing has been granted a right of first
refusal on specified private transfers by these shareholders during the first
two years after the consummation of the IPO on August 14, 1998. In addition,
subject to the exceptions in the Stockholders Agreement, some of these
shareholders have rights, which are referred to as tag-along rights,
permitting these shareholders to participate, on the same terms and
conditions, in some transfers of shares by

F-32

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
any other of these shareholders as follows: (1) PCG, GKW Unified Holdings and
CIBC and their affiliates and permitted transferees have the right to
participate in any transaction initiated by any of them to transfer 5% or more
of our outstanding securities; and (2) PCG, GKW Unified Holdings, CIBC and
their affiliates and permitted transferees have the right to participate in
any transaction initiated by any of them to transfer any Global Crossing
securities if that transaction would result in a change of control of Global
Crossing. Under the Registration Rights Agreement, Global Crossing
shareholders who are parties to that agreement and a number of their
transferees have demand and piggyback registration rights and will receive
indemnification and, in some circumstances, reimbursement for expenses from
the Company in connection with an applicable registration.

Principal shareholders of Global Crossing, representing at that time over a
majority of the voting power of the Company's common stock, entered into a
Voting Agreement with Frontier Corporation in March 1999 in connection with
the Frontier merger. These Global Crossing shareholders reaffirmed their
voting obligations under the Voting Agreement in connection with subsequent
amendments made to the merger agreement during 1999. Pursuant to the Second
Reaffirmation of Voting Agreement and Share Transfer Restriction Agreement
dated September 2, 1999, the Global Crossing shareholders that are parties to
the Voting Agreement also agreed, from September 2, 1999 until March 28, 2000,
not to transfer record or beneficial ownership of any shares of Global
Crossing common stock held by such shareholders, other than transfers to
charities, transfers made with the consent of the Company and other limited
exceptions, and to work in good faith toward implementing a program with the
purpose that, if the Global Crossing shareholders that are parties to the
Voting Agreement wish to sell or transfer their shares after March 28, 2000,
these sales or transfers would be completed in a manner that would provide for
an orderly trading market for the shares of Global Crossing common stock.

Also on September 2, 1999, fourteen of the Company's executive officers and
three executive officers of Frontier entered into a Share Transfer Restriction
Agreement with Global Crossing. Under this agreement, the Global Crossing
executive officers agreed not to sell or transfer shares of the Company's
common stock, and the Frontier executive officers agreed not to sell or
transfer shares of Frontier common stock and the shares of Global Crossing
common stock they would receive in exchange for their Frontier common stock in
the merger, until March 28, 2000, subject in each case to substantially the
same exceptions as are applicable to the Second Reaffirmation of Voting
Agreement and Share Transfer Restriction Agreement described in the
immediately preceding paragraph.

Advisory Services Agreement ("ASA")

ACL entered into the ASA with PCG Telecom, an affiliate of PCG which is a
shareholder of GCL. Under the ASA, PCG Telecom provided ACL with advice in
respect of the development and maintenance of AC-1, development and
implementation of marketing and pricing strategies and the preparation of
business plans and budgets. As compensation for its advisory services, PCG
Telecom received a 2% fee on the gross revenue of the Company over a 25 year
term, subject to certain restrictions, with the first such payment to occur at
the AC-1 RFS date. Advances on fees payable under the ASA were being paid to
PCG Telecom at a rate of 1% on signed CPAs until the ASA was terminated, as
described below. Fees paid under the ASA to PCG Telecom were shared amongst
Union Labor Life Insurance Company ("ULLICO"), PCG, CIBC, and certain
directors and officers of the Company, all of whom are shareholders of GCL.
Effective June 1998, GCL acquired the rights under the ASA on behalf of the
Company for common stock and contributed such rights to the Company as the ASA
was terminated. This transaction was recorded in the consolidated financial
statements as an increase in additional paid-in capital of $135 million and a
charge against operations in the amount of $138 million. The $138 million is
comprised of a $135 million settlement of the fees that would have been
payable and the cancellation of $3 million owed to the Company under a related
advance agreement. The $135 million amount was calculated by applying the 2%
advisory services fee to projected future revenue and discounting the amount
relating to AC-1 revenue by 12% and the amount relating to all other system's
revenue by 15%. The result of this calculation was $156 million, which amount
was subsequently reduced to $135 million. Both the discount rates and the
ultimate

F-33

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
valuation were determined as a result of a negotiation process including a non
management director of the Company and the various persons entitled to fees
under the ASA. The Company obtained a fairness opinion from an independent
financial advisor in connection with this transaction. In addition, the
Company incurred approximately $2 million of advisory fees prior to
termination of the contract, for a total expense of $140 million for the year
ended December 31, 1998.

PCG Warrants

PCG Warrants, issued in 1998 by the Company's predecessor, Global Crossing
Ltd., LDL ("Old GCL") became exercisable upon the completion of the IPO. The
PCG Warrants gave each holder the option to convert each share under warrant
into a fraction of a Class B of Old GCL share based upon the ratio of the
current per share valuation at the time of conversion less the per share
exercise price of the warrant divided by the current per share valuation at
the time of conversion multiplied by the 36,906,372 shares available under the
PCG Warrants, together with a new warrant ("New PCG Warrants") to purchase the
remaining fraction of such Class B share at an exercise price equal to the
then current per share valuation. Prior to the IPO, the holders of the PCG
Warrants exercised their warrants to acquire Class B of Old GCL shares by way
of the cashless conversion and the New PCG Warrants were issued with an
exercise price based on the per share valuation at the conversion date, the
obligation on which were assumed by GCL.

The Company accounted for the cashless conversion of the PCG Warrants, which
occurred as of June 1998, using the current estimated per share valuation at
the expected conversion date, multiplied by the number of Class B shares of
Old GCL estimated to be converted in exchange for the PCG Warrants. The
resulting value under this calculation is approximately $213 million, which
was allocated to the new systems in exchange for the PCG Warrants. In
connection with the formation of PCL, the Company agreed to make available to
PCL the consideration received by the Company in connection with the grant of
the PCG Warrants, in addition to the $231 million cash investment made by the
Company. Therefore, the Company recorded an increase in its investment in PCL
in the amount of approximately $127 million and an increase in construction in
progress for PAC and MAC in the amounts of approximately $50 million and $36
million, respectively, with a corresponding increase of $213 million in
additional paid-in capital. The $213 million was allocated on a pro rata basis
to the three projects according to the estimated cost of each system. The
Company's accounting for the PCG Warrants is pursuant to Emerging Issues Task
Force 96-18, "Accounting for Equity Instruments with Variable Terms that are
Issued for Consideration other than Employee Services under FASB Statement No.
123" ("EITF 96-18"). Under EITF 96-18, the fair value of equity instruments
issued for consideration other than employee services should be measured using
the stock price or other measurement assumptions as of the date at which a
firm commitment for performance level has been reached. The Company has
recorded the estimated value of the PCG Warrants as of June 1998, since the
IPO was probable at that date. The $213 million value attributed to the PCG
Warrants as of June 1998 was adjusted to the actual value of $275 million on
the date of the IPO based upon the $9.50 price per share of the IPO.

The Company gave accounting recognition for the New PCG Warrants on the date
these warrants were issued, which was the date of the IPO. The Company valued
each of the New PCG Warrants at $3.48 based on an independent valuation based
on the IPO price of $9.50 per share. The New PCG Warrants had a total value of
approximately $43 million. The Company recorded the actual value of the New
PCG Warrants in a manner similar to that described above whereby the total
value was allocated to the investment in PC-1, MAC and PAC based on their
relative total contract costs.

Other transactions

In 1998, GCL purchased all common shares owned by Telecommunications
Development Corporation ("TDC") in the Company in exchange for 300,000 fewer
newly issued shares of common stock based upon the

F-34

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
per share value at the repurchase date. The transaction benefited GCL since
300,000 fewer shares were outstanding after the repurchase without any cost to
GCL. This transaction was accounted for as the acquisition of treasury stock
and was recorded as $209 million, the fair value of the consideration given.
Certain officers and directors of the Company held direct or indirect equity
ownership positions in TDC, resulting in these officers and directors having a
majority of the outstanding common stock of TDC. Following this transaction,
TDC distributed all of its shares of common stock and GCL warrants to the
holders of its common stock and was then liquidated.

19. SEGMENT REPORTING

The Company is a worldwide provider of Internet and long distance
telecommunications facilities and related services supplying its customers
with global "point to point" connectivity and, through its Global Marine
Systems subsidiary, providing cable installation and maintenance services. The
Company's reportable segments include telecommunications services,
installation and maintenance services, and incumbent local exchange carrier
services. There are other corporate related charges not attributable to a
specific segment. While the Company's chief decision maker monitors the
revenue streams of the various products and geographic locations, operations
are managed and financial performance evaluated based on the delivery of
multiple, integrated services to customers over a single network. As a result,
there are many shared expenses generated by the various revenue streams and
management believes that any allocation of the expenses incurred to multiple
revenue streams would be impractical and arbitrary.

F-35

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The information below summarizes certain financial data of the Company by
segment (in thousands):

Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------

Telecommunication
Services
Revenue................ 1,318,248 419,866 --
Operating expenses..... 1,370,534 299,922 3,101
----------- ---------- --------
Operating income
(loss)................ $ (52,286) $ 119,944 $ (3,101)
=========== ========== ========
Cash paid for capital
expenditures.......... $ 1,552,019 $ 413,996 $428,743
=========== ========== ========
Total assets........... $16,813,242 $2,639,177 $572,197
=========== ========== ========
Installation and
Maintenance Services
Revenue:
Maintenance........... 67,981 -- --
Installation.......... 92,674 -- --
----------- ---------- --------
Total revenue.......... 160,655
Operating expenses..... 162,209 -- --
----------- ---------- --------
Operating loss......... $ (1,554) $ -- $ --
=========== ========== ========
Cash paid for capital
expenditures.......... $ 170,585 $ -- $ --
=========== ========== ========
Total assets........... $ 1,519,166 $ -- $ --
=========== ========== ========
Incumbent Local Exchange
Carrier Services
Revenue................ $ 185,921 $ -- $ --
Operating expenses..... 131,942 -- --
----------- ---------- --------
Operating income....... $ 53,979 $ -- --
=========== ========== ========
Cash paid for capital
expenditures.......... $ 48,311 $ -- $ --
=========== ========== ========
Total assets........... $ 1,373,172 $ -- --
=========== ========== ========
Corporate and Other
Revenue................ $ -- $ -- $ --
Operating expenses..... 7,600 139,669 --
----------- ---------- --------
Operating loss......... $ (7,600) $ (139,669) $ --
=========== ========== ========
Cash paid for capital
expenditures.......... $ -- $ -- $ --
=========== ========== ========
Total assets........... $ -- $ -- $ --
=========== ========== ========
Consolidated
Consolidated revenue... $ 1,664,824 $ 419,866 $ --
Consolidated operating
expense............... 1,672,285 439,591 3,101
----------- ---------- --------
Consolidated operating
(loss)................ $ (7,461) $ (19,725) $ (3,101)
=========== ========== ========
Consolidated cash paid
for capital
expenditures.......... $ 1,770,915 $ 413,996 $428,743
=========== ========== ========
Consolidated total
assets................ $19,705,580 $2,639,177 $572,197
=========== ========== ========

F-36

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1999 1998
--------------------- ---------------------
Long-Lived Long-Lived
Revenue Assets Revenue(1) Assets(2)
---------- ---------- ---------- ----------
(In thousands)

North America
United States.................. $ 997,025 $3,029,828 $193,142 $ 76,055
Other.......................... 64,040 26,515 64,558 --
---------- ---------- -------- ----------
1,061,065 3,056,343 257,700 76,055
Europe
The Netherlands................ 89,600 92,251 46,770 82,433
Germany........................ 145,289 204,564 36,047 30,021
England........................ 106,815 722,462 34,777 49,081
Other.......................... 244,351 302,645 44,572 --
---------- ---------- -------- ----------
586,055 1,321,922 162,166 161,535
International waters............. -- 1,339,614 -- 770,966
Other............................ 17,704 308,174 -- --
---------- ---------- -------- ----------
Consolidated..................... $1,664,824 $6,026,053 $419,866 $1,008,556
========== ========== ======== ==========

- --------
(1) During 1998, there was one customer located in the United States that
accounted for 16% of consolidated revenue, another customer located in
Canada that accounted for 16% of consolidated revenue, and one customer
located in the Netherlands that accounted for 11% of consolidated revenue.
There were no individual customers in 1999 that accounted for more than
10% of consolidated revenue.
(2) Long-lived assets include capacity available for sale and construction in
progress as of December 31, 1999 and 1998.

20. QUARTERLY FINANCIAL DATA (UNAUDITED)

The Company's unaudited quarterly results are as follows:

1999 Quarter Ended
--------------------------------------------
March 31 June 30 September 30 December 31
-------- -------- ------------ -----------
(In thousands, except per share data)

Revenue.......................... $176,319 $188,459 $234,582 $1,065,464
Operating income (loss).......... 41,067 39,764 13,226 (101,518)
Income (loss) before
extraordinary item and
cumulative effect of change in
accounting principle............ 12,802 9,978 135,854 (169,169)
Net income (loss)................ (1,908) 9,978 120,989 (199,985)
Net income (loss) applicable to
common shareholders............. (14,952) (4,219) 106,918 (225,315)
Income (loss) per common share
before extraordinary item and
cumulative effect of change in
accounting principle, basic..... (0.00) (0.01) 0.30 (.25)
Net income (loss) per common
share, basic.................... (0.04) (0.01) 0.26 (.29)
Income (loss) per common share
before extraordinary item and
cumulative effect of change in
accounting principle, diluted... (0.00) (0.01) 0.27 (.25)
Net income (loss) per common
share, diluted.................. $ (0.04) $ (0.01) $ 0.24 $ (.29)

F-37

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Significant 1999 interim events:

On December 15, 1999, the Company issued 2,600,000 shares of 7% cumulative
convertible preferred stock at a liquidation preference of $250.00 for net
proceeds of $630 million.

On November 24, 1999, the Company acquired Racal Telecom, a group of wholly
owned subsidiaries of Racal Electronics plc, for approximately $1.6 billion in
cash.

On November 12, 1999, GCH issued two series of senior unsecured notes. The 9
1/8% senior notes are due November 15, 2006 with a face value of $900 million,
for net proceeds of $887 million and the 9 1/2% senior notes are due
November 15, 2009 with a face value of $1,100 million, for net proceeds of
$1,084 million.

On November 5, 1999, the Company issued 10,000,000 shares of 6 3/8%
cumulative convertible preferred stock at a liquidation preference of $100.00
for net proceeds of approximately $969 million.

On September 28, 1999, the Company consummated its merger with Frontier
Corporation in a transaction valued at $10.3 billion.

On July 2, 1999, the Company completed its acquisition of the Global Marine
Systems division of Cable & Wireless Plc for approximately $908 million in
cash and assumed liabilities.

During the third quarter, the Company recognized $210 million, net of merger
related expenses, of other income in connection with the termination of the US
WEST merger agreement.

1998 Quarter Ended
---------------------------------------------
March 31 June 30 September 30 December 31
-------- --------- ------------ -----------
(In thousands, except per share data)

Revenue........................... $ -- $ 100,244 $116,494 $203,128
Operating income (loss)........... (3,794) (123,649) 31,994 75,724
Income (loss) before extraordinary
loss............................. (3,722) (135,725) 15,229 56,024
Net income (loss)................. (3,722) (155,434) 15,229 56,024
Net income (loss) applicable to
common shareholders.............. (8,129) (193,473) 15,229 51,649
Income (loss) per common share
before extraordinary item, basic. (0.02) (0.52) 0.04 0.13
Net income (loss) per common
share, basic..................... (0.02) (0.58) 0.04 0.13
Income (loss) per common share
before extraordinary item,
diluted.......................... (0.02) (0.52) 0.04 0.12
Net income (loss) per common
share, diluted................... $ (0.02) $ (0.58) $ 0.04 $ 0.12

Significant 1998 interim events:

In December 1998, 5,000,000 shares of GCH 10 1/2% Preferred Stock were
issued for proceeds of $483 million.

During August 1998, the Company completed an IPO for which the Company
received net proceeds of approximately $391 million.

In May 1998, the first segment of AC-1, the United States to United Kingdom
route, was completed and commenced operations.

During the second quarter, the Company acquired the rights from those
entitled to fees payable under the advisory services agreement in
consideration for the issuance of common stock having an aggregate value of
$135 million and the cancellation of approximately $3 million owed to the
Company under a related advance

F-38

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
agreement. As a result of this transaction, the Company recorded a non-
recurring charge in the approximate amount of $138 million during the second
quarter. In addition, the Company recognized as an expense approximately $2
million of advisory fees incurred prior to termination of the contract.

On May 18, 1998, the Company issued 9 5/8% senior notes due May 15, 2008,
with a face value of $800 million.

21. SHAREHOLDERS' EQUITY

Share Cancellation

As part of the Company's break-up fee received from US West, Inc. ("US
West"), the Company received 2,231,076 shares of its common stock from US West
which were cancelled by the Company. For the year ended December 31, 1999,
other income, net was composed primarily of a $210 million termination fee
paid by US West in connection with the termination of its merger agreement
with the Company, net of related expenses.

Old GCL Common Stock and Additional Paid-in Capital

During March 1997, Old GCL, formerly GT Parent Holdings LDC, was
incorporated as an exempted limited duration company in the Cayman Islands. In
March 1998, GCL, a Bermuda company, was formed as a wholly-owned subsidiary of
Old GCL. At that time, Old GCL contributed its investment in Global
Telesystems Holdings Ltd. ("GTH") to GCL. During April 1998, GCL formed a
wholly-owned subsidiary, Global Crossing Holdings Ltd. ("GCH"), a Bermuda
company, and contributed its investment in GTH to GCH upon its formation.

In January 1998, Old GCL effected a 100-for-1 stock split of each of its
Class A, B, C and D common stock and undesignated stock and amended the par
value of each share of common stock from $.0001 per share to $.000001 per
share. Prior to GCL's IPO in August 1998, GCL declared a stock dividend to Old
GCL resulting in Old GCL holding 1.5 shares of common stock of GCL for each
share of common stock of Old GCL outstanding. Pursuant to the terms of the
Articles of Association of Old GCL and prior to the Company's IPO, each holder
of Class D shares of Old GCL converted such shares into a fraction of a Class
E share of Old GCL based upon a valuation at the time of such conversion,
together with a warrant to purchase the remaining fraction of such Class E
share at an exercise price based upon such market valuation. In addition, each
holder of Class E shares of Old GCL had such Class E shares converted into
Class B shares of Old GCL. Accordingly, each holder of Class D and Class E
shares ultimately received Class B shares, with the warrants to purchase Class
E shares received by former Class D shareholders then cancelled in exchange
for warrants ("New GCL Warrants") to purchase shares of Common Stock of GCL at
an exercise price equal to the IPO price of $9.50 per share.

Subsequent to the above transaction and prior to the Company's IPO, each
shareholder of Old GCL (other than CIBC) exchanged their interests in Old GCL
for shares of common stock of GCL held by Old GCL at a rate of 1.5 shares of
common stock of GCL for each share of common stock of Old GCL ("Old GCL
Exchange"). CIBC did not participate in the above mentioned transaction and
continued to maintain its ownership of GCL through Old GCL, which became a
wholly owned subsidiary of CIBC.

Because Old GCL, GCL and GCH were entities under common control, the
transfers by Old GCL to GCL and GCL to GCH and the Old GCL Exchange were
accounted for similar to a pooling of interests. The consolidated financial
statements presented have been retroactively restated to reflect these
transactions as if they had occurred as of March 19, 1997 (Date of Inception).

F-39

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Information with respect to Old GCL common stock and additional paid-in
capital prior to the Old GCL Exchange is as follows:

Common Stock:

Authorized:

1,000,000,000 Class A common stock of $.00000067 par value

1,000,000,000 Class B common stock of $.00000067 par value

1,000,000,000 Class C common stock of $.00000067 par value

3,000,000,000 Class D common stock of $.00000067 par value

1,000,000,000 Class E common stock of $.00000067 par value

43,000,000,000 undesignated common stock of $.00000067 par value

Class A shares, Class B shares and Class C shares all had voting rights. On
March 25, 1997, Old GCL issued 22,500,000 Class A shares, 101,250,000 Class B
shares, 101,250,000 Class C shares for $.33 per share, resulting in aggregate
proceeds of $75 million. In addition to the 22,500,000 Class A shares issued
to the preference shareholders for cash in connection with the issuance of the
preference shares, a total of 39,705,900 Class A shares were distributed to
the initial preference shareholder representing 15% of the aggregate number of
Class A, B and C shares outstanding. In addition, warrants to acquire a
maximum of 92,880 shares of common stock of Old GCL were issued into escrow
for the benefit of the holders of preferred stock. Effective January 21, 1998,
Old GCL authorized 1,000,000,000 new Class E non-voting shares.

Certain of the Class B shareholders were issued a total of 66,176,400 Class
D shares on March 25, 1997. Of the $34 million of proceeds received from the
issuance of Class B shares, $3 million was allocated to the Class D shares
representing the estimated fair value of the Class D shares based on an
independent valuation. Class D shares were non-voting shares which carried
special preference rights on the cash distributions made by Old GCL. Class D
shareholders were to receive 10% of cash distributions to common shareholders
once the internal rate of return to Class C shareholders exceeded 10%, and
then increasing to 20% of cash distributions to common shareholders once the
internal rate of return to Class C shareholders exceeded 30%. Effective
January 1998, Class D share rights were amended such that Class D shareholders
received the option to convert each Class D share into one Class E share upon
payment to Old GCL of $.74 per share or to a fraction of a Class E share based
upon a valuation at the time of such conversion, together with a warrant to
purchase the remaining fraction of such Class E share at an exercise price
based upon such market valuation. By granting to holders of the Class D shares
an option to convert such shares into Class E shares, the Company obtained
effective assurance that it could effect a change to a corporate structure in
the event of a major equity event, such as a merger or other business
combination or in the event of an IPO by GCL, of its common stock, since the
holders of the Class D shares would need to exercise their options in order to
participate directly in benefits of a merger or acquisition of the Company or
in order to obtain the benefits of any trading market for the common stock of
the Company; no trading market was expected to develop for the Class D shares.
The grant of the options to Class D shareholders represents an equity
transaction since the Company granted these shareholders amended share rights
in the form of options with new warrants. Since the Company had an accumulated
deficit, the charge was made against additional paid in capital, which had no
impact on the consolidated financial statements. The Company accounted for the
new warrants as an equity transaction on the date the warrants were issued,
which was the IPO date of August 13, 1998.

In 1998, the Company issued, at a price of $0.33 per share, 900,000 Class B
shares and 675,000 Class E shares. Since the estimated fair value of shares
exceeded the issue price, the Company increased stock related expense and
shareholders' equity by $2 million in 1998.

F-40

GLOBAL CROSSING LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

22. SUBSEQUENT EVENTS

IXnet and IPC Acquisitions

On February 22, 2000, the Company announced a definitive agreement to
acquire IXnet, Inc., a leading provider of specialized IP-based network
services to the global financial services community, and its parent company,
IPC Communications, Inc., in exchange for shares of common stock of Global
Crossing valued at approximately $3.8 billion. Under the terms of the
definitive merger agreement, 1.184 Global Crossing shares will be exchanged
for each IXnet share not owned by IPC and 5.417 Global Crossing shares will be
exchanged for each share of IPC. The acquisition is expected to be completed
in the second quarter of 2000 and is subject to regulatory approval and
customary closing conditions.

GlobalCenter Japan

On January 26, 2000, the Company's Asia Global Crossing joint venture
announced an agreement to create GlobalCenter Japan, a joint venture with
Japan's Internet Research Institute, Inc. ("IRI"). GlobalCenter Japan will
design, develop and construct a media distribution center in Japan providing
connectivity worldwide through the Global Crossing Network. The joint venture
will also develop and provide complex web hosting services, e-commerce support
and applications hosting solutions. Asia Global Crossing will own 89 percent
of GlobalCenter Japan, with IRI owning the remaining 11 percent.

Hutchison Global Crossing Joint Venture

On January 12, 2000, the Company established a joint venture, called
Hutchison Global Crossing, with Hutchison to pursue fixed-line
telecommunications and Internet opportunities in Hong Kong. For its 50% share,
Hutchison contributed to the joint venture its building-to-building fixed-line
telecommunications network in Hong Kong and a number of Internet-related
assets. In addition, Hutchison has agreed that any fixed-line
telecommunications activities it pursues in China will be carried out by the
joint venture. For its 50% share, the Company provided to Hutchison $400
million in Global Crossing convertible preferred stock (convertible into
shares of Global Crossing common stock at a rate of $45 per share) and
committed to contribute to the joint venture international telecommunications
capacity rights on our network and global media distribution center
capabilities which together are valued at $350 million, as well as $50 million
in cash. The Company intends to integrate its interest in Hutchison Global
Crossing into Asia Global Crossing.

F-41

GLOBAL CROSSING LTD. AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

Column A Column B Column C Column D Column E
---------- ---------- -------- ---------- ----------
Additions
-------------------
Balance at Charged to Charged Balance at
Dec 31, costs and to other Dec 31,
Description 1998 expenses accounts Deductions 1999
----------- ---------- ---------- -------- ---------- ----------

Reserve for uncollectible
accounts................. $4,233 $37,157 $88,055 $(34,335) $95,110
Deferred tax valuation
allowance................ $ -- $ -- $54,780 $ -- $54,780

F-42

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf on March 16, 2000 by the undersigned, thereunto duly authorized.

Global Crossing Ltd.

/s/ Dan J. Cohrs
By: _________________
Dan J. Cohrs
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 16, 2000 by the following persons on
behalf of the registrant and in the capacities indicated.

Signatures Title
---------- -----

/s/ Gary Winnick Chairman of the Board and Director
___________________________________________
Gary Winnick

/s/ Lodwrick M. Cook Co-Chairman of the Board and Director
___________________________________________
Lodwrick M. Cook

/s/ Leo J. Hindery, Jr. Chief Executive Officer and Director;
___________________________________________ Chairman and Chief Executive Officer,
Leo J. Hindery, Jr. GlobalCenter Inc.

/s/ Thomas J. Casey Vice Chairman of the Board and Director
___________________________________________
Thomas J. Casey

/s/ David L. Lee President, Chief Operating Officer and
___________________________________________ Director
David L. Lee

/s/ Joseph P. Clayton Director; President, Global Crossing North
___________________________________________ America
Joseph P. Clayton

/s/ Jack M. Scanlon Director; Vice Chairman of the Board, Asia
___________________________________________ Global Crossing
Jack M. Scanlon

/s/ Abbott L. Brown Senior Vice President and Director
___________________________________________
Abbott L. Brown

/s/ Barry Porter Senior Vice President and Director
___________________________________________
Barry Porter

S-1

Signatures Title
---------- -----

/s/ Dan J. Cohrs Senior Vice President and Chief Financial
___________________________________________ Officer (principal accounting officer)
Dan J. Cohrs

/s/ Robert Annunziata Director
___________________________________________
Robert Annunziata

/s/ Jay R. Bloom Director
___________________________________________
Jay R. Bloom

/s/ William E. Conway Director
___________________________________________
William E. Conway

/s/ Eric Hippeau Director
___________________________________________
Eric Hippeau

/s/ Dean C. Kehler Director
___________________________________________
Dean C. Kehler

/s/ Geoffrey J.W. Kent Director
___________________________________________
Geoffrey J.W. Kent

Director
___________________________________________
Canning Fok Kin-ning

/s/ Douglas H. McCorkindale Director
___________________________________________
Douglas H. McCorkindale

/s/ James F. McDonald Director
___________________________________________
James F. McDonald

/s/ Bruce Raben Director
___________________________________________
Bruce Raben

/s/ Michael R. Steed Director
___________________________________________
Michael R. Steed

S-2