JIN-170 -- Failed Global Submarine Fiber Connection Doesn't Stop

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J@pan Inc Magazine Presents:
T H E J @ P A N I N C N E W S L E T T E R
Commentary on the week's business and technology news
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Issue No. 170
Wednesday February 27, 2002
Tokyo

CONTENTS

++ Viewpoint: Failed Global Submarine Fiber Connection Doesn't Stop
Japan from Building More
++ Noteworthy News
- eBay Japan to Withdraw from Net Auction Market
- JASDAQ and NASDAQ Japan Negotiate Possible Integration
- Japan's Financial Watchdog FSA Penalizes More Foreign Securities
Firms
++ Events

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++ VIEWPOINT: Failed Global Submarine Fiber Connection doesn't Stop
Japan from Building More

The recent Chapter 11 filing for bankruptcy protection by Global
Crossing, a worldwide fiber-optic carrier, has prompted media
speculation that the days of wholesale submarine fiber cable are over.
As the company's CEO John Legere put it: "There is some supply and
demand issue in components of the sub-sea space," adding that "we
happen to be the only remaining viable global wholesale player because
everyone is moving away from that business."

Although Legere insists that the company's key asset is fiber optic
network connecting major cities, not its well-known undersea fiber
optic cable, the company holds 20 percent of the undersea cables
connecting the US to the rest of the world, according to BusinessWeek.
So far, Hong Kong's Hutchison Whampoa and Singapore Technologies
Telemedia, both hungry for Asian IT infrastructure, are bidding and
Legere is still waiting for a rescue plan.

This is one of the biggest bankruptcies in American IT history and is
likely to have minimal impact in Japan, except for scuppering the
ambitions of troubled trading house Marubeni Corporation to become an
Asia-wide, if not worldwide, player in IT infrastructure.

Global Crossing's Asian arm, Asia Global Crossing (Global Crossing
58.5%; SoftBank 14.7%; Microsoft 14.7%) and Marubeni's US IT entity,
Vectant have a joint venture (Global Access) in Japan and have already
completed a cable connection from the US via Ibaraki Prefecture. Over
the past two years, the company has expanded its land fiber cable
connections, city-to-city, towards the South China Sea.

Asia Global Crossing is not affected by the Chapter 11 filing because
it is a separate legal entity. Neither is Japan's Global Access. "This
is not the core of Marubeni's financial problem, but it has surely
left Marubeni without enough capital to expand internationally," says
Fumihito Gotoh, an analyst at Merrill Lynch Japan Securities. As a
result, the company is being forced to focus more on domestic
business, he says.

Marubeni initially aimed to revive its financial status by investing
in this IT business, like its rival Itochu did with its successful IPO
of ITOCHU TECHNO-SCIENCE Corporation (CTC). While Itochu made capital
gains on CTC, Marubeni has now missed its chance. However, Marubeni's
failed dream of becoming an IT infrastructure giant doesn't mean the
end of fiber-optic cable business altogether. After all, the demand
for high capacity networks has kept pace with the accelerating shift
toward local access broadband services such as ADSL and FTTH,
according to Global Access' web page. The company says it will
continue business as usual.

Meanwhile, more submarine routes are being built. The Korea-Japan
Cable Network (KJCN), connecting Japan and Korea with two routes, will
be ready for service in March, aimed at serving an expected growth in
broadband services in the two countries during the upcoming 2002 FIFA
World Cup Korea/Japan.

The project was initiated by Japan-Korea IT Optical, in which Kyushu
Electric Power Co (KEPCO) has a 40 percent share; NTT Communications
Corporation 20 percent; Japan Telecom 20 percent and Korea Telecom
Cooperation 20 percent.

-- Sumie Kawakami

Sources:
Asia Global Crossing
http://www.asiaglobalcrossing.com

Global Access:
http://www.globalaccess.co.jp

Global Crossing:
http://www.globalcrossing.com

"A Port in the Storm for Global Crossing?" (From BusinessWeek online)
http://www.businessweek.com/bwdaily/dnflash/jan2002/nf20020129_1781.htm

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++ NOTEWORTHY NEWS
(Long URLs may break across two lines, so copy and paste to your browser.)

** eBay Japan to Withdraw from Net Auction Market
Extract: eBay Japan announced on Tuesday that it will shut down its
net auction site by the end of March. But the move was not a big
surprise for Tokyo, since eBay had mentioned as early as January that
it may sell its Japanese operation, as it wasn't generating enough
business. eBay is the No.1 auction site in 16 of the 17 markets, but
not in Japan. Like any other auction site, eBay Japan had suffered a
lot from severe competition, the continued economic recession, and the
hegemony of Yahoo! JAPAN. eBay's withdrawal will leave Rakuten as the
only viable competitor.

eBay Japan press release
http://pages.ebay.com/announcement/jp.html

"eBay US Hints at Possible Withdrawal from Japan" (JIN 164)
http://www.japaninc.com/newsletters/index.html?list=jin&issue=164

==============================ANNOUNCEMENT============================

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** JASDAQ and NASDAQ Japan Negotiate Possible Integration
Extract: Japan's two stock exchanges, Nasdaq Japan and JASDAQ, are
negotiating for a possible integration, according to Nikkei Net.
Along with Mothers at the Tokyo Stock Exchange (TSE), the
two exchanges are more lenient on listing criteria than other
traditional exchanges such as TSE, thus are thought to be the first
places for venture firms to go public. Both exchanges have been
suffering from mounting system costs as well as the continued decline
in trading volume.

From Nikkei Net
http://www.nikkei.co.jp/news/keizai/20020227CSSI036626.html

"Grading the Exchanges," History of JASDAQ and NASDAQ Japan, 06/01
http://www.japaninc.net/mag/comp/2001/06/jun01_grading.html

** Japan's Financial Watchdog FSA Penalizes More Foreign Securities
Firms
Extract: Japan's financial watchdog, the Financial Services Agency
(FSA), Tuesday released an additional list of foreign brokers that
will be penalized for violating rules on short selling of stocks.
Those who are to be penalized are: Tokyo branches of Credit Lyonnais
Securities, Bear Stearns, Deutsche Securities and Nikko Salomon Smith
Barney.

"Amid Market Woes, Financial Authorities Get Tough" (JIN 169)
http://www.japaninc.com/newsletters/index.html?list=jin&issue=169

FSA press releases (in Japanese)
http://www.fsa.go.jp/indexe.html

From the Asian Wall Street Journal
http://online.wsj.com/public/asia

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++ EVENTS
2002 Asian Venture Forum/Japan
The Four Seasons Hotel, Tokyo
March 4-6, 2002

Opportunities in Japanese Private Equity: A Contrarian View

With Japan still groping its way through the lost decade searching
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AVF/Japan is a MUST go event for the serious Asian private equity
investor.
For the latest details, please download our online brochure at:
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JAPAN SMALL COMPANY INVESTMENT CONFERENCE
New York City -- March 12, 2002
An all day forum featuring presentations by promising Japanese
companies seeking foreign investors and business partners. Hear from
leading experts on how to manage the transaction process and the
investment opportunities arising as a result of current economic
trends in Japan. This event is sponsored by Sonnenschein Nath &
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For company profiles, additional information and a registration form
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or contact: jsciconference@kwrintl.com

MKI chit chat night
Come and join us for an informal telecoms related get together
MKI will present a bottle of Mexican beer to the first 20 people to
say hello to Jim Tajima (sorry, but you can only say hello once), so
don't leave the office too late!

Date: Thursday 28th February, 2002
Time: 7pm start
Place: Zest Cantina (Iikura) Grand-Mer Roppongi 1F,
5-18-19 Minato-ku
Tel: 03-5570-6999

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SUBSCRIBERS: 5,129 as of February 27, 2002

STAFF
Written by Sumie Kawakami (sumie@japaninc.com)

Edited by J Mark Lytle (mark@japaninc.com)

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