Global Crossing, the US telecoms carrier that went into Chapter 11 bankruptcy protection after running up debts of £6 billion on an acquisition spree, is considering plans to sell off or merge its European arm with a competitor.

The company, worth £24 billion at its peak, emerged from bankruptcy protection in late 2003. It has been canvassing interest for several months.

The move will surprise some observers. The UK arm is one of the largest profit drivers for US-listed Global. Its controlling shareholder, Singapore Technologies Telemedia, part of the Singapore government’s investment arm, Temasek, has raised debt against the division.

The bulk of the operation is the former Racal Telecom, which Global bought in 1999 from Sir Ernest Harrison’s Racal Electronics empire for £1 billion. It has an extensive fibre-optic network, including British Rail’s old telecoms arm. More importantly, Global has retained a string of contracts with government departments, including Revenue & Customs.

Global Crossing UK made £78m in underlying earnings last year on £297m of revenue, which financiers think could value it at £600m-£700m.

However, a long-standing contract with Camelot, which dates back to Racal’s shareholding in the lottery consortium, runs out this year.

A deal could interest Cable & Wireless or BT, which are keen to build up long-term corporate and public-sector contracts. Scottish & Southern Energy is also interested in telecoms infrastructure. Global Crossing declined to comment.

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