Enron Mail

From:sanjay.bhatnagar@enron.com
To:steve.elliott@enron.com
Subject:Re: Meeting with FLAG
Cc:annat.jain@enron.com, jeff.skilling@enron.com, kenneth.rice@enron.com,kevin.kohnstamm@enron.com
Bcc:annat.jain@enron.com, jeff.skilling@enron.com, kenneth.rice@enron.com,kevin.kohnstamm@enron.com
Date:Thu, 23 Dec 1999 02:11:00 -0800 (PST)

Thanx for the feedback Steve. I will discuss this with the team and get back
to you shortly on this. I have just arrived in Houston after some very useful
conversations and visit to some of Verio's datacenters and would like to
discuss that with you. Ken and Joe as well.

In the meantime I would like to wish all of you A very happy Holiday season.

Regards,

sanjay




Steve Elliott@ENRON COMMUNICATIONS
12/20/99 05:56 PM
To: Sanjay Bhatnagar/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Annat
Jain/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT
cc: Jeff Skilling/Corp/Enron@ENRON, Kenneth D Rice/HOU/ECT@ECT, Joe Hirko,
Kevin Kohnstamm/Enron Communications@Enron Communications
Subject: Meeting with FLAG

The following is a quick summary of last week discussions between FLAG, Ken
Lay, Jeff Skilling and myself:

FLAG clearly wanted ECI to commit to some form of capacity or fiber
purchase/deal on any or all of their planned expansions; the Pacific,
Atlantic or to partner with them in obtaining European capacity. We
explained why obtaining fiber or major capacity on projects so far in the
future was not of interest to us, unless we could do so on a capacity swap
basis. They indicated our U.S. network was not of value to them in such a
deal, given that their customer base didn't need connectivity across the
U.S., only to either of the coasts. As for partnering in Europe, we each
clearly have the ability to do it alone and I believe our U.S. assets are of
adequate value to allow us to do it alone and may be of more value to
potential swap partners than FLAG's existing capacity.
They are clearly focused on two objectives:
1. portray a story of around the world connectivity to secure additional
funding for further development.
2. develop additional entry points into their existing markets, in
particular India, to fuel added demand for their capacity.
As for India, they said they have decided to develop a second landing point
in Chennai, connected into Malaysia at a cost estimate of $100mm. They want
us to be their 50/50 partner and clearly value our in country expertise.
They said they would like us to decide within the next month or they will
proceed with Reliance to develop the second landing.

I think it comes down to this. There are a few ways we could do business with
FLAG and here is my view of each of these:

1. I would still like to do a capacity swap with them, but they are not
interested in any of our existing assets and I am not interested in putting
our capital into forward commitments against their project plans. They
clearly do not see the world the way we do and we are better off procuring
capacity when we need it as prices continue to fall in the markets in which
they now/will compete. They have capacity between London/Mumbai/Tokyo now
and prices will continue to fall. They are adding capacity later this year
between New York/London and we can always talk with them at that time, but I
believe we can get the capacity we need by trading for it as we expand.

2. We should not make any forward commitments on any of the 2001-2003
developments as I think they may have financing problems in the future.

3. We could co-develop the second landing in India in exchange for
preferential rights to capacity into/out of India. Sanjay we need to
seriously discuss this, but if they are to be believed, they will proceed
with this anyway. If they do this without us, we will still benefit from
additional capacity being made available into the market. We have to weigh
the benefit of preferential capacity rights against the risk of putting $50mm
at risk into a project that is not core to our business. I would like your
thoughts on this.

Sanjay, let's discuss this on the next weekly conference call and decide how
we want to respond to FLAG.

Thanks, Steve