By JASON BOOTH

Staff Reporter

So much for champagne toasts at Global Crossing Ltd.

Since the Beverly Hills-based telecommunications concern announced plans on May 17 to acquire U.S. West Inc., shares have plummeted 25 percent.

Not only has that cut about $1.5 billion off the personal net worth of founder and co-Chairman Gary Winnick (who nevertheless remained L.A.’s richest resident as of late last week), it could complicate Global Crossing’s ambitions to expand its fiber-optic network around the world.

There are other factors besides the U.S. West deal to blame for the stock drop, such as a pullback in the technology sector and the fact that some Global Crossing investors, having enjoyed a steep run-up in recent months, may have decided to take some profits.

Yet the primary reason seems to be a lack of enthusiasm for the merger.

“People really don’t understand this deal,” said Berge Ayvazian, an analyst at the Yankee Group. “It is like a kid becoming an adult overnight, skipping adolescence. People are uncomfortable with it.”

Another potential source of concern is that the proposed $37 billion acquisition comes just a few weeks after Global Crossing announced plans to acquire Frontier Corp., a long-distance carrier based in New York, for $11.2 billion.

With two such mega-deals launched almost simultaneously, and nowhere near closing yet, analysts are scrambling to make sense of it all. And opinions are all over the map.

Global Crossing shareholders appear less than thrilled over the fact that their fast-growing company, which is attempting to link London, New York and Tokyo with fiber-optic cables, is getting hitched to slow-growing U.S. West, whose core asset is a network of old-fashioned copper cables. Meanwhile, many U.S. West investors are likewise miffed because the few high-growth assets that U.S. West does own are being reallocated.

Under terms of the deal, the post-merger Global Crossing would have two separately traded stocks. The A-class stock would reflect U.S. West’s traditional telephone and printed phone directory business. The B-class stock would track Global Crossing’s pre-existing high-growth business, plus the fast-growing data and Internet business, wireless and fiber-optic networks of U.S. West.

Some analysts said neither of the new stocks fit the risk/return profile of U.S. West investors. The class-B stock would be too risky for them, while the class-A stock would not provide enough upside potential.

Besides being a reflection of investor coolness to the merger, the recent downturn in Global Crossing’s stock price could have a more significant consequence. It could threaten the Frontier deal.

If Global Crossing’s stock falls below $45 a share, the company would be forced to issue more stock to pay for Frontier. That in turn would dilute the holdings of existing Global Crossing shareholders, possibly further dampening their confidence in the company’s growth plans.

(Since peaking at about $64 two weeks ago, Global Crossing fell to just over $45 last week before rebounding slightly to the $48 level.)

Resolving such issues is crucial to Global Crossing’s future because the company has been built almost exclusively on financial deals, rather than on internal operational growth.

“The deal is more about financial value than strategic value,” said Anthony Ferrugia, an analyst at A.G. Edwards in St. Louis. “U.S. West has a large cash flow. To a large extent, that is what Global Crossing wants. And at this time they could buy it at an attractive price. But strategically it makes less sense. U.S. West has relatively few big customers that Global Crossing can leverage.”

With most of Global Crossing’s plans still on the drawing board, Winnick may have decided that buying U.S. West would be a way to give his company the trappings of stability namely dividends, cash flow and hard assets.

To date, the company’s strength has been based on its huge market capitalization, with its stock price having appreciated six-fold since its initial public offering last August.

And as most professional investors know all too well (and Winnick is, after all, a professional investor), such steep run-ups are never sustainable for long.

The ultimate outcome of the U.S. West and Frontier acquisitions remains a long way off. The Frontier deal is slated to close this fall, and the U.S. West deal in mid-2000.

As Winnick told the Business Journal shortly after the U.S. West announcement, Global Crossing is still in “the third inning” of its game plan. But without the support of investors, the game might get rained out.