KPNQwest networks to keep running until July

11 June 2002 -- The liquidators of bankrupt Amsterdam-based KPNQwest NV have approved a plan to keep its network running until end-June.

11 June 2002 -- After the resignation from its supervisory board of parent companies Dutch incumbent operator KPN Telecom and US local carrier Qwest Commincations Inc, filing for creditor protection and entering bankruptcy on 31 May, the liquidators of Amsterdam-based KPNQwest NV have approved a plan to keep it running until end-June. This is despite not receiving all the required cash from clients to fund it by the 11 June deadline.

Founded in 1998, KPNQwest is in debt by Euro2bn and its market valuation is down from over Euro42bn two years ago to Euro13m after spending Euro1bn building Europe's largest datacoms network, which spans 25,000km connecting 60 cities over 18 countries and serves about 40% of the European market.

The extension is to give trustees more time in talks on selling the network - as a whole or in parts - and give customers more time to develop and execute contingency plans. Rumoured bidders have included Verizon Communications Inc, the UK's Cable & Wireless, Spain's Telefonica, Hutchison Whampoa Ltd and Swisscom. However, KPNQwest now says that the USA's AT&T Corp is the most likely buyer. Estimated proceeds of Euro200-250m would go to paying off lender banks, led by Citigroup, which is owed Euro300m.

However, the liquidators have reserved the right to shut down the network if there continues to be insufficient funds to meet all obligations. Euro20-25m is said to be needed. "The liquidators do not envisage continuation of the networks after 1 July 2002 if not sold," said KPNQwest. The network could also be shut off if the proposal, which provides only for a payment of current obligations and not any arrears, is rejected by its key suppliers. These include Alcatel, Nortel Networks, Cisco Systems, Ciena and Foundry Networks.

Users of KPNQwest's network for the transmission of data and internet traffic include KPN Telecom, Qwest (which has 30-60 clients dependent on the infrastructure) and others including IBM, Nokia, Sonera and Dell. All have therefore been looking elsewhere for alternative service providers. On 31 May Level 3 agreed to provide communications services in Europe to subsidiaries of KPN, including Internet access in both the Netherlands and Belgium, while last week the UK's COLT Telecom Group signed a deal with KPN to supply its clients with back-up services.

After failing to sell the whole network as a whole, the sale is now complicated because each of KPNQwest's national units is a separate business entity. The Belgian and German units have filed for bankruptcy, but it will not seek receivership for its branches in Portugal, Italy and a few other divisions in Central Europe.
Irish operator eTel is interested in buying KPNQwest's profitable Central European business. KPNQwest may also be close to selling its East European network, part of Global TeleSystems, the US operator bought from bankruptcy in March. KPNQwest's Finnish business has said it will try to go independent.

KPNQwest Sweden AB ? which has about 20 staff - also declared bankruptcy last week, but aims to continue operations while administrator have already received bids it. Telia's International Carrier unit has gained market share in Sweden after taking over five to six of KPNQwest's big clients in Sweden, says Telia's Magnus Nerell.

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