KPNQwest faces break up

Amsterdam-based KPNQwest NV is to be sold in parts after AT&T first withdrew a USD200m bid for the company, then a €100m bid for its European network (excluding the central European network, acquired with Global TeleSystems in March).

After its failed joint venture with BT, AT&T wants to assemble its own European network, but needed time for due diligence beyond the end-June deadline, when funds to keep the system live ran out.

KPNQwest was founded in 1998 by Dutch incumbent KPN Telecom and US local carrier Qwest Communi-cations (each own about 40%). It spent €1bn building Europe's largest datacoms network, which spans 25,000km between 60 cities in 18 countries and carries 40% of Europe's Internet traffic. But debt is €2bn and market value down from €42bn two years ago to under €20m.

In mid-May, both KPN and Qwest (which accounted for 43% of 2001 sales) stopped long-term funding. After they resigned from KPNQwest's supervisory board, it filed for protection from creditors 23 May, then bankruptcy on 31 May.

KPNQwest risked breaching covenants on a €525m credit facility for March's Global TeleSytems takeover from a banking syndicate, which demanded repayment of the €300m already drawn.

On 11 June administrators collected most of the €20-25m needed to keep the network running until end-June while they sought to sell it and to give customers time to find alternative providers.

But on 17 June Alcatel demanded €15m of the €135m it is owed. The banks hold about €15m, but want guarantees they will get it back from asset sales before handing it over.

On 24 June KPN, which has been providing day-to-day funding, allied with other large user telcos to keep it running until at least 1 July. Shutdown jeopardises e-mail and Web access for 100,000 European business clients.

In May KPNQwest warned users to seek alternative service providers, so COLT, BT, Cable & Wireless, Level 3 Communications, WorldCom and Telia have all been inheriting customers (see panel).

Administrators hope to sell as much of the network in one chunk as possible. However, existing European operators are looking to fill gaps in their own networks. Bidders could include British Telecom, Colt, Cable & Wireless, Energis, Deutsche Telekom, Level 3 Communications, Infonet Sevices, Interoute, Verizon Communications, and Telefonica.

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