KPNQwest switches off

The company has struggled to tempt a buyer towards a purchase of the whole group, but last night AT&T were reported to have offered around $200m for its core assets. However, that offer was this morning withdrawn and its UK office confirmed that the company has just begun the process of shutting down.

Its banks will not support it any longer and have refused to step into the fray. The entire 25,000km network is expected to be switched off at 5.30pm this afternoon, leaving around 100,000 companies in the lurch.

Total Tele.com had reported that AT&T was set to bid $200m for KPNQwest, a fraction of the near-$40bn that the company was valued at two years ago. But, with this deal not materialising, yesterday's warning from the company - it told customers to make contingency plans in the event that the company goes under - has become a harsh reality. Customers are expected to lose millions of pounds due to the furore.

BT Ignite today said it is "ready and prepared" for the anticipated influx of customers seeking capacity for data traffic. KPNQwest counts IBM, Dell and Hewlett-Packard among its clients.

The company is thought to be close to announcing a buyer for its non-core assets, but the real prize is the 25,000km fibre-optic network that it inherited from parents KPN and Qwest, and which has been developed over the last three years to service 60 cities in 18 countries. This network could have been what AT&T was referring to when in February it said that "certain stranded assets" had been identified for possible acquisition, to bolster its own network.

Meanwhile, KPN has been linked with providing its faltering subsidiary with around $35m in a rescue package that would not preserve the company's long-term future, but would allow it to continue to operate a service.

If it loses key customers then the depleted value of its assets will be further reduced, allowing a buyer to shell out even less for the largest European data network. However, such an interim lifeline could take weeks to arrange, and time is not on KPNQwest's side, with creditors keen to recover as much of the $1.7bn debt as possible.

KPN may also acquire selected assets from the embattled KPNQwest. Both parents recently wrote-off their combined investment in the venture, a figure that approaches $1bn. It remains to be seen whether creditors can now realise any real value from its assets, which are now likely to come under the auctioneer's hammer.



"www.kpnqwest.com ":www.kpnqwest.com