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Friday, 31 May, 2002, 14:42 GMT 15:42 UK
KPNQwest files for bankruptcy
Dusty phone
More trouble for the telecoms industry
Debt-laden telecoms firm KPNQwest has filed for bankruptcy after attempts to raise cash by selling off some of its assets fell through.

The Netherlands-based company, jointly owned by Dutch telecoms operator KPN and US-based telephone firm Qwest, had signalled that it would file for bankruptcy last week.

KPNQwest said attempts to "secure sufficient cash proceeds to meet the ongoing obligations of the company have not been successful".

The company's collapse has raised fears that its fibre-optic cable network may be shut down, disrupting internet and data communication services for thousands of customers.

Customers nervous

KPNQwest said it was working on "contingency plans" aimed at ensuring that normal service continued.

The company rents capacity on its cable network to other telecoms service providers, including Verizon Communications.

It also uses the network to provide data transmission services to blue-chip firms such as Dell, IBM and Hewlett-Packard.

On Thursday, the company alarmed customers with a warning that they should look for alternative suppliers in case of a "significant deterioration" in the performance of its network.

Buyer still sought

KPNQwest said on Friday that "it may still be possible for a substantial part of the business to be sold".

US telecoms giant AT&T was reported to be considering buying up part of KPNQWest's business earlier this week.

KPNQwest's cash crisis began in earnest last week when its parent companies cut off its funding and its banks suspended its credit lines.

The company, which has debts of about 1.8bn euros ($1.7bn; 1.2bn), warned investors on Friday of "a substantial risk that there may be no underlying value to either its debt or equity securities".

Trading in the company's shares was suspended earlier on Friday, pending a company statement.

KPNQwest, launched in November 1998, initially attracted strong interest from investors.

But the high cost of building its fibre-optic network, coupled with the subsequent economic downturn, ensured the company never lived up to its early promise.

Its share price, which rose as high as 90 euros at its peak, is currently languishing at 0.32 euros.

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