AT&T Bids on KPNQwest Network
KPNQwest stock plummeted more than 70 percent in morning trading today, following the news of the bankruptcy. The stock, which closed at 31 cents a share on Friday, had dropped to under a dime before noon today.
KPNQwest announced a week-and-a-half ago that it was seeking protection from its creditors in a Dutch court in Haarlem (see KPNQwest Goes Bankrupt). On Friday, KPNQwest NV, the KPNQwest umbrella company, saw its moratorium, which only protects a company from unsecured creditors, transformed into a bankruptcy proceeding by the same court (see KPNQwest Files for Bankruptcy). Koen Van Zijl, a spokesperson for the company, said today that four or five of the company’s subsidiaries remain in creditor protection, but that they are expected to follow their parent company into bankruptcy soon. The company’s German unit filed for bankruptcy today.
The bankrupt carrier would not say how much AT&T had offered to pay for its network, but observers say they expect a fire-sale price around US$200 million. AT&T had not returned calls by press time. KPNQwest spent about $1 billion building its network, which stretches across 18 countries and serves about 40 percent of the European market. Two years ago, the estimated value of the company was €42 billion (about $39.3 billion).
Any cash the Dutch telecom can get now is desperately needed to pay off its creditors. The company, which is struggling with a more than €2 billion ($1.87 billion) debt load, owes €300 million ($281 million) to a group of lender banks, led by the Citigroup. The banks and bondholders are not expected to recover all of their money, and shareholders in the company will probably come out of the proceeding empty handed.
Equipment vendors are expected to be especially hurt by the bankruptcy. Les Echos, a French daily paper, estimated today that Alcatel SA (NYSE: ALA; Paris: CGEP:PA) could stand to loose €100 million ($93.7 million) from the bankruptcy. Alcatel would not comment on how hard a hit it would take.
In addition to Alcatel, Van Zijl says Nortel Networks Corp. (NYSE/Toronto: NT) and Cisco Systems Inc. (Nasdaq: CSCO) will probably also be affected by the bankruptcy. He would not say how much each company stands to lose.
And while creditors and shareholders scramble to salvage whatever they can of their investments, customers scurry to find alternative service providers. Last week, British Telecom (BT) (NYSE: BTY) announced that it would gladly accommodate any worried KPNQwest customers (see BT Ignite to Aid KPNQwest Orphans). Following the bankruptcy announcement on Friday, several service providers, including Cable & Wireless (NYSE: CWP) and Britain’s COLT Telecom Group PLC (Nasdaq: COLT; London: CTM.L) saw their shares rise with the anticipation of customers migrating from the Dutch company.
Van Zijl says that KPNQwest is helping customers with the migration process. “The network is stable right now,” he says, “but I can’t say for how long.”
— Eugénie Larson, Reporter, Light Reading