KPNQwest customers asked to pay to keep network up

Trustees of bankrupt KPNQwest NV, scrambling to keep one of Europe's largest fiber-optic networks from shutting down, are urging customers to pay all amounts due to KPNQwest for service in May and June, the trustees said in a statement last Thursday.

Also, a deal is in the works with a European telecommunication company to operate a key backbone owned by Ebone before it was acquired by KPNQwest last year, a source close to the trustees said Friday. A deal, which would keep the Ebone network online for one month, could be reached as early as Friday evening, the source said.

The trustees want to keep the KPNQwest network running this month and possibly through July. This would give them more time to find a buyer and maximize proceeds for the creditors because an operating business is worth more than a defunct business, and at the same time give customers more time to find an alternate carrier, according to the statement.

Customers are being asked to pay money owed and an advance for June into an escrow account. If there is not enough money raised by close of business on Monday, the network will be shut down and the money will be refunded, according to the statement. The trustees hope to raise about €50 million (US$47 million), the source said.

Koninklijke KPN NV, one of KPNQwest's main shareholders, but also a major customer, owes KPNQwest €23 million and has been asked to pay that, according to the source.

Nobody at KPN in The Hague, Netherlands, was immediately available for comment. Industry sources said KPN has been running the KPNQwest network in the past week at an estimated cost of between €500,000 and €1 million per day as a way of keeping its own customers online.

KPNQwest on Wednesday laid off a large part of its Hoofddorp, Netherlands, headquarters staff. [See "KPNQwest lays off 500 at Dutch headquarters," June 6.]Despite the effort of the trustees, parts of the KPNQwest network have already gone down, according to Web portal company Lycos Europe NV, which has its systems connected to the KPNQwest network in several of its locations.

"I am not sure what happened, whether it was KPNQwest or one of their suppliers, but part of the network was switched off last week," said Frank Weller, chief technology officer for Lycos Europe. "Our data traffic is taking different routes now. We had fallbacks in place."

KPNQwest, once a stock market darling worth US$40 billion, went bankrupt last Friday after a plan to sell some assets to meet its most urgent financial obligations failed. The company's 18 country, 25,000 kilometer fiber-optic network is said to be Europe's largest, carrying about 25 percent of the continent's Internet traffic. [See "KPNQwest bankrupt, company to liquidate," May 31.]Bandwidth providers, including WorldCom Inc., BT Ignite, and even Global Crossing Holdings Ltd., which has its own financial woes, are actively targeting KPNQwest customers. KPNQwest has advised customers to switch.

Utrecht, Netherlands, Hit Rail BV, which manages IT and data communications projects for 14 European railway operators, had signed a deal with KPNQwest for a 16 country, 29 site VPN (virtual private network) and implementation. Two sites were live when KPNQwest toppled. Hit Rail BV is now talking to WorldCom, Equant NV and AT&T Corp., said Antonio López, Hit Rail's director of network services who is based in Madrid.

"We have not received any news from KPNQwest since last Friday. My account manager, who was based in France, was dismissed this Monday. We reopened negotiations with suppliers," he said.

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