Fibernet Group PLC has decided to fold its long-distance networks in France and Germany after its major supplier of fiber-optic cable, KPNQwest NV, sought protection from creditors.
On Thursday, the London provider of high-speed data communication services said it will close its French and German units, but continue with its smaller metropolitan network operations in Frankfurt, Germany.
KPNQwest supplies about 80 percent of the 7,000-kilometer fiber-optic network operated by Fibernet in France and Germany. Fibernet signed a 24 million (US$23.5 million) 20-year lease, known in the industry as an IRU (indefeasible rights of use), for dark fiber with the Amsterdam bandwidth provider. In addition to dark fiber, Fibernet leases space to collocate equipment, such as optical repeaters.
"As a result of KPNQwest going into administration, our investment has zero commercial value," said Nigel Pitcher, marketing director at Fibernet. "A new owner could sell us a new IRU or we could buy capacity from an alternative carrier. But the net effect is that we would have to invest in building another network. Going back to the banks and shareholders is not an option in the current climate."
Like many other service providers that have expanded their footprint in Europe over the past few years, Fibernet has been hurt by bandwidth capacity far exceeding demand and by corporate customers having to pare spending on telecommunications services because of tough economic times.
In a statement, Fibernet said it has decided to write off the value of its assets in each of the countries. The company estimates the total value of the write-off, including restructuring changes, to be £75 million ($114.4 million).
The KPNQwest network in France and Germany is still operating, according to Pitcher, but no one can say for how long. "We were told by the administrators that the company will run out of money very shortly," he said.
Fibernet is concerned about the continued supply of electricity to the collocation facilities. If KPNQwest is unable to pay the bills and electricity companies are forced to pull the plug, network services will abruptly end, Pitcher said.
In the meantime, Fibernet will try to move customers over to other service providers as quickly as possible, he said.