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Telia joins bid for KPNQwest’s French network

HELSINKI, Finland-Telia, the Stockholm-based Swedish state-controlled telecom company, confirmed 3 July that the company had joined in a bidding contest with Dutch company KPN to acquire troubled KPNQwest’s French network.

A French judge has been appointed to review bids, but a decision is not expected until 10 July. The breakup of bankrupt pan-European telecom KPNQwest will result in a fire sale of assets in Belgium and France.

Europe’s largest data communications network, KPNQwest was declared bankrupt on 28 May. In contrast to Telia’s strictly commercial bid, KPN’s interest is more corporate. KPNQwest’s network had 25,000 kilometers of capacity at the end of May.

The Dutch company co-founded the Belgian telecom company and was a significant shareholder and customer. It also contributed to a fund to sustain KPNQwest’s operations until a buyer is found.

“This far, we have received two offers. One has come from Telia and the other from KPN. Telia is interested in KPNQwest’s French network only, while KPN is interested in French and other assets,” said Christian Keating, a spokesman for the Trustees Fund established to oversee KPNQwest’s business operations.

Belgian employees of KPNQwest reacted to the company’s deteriorating financial situation by confirming plans to shut down the key Belgian link of the network. This action unfolded when a US$200 million offer from venture capital fund Trimoteur, based in Amsterdam, was rejected.

Trimoteur’s bid was considered too low and lacking in a substantial cash tranche by KPNQwest’s administrators and lenders. However, the offer, which included a US$60 million cash element, did cover KPNQwest’s entire network.

The rejection proved a double blow for KPNQwest, which had seen U.S. telecoms giant AT&T withdraw from acquisition talks a week earlier. AT&T had offered US$100 million in cash for KPNQwest’s whole network.

KPN has offered to acquire KPNQwest’s whole network to retain company value. The Dutch company is proposing to revamp KPNQwest’s key divisions and sell it on once core segments regain profitability. The divisions earmarked operate in Germany, the Netherlands, Belgium and France.

Different interested parties have emerged for KPNQwest’s networks in Central Europe. These are reported to include a European consortium led by Lehman Brothers and the Ireland-based eTel.

KPNQwest has blamed its spectacular collapse on a dramatic decline in demand for data services in core European markets. Significant losses were incurred during the height of KPNQwest’s capital intensive pan-European expansion in 2000 and 2001, at a time when the information technology (IT) and telecom bubble started to lose its buoyancy.

The Telia owned subsidiary, Telia International Carrier, responded to KPNQwest’s bankruptcy by selling pan-European network capacity to Belgian operator Belgacom. This replaced capacity previously provided by KPNQwest.

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