AT&T backs off from KPNQwest

UPDATE: With the US telecoms giant now apparently out of the running, break-up seems very likely for bankrupt service provider KPNQwest

US service provider AT&T is reported to have backed out of a deal to pick up the remains of KPNQwest on Thursday. Sources close to the sale process said that the bankrupt service provider is now very likely to be broken up and sold in pieces. AT&T's offer, believed to less than $100m, would have been acceptable, said a source, but the company backed out when it could not complete its bid in time. The only known rival bid, from Dutch investment group Trimoteur, has problems -- it may be higher on paper, but is not a cash bid like that from AT&T. Any sale of KPNQwest would have to be agreed on Friday, as the liquidators appointed for the group's French subsidiary are reported to have insisted that they will sell the French assets separately on that day, if a sale for the whole network is not agreed sooner. If the network is broken up, its value will fall by about 90 percent, sources said. Sources close to Trimoteur have claimed to able to offer "several hundred million euros", but much of that is in funds which would have to be raised from customers. AT&T's bid was a tiny fraction of the cost of building the KPNQwest network, which at 25,000km of fibre is one of Europe's biggest, or even the value it would have been given six weeks ago. The sales process has been hampered by arguments between the liquidators in different European countries and the trustees appointed in KPNQwest's home country, the Netherlands. Most of these were ironed out at a meeting on Tuesday, from which only the French administrator was absent. The network was still reported to be running normally on Thursday, thanks to support from service providers including KPN which seems to have averted the danger of shutdown for now.

More enterprise IT news in ZDNet UK's Tech Update Channel.

For a weekly round-up of the enterprise IT news, sign up for the Tech Update newsletter. Have your say instantly, and see what others have said. Go to the ZDNet news forum. Let the editors know what you think in the Mailroom.