KPNQwest filed for bankruptcy on Friday after failing to raise funds to keep its European datacommunications network running as heavy debt and low revenues brought an end to the former investor darling.
The collapse of KPNQwest, which operates Europe's largest fibre-optic network, is one of the more spectacular failures among alternative telecoms firms that spent heavily to capitalise on growing demand for data transfer at the height of the tech bubble but which fell from favour as revenues waned.
The provider filed for creditor protection last week, and yesterday advised its customers to "put in place contingency plans with other providers." The company has been negotiating for AT&T to take over its services for a reported $200m (£136m), but this deal now appears to have fallen through.
KPNQwest carries around a quarter of Europe's IP data, and its customers include Dell, Hewlett-Packard and Nokia.
Earlier this week, some equipment was actually turned off in the company's Brussels network centre, before a last-minute reprieve kept the service online.
The news has caused shockwaves, as the company, a joint venture between Dutch national carrier KPN and the US-based Qwest, was seen as a survivor in the carnage of new telco providers. At the end of 2001, it had completed the purchase of Ebone, one of Europe's longest-established IP networks, and was looking for further expansion.
Both partners in the joint venture resigned from the company's board this year, and without this support, the company is not able to pay the bills for its continued service.
The company has so far failed to find a buyer, even though the mooted deal with AT&T would have seemed an excellent deal in pre-recession times, as AT&T has $300m earmarked for expansion into Europe, and lost its international partnership, Concert, last year.
Even if such a deal were to be agreed, it would take several weeks to finalise, during which time KPNQwest would be relying on KPN to pay its bills.
The fall-out from the failure of KPNQwest will take a long while to settle. Like many other carriers, the company had "vendor financing" from companies including Nortel on much of its network equipment, so many of the assets in its centres actually belong to the equipment vendors. Employees are not expected to get redundancy payouts.
IT managers are anxiously watching developments -- previous bankruptcies such as Carrier1 and Viatel in the telecoms field have not led to a loss of service, as buyers have always been found for the failed companies.
Other companies scent opportunity: Vanco
, a "virtual network operator" which sources network services for multinationals, has launched a "KPNQwest SWAT team" which promises a one-hour response time to concerned IT managers who contact it by email
Reuters contributed to this story.