KPNQwest files for bankruptcy

KPNQwest has seen its debt mount after a spending spree to expand

AMSTERDAM, Netherlands -- Dutch telecoms group KPNQwest said on Friday it would file for bankruptcy after last-minute talks aimed at securing new funding failed.

The company said in statement that negotiations were continuing in an effort to sell the group's assets. "These negotiations are still ongoing and it may still be possible for a substantial part of the business to be sold," it said.

"The efforts to try and sell certain non-critical assets in order to secure sufficient cash proceeds to meet the ongoing obligations of the company have not been successful."

The company said a number of KPNQwest subsidiaries across Europe would also file for protection, "with the exception of the Central European subsidiaries, KPNQwest Portugal Telecomunicaoes and KPNQwest Italy among others."

Earlier on Friday, Reuters reported that the Belgian unit would file for bankruptcy, as Euronext suspended the stock for a second time in as many days.

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John Shearing, vice president of KPNQwest's network services and head of the Belgian division, told Reuters the business would fold, saying, "It is based on the financial situation of the parent company in the Netherlands."

A union representative also said the Belgian unit would file for bankruptcy, Reuters reported.

The ailing Dutch telecom operator KPNQwest said on Thursday it had not found a buyer for a substantial part of its business and warned clients to find alternative carriers.

The company filed for protection from its creditors after its supervisory board resigned last week. Its lenders, which are owed more than 2 billion euros ($1.8 billion), have insisted that it sell certain assets.

To meet that demand, the company said its management and administrators were in talks to sell non-critical assets by the end of Friday. It was also in advanced talks to sell its central European business as a stand alone operation.

Its two biggest shareholders, KPN of the Netherlands and Qwest (Q) of the U.S., have refused to prop up the ailing company.

Sources told Reuters on Wednesday that the company had failed to find buyers and the banks refused to provide last minute-financing. That could force the company, which has seen its market value plummet from 40 billion euros to 13 million euros in just two years, will crease operations.

KPNQuest provides Internet services throughout Europe over its fibre optic networks but has been hit by a slowdown in the telecoms market -- leaving it with over capacity and mounting debts after a spending spree to expand services.

Investment bank Bear Stearns, which has been advising the ailing telecoms operator, has held talks to sell the business to U.S. giant AT&T (T), Britain's Cable & Wireless (CW) and Spain's Telefonica, said Reuters.