News | November 25, 1998

KPN and Qwest Form $700 Million European Fiber Network Team

Privatized Dutch PTT KPN and Qwest Communications have joined forces to finish a European fiber network and connect it to Qwest's North American network. The equally-owned joint venture, called KPNQwest, plans to turn up the Internet Protocol (IP)-based network in January and offer wholesale and retail network capacity to telecom carriers, Internet service providers, and multinational corporations.

Partnering with Qwest enables KPN to leverage its network toward a "leapfrog" move into the IP market, and gives Qwest a creative way to expand globally, executives say. The partnership does not surprise analysts, who say that Qwest's nearly-complete network and sophisticated service offerings make it an attractive telecom partner. "[Qwest] remains at the top of everyone's dance card within the world of telecom and technology who is looking for a strategic partner," concludes Salomon Smith Barney analyst Jack Grubman.

The partners will invest a combined $700 million in existing assets to launch the venture, which will begin in January, 1999 with 700 employees. The network combines KPN's fully-owned pan-European fiber network with a transatlantic link to Qwest's 18,499-mile fiber network in North America.

In early 1998, KPN started to build its own pan-European fiber optic backbone. With over 2,500 km (1,500 miles) of the first 3,500 km (2,000 miles) phase already installed, the first two rings will be fully operational by the first quarter in 1999. The network will encompass six bi-directional rings linking more than 30 cities in western, central, and eastern Europe. The first phase connects major cities in the UK, Germany, France, and the Benelux. Construction of these first two rings represents an investment of $250 million. KPNQwest will build the remaining four rings, covering another 11,000 km.

The venture will sell carrier services, including dark fiber, and offer IP-based services starting next spring. The venture also plans to offer voice, frame relay, and ATM (asynchronous transfer mode)-based services. In 1999, proponents forecast revenues of nearly $400 million that will grow over 40% percent annually on average.

Existing customers of KPN and EUnet, a European business Internet service provider acquired by Qwest in April 1998, can receive network services as soon as the venture commences, proponents say. Headquartered in London, EUnet serves nearly 84,000 customers in 14 countries: The Netherlands, Belgium, France, Spain, Portugal, Germany, Switzerland, Austria, Norway, Sweden, Finland, Estonia, Czech Republic and Romania.

A six-member board will oversee the venture. The acting management team for KPNQwest includes: John A. McMaster, executive vice president of Qwest's international business, CEO; Henjo Groenewegen, director of KPN's international network services, COO; Andrew Carver, EUnet CEO, executive vice president of the EUnet division; and Jan Pennings, finance manager of KPN's international network services, controller.