Oct 4, 2001 12:00 PM,

Qwest confirms negotiations with KPN

Vincent Ryan, senior editor

Qwest Communications and Dutch carrier KPN Telecom are in talks regarding a possible revision to their joint venture, KPNQwest. The talks could result in Qwest buying out KPN’s stake or allowing KPN to sell its interest to a third party.

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At a Goldman Sachs conference in New York, Qwest CEO Joe Nacchio reaffirmed the carrier’s commitment to a European strategy and to KPNQwest and said the companies are talking about a revision to the joint venture agreement.

“We’re trying to negotiate an agreement where one of us takes control,” Nacchio said.

Any new agreement is likely to take some time, however, because KPN’s new CEO Ad Scheepbouwer doesn’t take charge until Nov. 1, Nacchio said.

According to reports, KPN has confirmed it is talking with Qwest about revising the portion of the joint venture agreement preventing both parties from selling their stakes before April 2004. The agreement also stipulates Qwest and KPN have to give each other first right to buy each other’s stake.

Both KPN and Qwest hold 44% of KPNQwest, a joint venture created in 1999 to develop a fiber optic network connecting 50 European cities.

KPN is struggling to reduce its $19.9 billion debt load amassed through acquisitions and bids for European spectrum licenses. A consortium of banks recently extended KPN a $2.24 billion credit facility to bolster its balance sheet.

The company also is trying to cut projected capital expenditures by seeking network-sharing agreements. KPN’s mobile subsidiary E-Plus recently signed a deal with Group3G to share the cost of rolling out a third-generation mobile network in Germany. KPN is pursuing similar agreements in Belgium and the Netherlands.

Nacchio criticized KPN for the overspending in wireless auctions that lead to its financial troubles and for waffling on the issue of its involvement in the KPNQwest venture.

“Our European partners ought to fish or cut bait--decide whether they’re in or out,” Nacchio said. “If they want to wreck their balance sheet on wireless, that’s their business.”