July 02, 2002, 9:50 AM — Call it The Mad Dash. Managers of corporate communication networks in Europe, after fleeing KPNQwest NV to WorldCom Inc., now find themselves on the run again, in search of an international service provider that may survive the current shakeout.
Finding that provider could be a grueling marathon. The ranks of telecommunication companies in Europe are rapidly thinning, and the balance sheets of those remaining look about as red as a Bloody Mary.
Relief could come from some of the former European monopoly telephone companies or veteran IT service providers, such as Electronic Data Services Corp. (EDS) and IBM Corp. But don't expect anything to come cheap.
Against this background, it's understandable why corporate users in Europe are worried. The carrier shakeout on the continent threatens to undermine service continuity, quality and pricing -- all key components of their networking strategies -- and limit competition for cross-border seamless IP (Internet Protocol) transit and managed data services. Added up, this spells big trouble.
"It's an undeniably huge mess," said Ewan Sutherland, executive director of the International Telecommunications Users Group (INTUG). "Until recently, most users had plans to back up their networks if, say, one of their cables were damaged by a digger or something like that. But nobody really had plans for bankruptcies, at least not of this magnitude."
KPNQwest, which filed for protection from creditors in May, is likely to sell off its European operations in pieces after a bid for the company's whole network was rejected on Friday. The news spells trouble for customers who use KPNQwest's international services and have not yet switched to rival operators.
Now WorldCom Inc. faces a similar fate. After admitting fraudulent bookkeeping to hide losses, the company could be forced into bankruptcy, analysts say.
"I don't know how WorldCom can survive," said Julian Hewett, chief analyst at Ovum Ltd. The company has shattered confidence with its banks, investors, vendors and, not least of all, its customers, according to Hewett. "It won't be able to raise money any more, that's pretty clear," he said.
The prospect of WorldCom following KPNQwest into bankruptcy and being broken up into pieces is making network managers at many multinational corporations and medium-sized enterprises feel extremely nervous, according to Sandra O'Boyle, an analyst with Current Analysis Inc. "With the prospect of two major players abandoning the market, who wouldn't feel this way?"
Many users don't know which way to turn.