November 19, 1998 -- KPN, the $9 billion private Dutch telecommunications company, and Qwest Communications International Inc., a $3 billion company of Denver (USA) today announced a venture to build and operate a high capacity European fiber optic Internet Protocol (IP)-based network in Europe, linked to Qwest?s North American network for data, video and voice services and ready for service in January.
The equally owned venture will be called KPNQwest and begin in January 1999 with 700 employees. The network will combine KPN?s fully owned pan-European fiber optic backbone (EuroRings) with a high capacity transatlantic link to the nearly complete 18,499-mile fiber optic Qwest network in North America.
EUnet, one of the leading European business Internet service providers with nearly 84,000 customers, will be a vital part of the venture. Customers for the venture will include Internet service and content providers, multinational firms in Europe and North America as well as telecommunications carriers, operators and others who want to buy wholesale or retail network capacity, fiber or services.
The venture can deliver services from day one to the existing customers of KPN and EUnet. The venture will sell carrier services, including dark fiber when it begins business in January, and offer IP-based services starting next spring. Eventually the venture also plans to offer voice, frame relay and ATM (asynchronous transfer mode)-based services.
Wim Dik, chairman and CEO of KPN, said, "Our vision about the need for high speed network capacity in this rapidly changing market was put into action by the aggressive rollout of EuroRings. This puts us in the position that we now can partner with Qwest and make a leapfrog move into the IP market."
"At Qwest we have been busy building our own U.S. domestic fiber network, but we have never stopped looking for creative ways to expand our reach globally," said Joseph P. Nacchio president and CEO of Qwest. "Today, with KPN we take what we believe is the next natural step in the execution of our global expansion strategy."
The venture will have a six-person supervisory board. KPN and Qwest have appointed an acting Management Team. John A. McMaster, executive vice president of Qwest?s international business, will be CEO. Henjo Groenewegen, director of KPN?s international network services is appointed COO. EUnet?s current CEO, Andrew Carver, will take the seat of executive vice president of the Eunet division. Jan Pennings, finance manager of KPN?s international network services takes the role of controller.
The venture will have revenues of approximately $400 million in the first year with an expected average growth rate of over 40% in the next three years. Operating profits of the venture are expected to show a strong increase because of synergies and strong revenues growth. The venture will contribute to the owners earnings from day one with expected double digit growth for the next five years. KPN will proportionally consolidate the venture per 1 Jan. 1999. For Qwest, income from the venture will replace revenue and contributions margins from EUnet in 1999.
In early 1998 KPN started to build it?s own pan-European fiber optic backbone to meet the emerging high performance and bandwidth needs of international businesses into the next century. With over 2,500 km (1,500 miles) of the 3,500 km (2,000 miles) first phase already installed, the first two rings will be fully operational by the first quarter in 1999. The EuroRings Trans European network has been designed to give KPN a strong competitive advantage by providing the highest level of guaranteed service performance and availability. EuroRings will encompass six bi-directional self-healing rings linking more than 30 cities in western, central and Eastern Europe. Major cities in the UK, Germany, France and the Benelux are served in the first phase. The construction of these first two rings represents an investment of $250 million. The remaining 4 Eurorings, covering another 11,000 km, will be built by KPNQwest.
Qwest acquired EUnet in April, 1998. Headquartered in London, EUnet operates in 14 countries: The Netherlands, Belgium, France, Spain, Portugal, Germany, Switzerland, Austria, Norway, Sweden, Finland, Estonia, Czech Republic and Romania.
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Information Regarding Forward-looking Statements
This press release contains or refers to forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that include, among others, (1) statements by Qwest concerning the benefits expected to result from certain business activities and transactions, including, without limitation, synergies in the form of increased revenues, decreased expenses and avoided expenses and expenditures that are expected to be realized by the Company after the closing of such transactions, (2) the Company?s plans to complete the Qwest Network, an approximately 18,450 route-mile, coast-to-coast, technologically advanced fid (3) other statements by the Company of expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. The Company cautions the reader that these forward-looking statements are subject to risks and uncertainties, including financial, regulatory environment, and trend projections, that could cause actual events or results to differ materially from those expressed or implied by the statements. Such risks and uncertainties include those risks, uncertainties and risk factors identified, among other places, in documents filed with the Securities and Exchange Commission. The most important factors that could prevent the Company from achieving its stated goals include, but are not limited to: (a) failure by the Company to construct the Qwest Network on schedule and on budget, (b) operating and financial risks related to managing rapid growth, integrating acquired businesses and maintaining sufficient cash flow to meet its debt service requirements, make capital expenditures and fund operations, (c) intense competition in the Company?s Communications Services market, (d) the Company?s ability to achieve year 2000 compliance, (e) rapid and significant changes in technology and markets, and (f) adverse changes in the regulatory or legislative environment affecting the Company. These cautionary statements should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by the Company or persons acting on its behalf. The Company undertakes no obligation to review or confirm analysts? expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
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