KPNQwest to pull plug at 5.30pm today?

Europe's largest fibre optic network operator, KPNQwest, is set to shut down its entire operations at 17.30 (BST) today after the collapse of rescue talks with potential buyers and banks.

A source within the company confirmed that AT&T's last-minute, $200m bid for KPNQwest's network assets, made yesterday evening, has been withdrawn and that banks are refusing to step into the breach.

The source told silcon.com: "The entire network is being turned off at 5.30 today. Discussions with AT&T and other possible candidates for our assets have been nullified and the banks are not helping one bit. It's absolute chaos here. The UK office is being wound up at midday."

He added: "Switching us off will be like closing down the M25."

The source said that employees in the UK office have been informed they will not be receiving any redundancy packages and are currently being instructed on how to appeal to the government to reclaim what they are owed.

A second source close to the situation confirmed the details. At 11:55 (BST), the source told silicon.com: "Try ringing any phone in the office in five minutes and you won't get an answer."

A spokesman from KPNQwest denied the allegation. He said: "That (network shutdown) is not happening today. The holding company KPNQwest NV has filed for bankruptcy as have five subsidiaries in the Netherlands. A number of other divisions of the company including the UK have filed for protection from creditors.

"It is in a lot of people's interest to keep this network operating. Over 40 per cent of traffic in Europe goes over that network."

Yesterday, KPNQwest issued a less bullish statement which said: "The company is advising customers that they may want to put in place contingency plans with other providers in the event of a significant deterioration in the performance of the KPNQwest EuroRings network."

Yesterday evening AT&T made its second bid for the operator's network assets shortly after KPNQwest's Brussels and Nordic network operating centres were closed down.

The network operator claims it has 100,000 business customers across Europe, the USA and Asia, many of which are in the Fortune 500. Its customers include Dutch airline KLM, US-based sportswear company Foot Locker, travel portal Opodo and Finnish digital TV company Digita Oy.

Tony Nester, MD for southern regions at virtual network operator Vanco, said: "KPNQwest has stopped paying its network carriers on behalf of its customers. If I was a customer I would be very nervous.

"If its network was to stop working it would be an absolute disaster - business across Europe would grind to a halt. Hundreds of millions of pounds would be lost."

RoyalKPN NV, which has a 40 per cent stake in KPNQwest, refused to comment.

US cable business Qwest owns 44.3 per cent of KPNQwest and private investors hold the remaining 11.4 per cent.

KPNQwest filed for bankruptcy last week. Its fibre optic network - which is currently in the possession of its receivers in the Netherlands - is 25,000km long and covers 18 European countries.