Struggles continue for telecom players

Three more struggling network operators say they're in various stages of disrepair, the latest sign that the ongoing telecommunications downturn will spare few.

John Borland Staff Writer, CNET News.com
John Borland
covers the intersection of digital entertainment and broadband.
John Borland
2 min read
Three more struggling network operators said Thursday they were in various stages of disrepair, the latest sign that the ongoing telecommunications downturn will spare few, if any, companies.

Infonet Services, E*Spire Communications and ReFlex Communications join a long list of telecommunications companies affected by a sharp downturn in spending among customers and investment from stakeholders.

Infonet, a provider of data transmission services, announced Thursday that some of its major shareholders have expressed the desire to sell their stakes.

The El Segundo, Calif.-based company tapped UBS Warburg and Merrill Lynch to help sort out alternatives. "The process to be launched by Infonet is intended to maximize value for all shareholders by explor(ing) strategic relationships with a broad range of potential partners," Chief Executive Jose Collazo said in a statement.

Large international telecom companies like KDD, KPN, Swisscom, Telefonica, Telia and Telstra hold 88 percent of all the shares outstanding of the data carrier, whose network reaches more than 180 countries and serves some 2,600 multinational corporations.

The news comes as the tight equity markets make it difficult for telecom companies to raise money. KPN of the Netherlands, which owns about 17 percent of Infonet, announced Monday that it was selling its 56 percent stake in Teledynamics, a provider of call center services.

Separately, E*spire, a Herndon, Va.-based company that offers telephone, Internet and Web hosting service, said Thursday it had filed for Chapter 11 bankruptcy protection. Once placed in the ranks of promising new competitors to the big local phone companies, it has struggled with funding in recent months and seen its stock slip to just 30 cents per share.

Nevertheless, Chief Executive George Schmitt said that the company would operate "business as usual" while it reorganized, reduced expenditures and negotiated with bondholders.

The Nasdaq stock exchange halted trading of E*spire's shares Thursday while seeking more information about the company's situation.

Also, Seattle-based ReFlex is now seeking a buyer, according to a company executive. "ReFlex has lost its funding and is negotiating with a couple of people to buy the company," said Robert Budihas, vice president of Business Development.

The nationwide provider of broadband Internet access to residential buildings had been looking for a third round of funding. The company raised $33 million in its second round, which was lead by Enterprise Partners and the Sprout Group, the venture capital wing of Donaldson, Lufkin & Jenrette, now part of Credit Suisse First Boston.