The partners will invest a combined $700 million in existing assets to launch the venture, which will be called KPNQwest and headquartered in the Netherlands. Services are slated to begin in January.
"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 Qwest president and chief executive Joseph P. Nacchio. "Today, with KPN, we take what we believe is the next natural step in the execution of our global expansion strategy."
The companies expect 1999 revenues from the venture to be about $400 million and to grow an average of more than 40 percent annually.
"To be successful, I said [in the past that] we would need to take our domestic, low-cost, facility-based strategy across the Atlantic so that we could compete on a much wider scale," said Nacchio. "Though we had acquired EUnet, as a business we remained constrained by the fact that we didn't have the bandwidth to develop this new world of what I call 'bandwidth-enabled applications.'"
The equally owned venture will begin 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.
"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," said KPN chairman and chief executive Wim Dik. "This puts us in the position that we now can partner with Qwest and make a leapfrog move into the IP market."
"Our decision to partner with KPN was based on the notion of picking a partner that understood that the world needs to be redesigned from 'a clean sheet of paper,' as I like to say," said Nacchio. "Both companies are deploying state-of-the-art technologies and are not burdened by legacy systems and encumbrances of the old telecommunications world."
KPNQwest plans to incorporate EUnet, a company Qwest acquired in April 1998, into the venture. EUnet is headquartered in London, and operates in 14 countries in Europe including the Netherlands, Belgium, and France.
The venture aims to market its services to Internet service and content providers, multinational firms in Europe and North America as well as telecommunications carriers and operators. EUnet will be a vital part of the venture, since it has nearly 84,000 established European customers.
KPNQwest 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.