ETEL, the Dublin-based company founded by Irish telecommunications entrepreneur Mr Sean Melly, has submitted a bid for the central European operations of ailing Dutch firm KPNQwest.
The Irish company, which operates in countries throughout central and eastern Europe, made the bid last Friday and is raising financing from existing and new investors to support the bid.
Sources told The Irish Times yesterday the bid price was below €50 million but the financing had yet to be put in place by Mr Melly.
A spokeswoman for eTel would not comment yesterday on any bid by the firm and a spokesman for KPNQwest did not return calls.
The sale process is the first stage in a much larger sell-off of KPNQwest's European operations following the firm's application for bankruptcy protection last month.
The firm, which owns the biggest fibre optic network in Europe, owes €1.8 billion and could face closure before any sale of its network can go ahead.
Trustees last night renewed a threat to close KPNQwest if pledged payments due from customers were not in hand by today. A shutdown would leave customers without internet or telecoms services and could torpedo the sale process.
Rival consortiums will present eTel with stiff competition in what amounts to a firesale of KPNQwest's central European operations. Last year the same networks and businesses were valued at more than €200 million when they were sold off by troubled telecommunications provider GTS.
Lehman Brothers is considered by industry experts as the front-runner in the competition to acquire the European operations, and some believe a sale could be concluded as early as this week.
If its bid is accepted, investors in eTel would have to stump up most of the cash for the bid. These investors include Intel Capital, Dresdner Kleinwort Capital, private equity fund Argus Capital Partners and New York-based fund Greenhill Capital. These venture capital companies and private equity funds invested €55 million in eTel in December 2000, one of the largest early-stage technology fund-raisings in the Republic. But there is no guarantee they will be willing to support an acquisition at a difficult time for the industry.
Founded in 1999, eTel provides voice, data and internet services to businesses in Austria, the Czech Republic, Hungary, Poland and Slovakia. It generates annual revenue worth about €100 million and experts believe KPNQwest's central European networks would be a perfect fit.
Last year eTel expressed an interest in the same central European networks and businesses currently for sale, before they were acquired by KPNQwest. Subsequently eTel made two smaller multimillion euro acquisitions in Austria and the Czech Republic.
The company's business model is largely based on Mr Melly's first telecoms firm, TCL.
Founded in Dublin in 1994, TCL was one of Eircom's first competitors in the business sector before deregulation. In 1996, WorldCom took a 30 per cent shareholding in TCL, and in 1997 it bought out the remaining shareholders for a figure thought to be about €21.6 million, although the exact sum was never disclosed.
