Cost cutting raises telco fear of bankruptcy

NEWS 360networks announced yesterday it has cancelled its plan to buy internet network company NetRail. This follows hard on the heels of Friday's announcement by the Vancouver-based telecommunications carrier that it will delay a coupon payment on one of its bond issues. In a statement, 360networks said it will not follow through on the $50m all stock purchase plans it released in February, as it "no longer intends to acquire NetRail". The acquisition of NetRail would have given 360networks access to its 32,000km, leased fibre-optic network, which is connected to about 50 US cities. However, the companies cost cutting measures have raised bankruptcy fears. If 360networks does not meet its $10.9m coupon payment within 30 days it will then be in default on the $175m bond issue, which in turn opens the gate for its bondholders and bank lenders to chase the rest of its $2.5bn debt.