IBM in 10-year Cyber Centre pact

IBM and a Dutch-based fibre-optic network company yesterday unveiled plans to invest $1.9bn in a pan-European network of internet business centres over the next 10 years.

The US computer giant and KPNQwestsaid they planned to build and manage up to 18 "CyberCentres". The first six will open in London, Frankfurt, Paris, Munich, Stockholm and Milan by the end of this year.

KPNQwest and IBM will invest around $1bn and $900m respectively over the decade in an attempt to corner a double-digit share of the hosting area of the European internet market, which analysts predict will be worth $15bn by 2003.

The groups expect to generate revenues of at least 4bn euros from the alliance, although KPNQwest's president and chief executive,Jack McMaster, predicted revenues could be four times as large. IBM is guaranteeing to rent 25 per cent of the 10,000 square metres of floor space that each CyberCentre will provide.

"Getting IBM on board is a vote of confidence for KPNQwest," said one analyst. "It's a very, very fast-growing market and there probably isn't quite enough supply at the moment... That will reverse itself quite quickly." KPNQwest faces competitors such as Colt Telecom, Cable and Wireless and MCI WorldCom and its deal with IBM is not exclusive.

IBM will provide consulting, IT design and support services to clients and co-location capabilities. KPNQwest will offer network services via its broadband network that connects 46 cities in 14 European countries.

The move into offering co-location services, where companies can house IT systems, is part of a trend among telecoms groups to move up the value chain amid concerns over an potential glut of fibre-optic networks.

Shares in KPNQwest, a joint venture between the Dutch telecoms group KPN and the US long-distance carrier Qwest, rose 12 per cent, despite a global sell-off in tech stocks.