Global Crossing, the high profile telco that built its own international fibre-optic network, has filed for bankruptcy in New York.
The news came as the company, which counts the UK's Royal Mail as a customer, said it had sold off a majority stake for $750m in cash to partners in the Far East.
The bankruptcy filing is one of the largest ever by a telecoms company. Global Crossing said it had $22.4bn in liabilities and $12.4bn in assets.
According to analysts, the repercussions for international telecoms providers, and the enterprise customers that rely on them, could be far reaching.
While the filing had been widely expected, it came as another blow to the increasingly pressured US telecoms industry.
The company's hardships stemmed from its struggle with the debt incurred from building its global network, which links more than 200 major cities in 27 countries. The trouble came as slack demand for its network services and transport coincided with declining prices for bandwidth capacity.
Global Crossing maintained that around 55 per cent of its 85,000 customers are enterprises, with other telecoms providers making up the rest.
Announcing its bankruptcy protection, the company said its worldwide operations would be unaffected by the filing and that customers will not experience any changes in their service. "Ours is a balance sheet issue, not an operational one," explained chief executive officer John Legere in a statement.
But analysts are sceptical. "Chapter 11 means that Global Crossing will have a ton of staff turnover. That can only mean that, with a worldwide network, there will be tremendous upheaval and potential provisioning problems for its customers," said Kate Gerwig, principal analyst at CurrentAnalysis.
These issues could certainly force enterprise customers to rethink their international communications commitments, she added.
"The history of global networking companies is not good. Joint ventures have failed and now Global Crossing, a high-profile newcomer, has failed. Enterprise customers are more likely to go back to brand names like Equant, WorldCom, AT&T and BT," said Gerwig.
Global Crossing has insisted that, even though customers have been aware of the company's financial predicament for a while, it has still closed major deals.
The company announced in December that it had started work on a fully managed wide area network for the Royal Mail in the UK under a contract with Lockheed Martin Integrated Systems worth an estimated $33m.
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