Profits fell to £296,000 ($461,000) compared to £16.5 million ($25.7 million) last time after the company had to make provisions of £21 million ($32.7 million) for the failure of KPNQwest. The impact on rental income was eased by the fact that most customers using facilities fitted out by KPNQwest became direct tenants of Global Switch.

The other major tenant, Global Crossing, has come out of administration without going into receivership. Global Switch has agreed terms to restructure a number of leases and for joint marketing of fitted out space.

Chelsfield chairman Elliott Bernerd said: "The disintegration of KPNQwest knocked the Global Switch results for the period. Nonetheless, we are starting to see replacement lettings and there remains a good level of enquiries."

He added that the conversion into large scale new leasings will in all probability only come as part of a broader restoration in IT spend but there are already corporates in the market looking to buy fitted telehousing space.

John Gellatly, property analyst, at Credit Suisse First Boston said: "The news we were looking for is regarding the future of Global Switch. Nothing definite has been provided but the indications in the statement are that discussions are taking place with institutional investors – the scale of these negotiatons would apparently be such as to require shareholder approval."

Instant Insights /

Chelsfield Profits Hit by Telecom Crisis

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