POWERNET Telecom, the Internet company which crashed owing £30m in October, is to be wound up after efforts to find a buyer failed.

Creditors were being told of the decision at a meeting in Manchester today.

Joint administrator Simon Allport, a partner and head of accountancy firm Arthur Andersen's north west corporate restructuring division, said that despite interest from five potential buyers in the company's £28m hi-tech network, a price could not be agreed with creditors.

The closure will be a blow to investors, whose chances of getting their money back are slim.

However, Powernet, like other new-economy start-ups, never fully owned its network equipment, which was provided by manufacturers under vendor finance agreements. So the biggest creditors are not banks or venture capitalists, but the providers of the infrastructure.

Mr Allport had hoped to raise £36m by selling off Powernet in three parts - its high-speed broadband Internet infrastructure for £30m; its Internet incubation business, Powerten, for £5m, and its freephone business, Freecall, for £1m.

Had this happened, all creditors would have been paid in full, with £4.2m left over.

Offers for the business had been affected by the swing in market sentiment away from dot-com and Internet companies.

Now, the network equipment is being repossessed by its suppliers.

Mr Allport said: ''The next stage is to seek to realise value from the investments in the incubation business, then wind up the company.''

The company originally employed 70 staff, but since the administration order was issued on October 2 it has been working with a skeleton staff. These jobs will now go.

Clouds gathered at Powernet last summer when it failed to secure new funds of £4.5m. In September, one creditor, PA News, which had supplied the company's Internet Service Provider, Totalserve, with news and sport content through its Ananova service, issued a winding up order.

On September 29, Powernet, unable to pay wages and salaries of £210,000, was forced to call the police to its offices after some worried staff prepared to take computer equipment.

Considerable controversy surrounded Powernet after it emerged last summer that its founder and chief executive, Ian Carey, had been disqualified as a company director following the failure of another Manchester business.

The Wythenshawe-born former advertising executive was banned for five years in May, 1999, in relation to his conduct as a director of Call Free Directories, which failed owing creditors £680,000.

Mr Carey successfully went to court to obtain permission to act as a director of Powernet.

Asked about the role of Mr Carey, and the other directors in Powernet's demise, Mr Allport said: ''I am preparing a report, as I have to, which will be sent to the Department of Trade and Industry, and I, therefore, can't say more.''

Sources have revealed that the some of the biggest names in the IT industry had supplied Powernet with equipment. They include Sun Microsystems, Horizon and Cisco, all of which were owed several million pounds.

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