BT rumoured to be eyeing PlusNet with takeover view

By Simon Aughton

Posted on 12 Oct 2006 at 12:46

PlusNet has declined to comment on a report that it is in talks about the possibility of a takeover by BT Retail.

The Independent claimed yesterday that the Sheffield-based ISP may become the subject of a bidding war after 'industry sources' indicated that BT may put in a bid for the company. BT Retail also declined to comment.

PlusNet's share price rose by more than 18 per cent as the rumour circulated, valuing the company in the region of £53 million, although that is some way below the ISP's £120 million market capitalisation in March. The company has around 198,00 customers for its broadband and broadband-and-phone services; BT Retail is the UK's second largest ISP after ntl:Telewest, with more than 2.8 million subscribers.

The sheer weight of numbers in the Internet access market - ISP review lists 201 ADSL broadband providers alone - coupled with falling prices makes consolidation inevitable. Just yesterday AOL announced that it was selling its UK access business to Carphone Warehouse while last month Pipex agreed to pay £12 million for Cable & Wireless's Bulldog customer base.

Last week, PlusNet CEO Lee Stafford revealed his concerns that the UK's broadband infrastructure is under considerable pressure.

'We're now in a world where connection speeds have increased, bandwidth-driving applications are more readily available and everyone's infrastructure is full,' he told PC Pro. 'It means broadband is slowing down at evenings.'

As a consequence, he said, investment is under threat, particularly BT's 21st Century Network plans. The implication is that smaller ISPs such as PlusNet, which rely on BT for some if not all of their network provision, may not be able to compete with the larger providers' LLU networks.