BT buys service provider Plusnet

BT is buying Sheffield-based service provider Plusnet in a deal valuing the company at £76m.

The sale is subject to the approval of shareholders but it has been recommended unanimously by the directors.

Plusnet chief executive Lee Strafford said: “Our sector is consolidating and there are considerable benefits to Plusnet in becoming part of BT.

"BT recognises the importance of retaining Plusnet’s identity and culture and I believe this will give rise to exciting opportunities for Plusnet, our customers and our employees.”

Plusnet, which has been operating since 1997, has nearly 200,000 broadband customers and a few remaining dial-up users. If the offer is accepted, Plusnet will retain its brand and identity. In the year up to 30 June 2006 it had revenues of £41m and a net income of £3.9m.

BT Retail chief executive, Ian Livingston said: “Plusnet’s customers and employees will benefit from the combination of Plusnet’s excellent platform and access to BT’s resources and technology development.”

Tim Johnson, publisher of broadband market research company Point Topic, is not surprised by BT's move to buy Plusnet.

He said: "BT and Plusnet have always had a close relationship with both positioning themselves as more upmarket ISPs; they are not the cheapest but offer customers other benefits.

"I also expect BT will keep the Plusnet identity pretty much as it is because it is a good brand."

Johnson believes other developments involving other mid to larger ISPs are likely to be imminent and said the speed at which consolidation is now happening is leaving smaller ISPs behind.

He added: "Even I am amazed at the speed that so much is happening so fast. It has really got serious and while there will always be a market for smaller ISPs, they will have to make sure they do a lot to differentiate themselves.

"Orange, for example, is being left in the dust. I wouldn't be surprised to see more consolidation with mid-size brands such as BSkyB looking to acquire or form some kind of partnership with ISPs such as Tiscali or Orange."