BT puts up pounds 3m to keep Ionica on line

Click to follow
BRITISH TELECOM has come to the rescue of Ionica, its former rival, amid fears that the ailing telecoms company would suddenly collapse and leave 62,000 customers scrambling to find a new telephone supplier.

BT is putting up pounds 3m to keep Ionica's network up and running until 28 February, when it will be switched off. In the meantime, BT will contact all Ionica's customers in an attempt to encourage them to switch to its network.

BT said it had put up the cash in order to ensure an "orderly transition" from Ionica to other telephone providers. "We wanted to avoid a sudden shutdown," a BT spokesman said. "It would be a catastrophe for us if 60,000 people were all trying to get a BT line at the same time."

The deal is the final humiliation for Ionica, once thought to be best placed to mount a serious challenge BT in the residential telecoms market. The firm, founded by Nigel Playford and valued at pounds 640m when it floated on the stock exchange in July 1997, was placed in administration in October after last-ditch attempts to mount a rescue collapsed.

PricewaterhouseCoopers, administrators to Ionica, have written to the group's customers to inform them of the deal. "In spite of significant interest shown by a number of parties in acquiring the business, regrettably I have been unable to conclude a sale," Neville Kahn, a partner at the firm, wrote in the letter.

"As a result, it will be necessary for your current Ionica telephone service to cease, and for you to be transferred to an alternative telephone supplier."

In return for its support, BT has been given access to Ionica's customer database and is planning to get in touch with all its customers. The company will offer them the standard charge of pounds 9.99 for customers who want to reconnect to BT - even if they have never been BT customers.

Cable operators will also be allowed to approach Ionica's customers in the areas they cover. However, it is unclear whether the cable companies will make the effort. One of Ionica's many problems was that it signed up a large number of risky customers who subsequently defaulted on bills.

The deal has the blessing of Oftel, the telecoms watchdog. David Edmonds, Oftel director-general, said: "The deal announced today will ensure an orderly transfer of customers to another phone network."