Energis may link with cable firms to reach new customers

Energis, the telecommunications business owned by National Grid, is considering radical plans to form alliances with UK cable companies to give the network better access to local business customers.

The move, which could cost up to pounds 50m in additional investment, is thought to be a clue to Energis's long-term strategy following last year's persistent speculation that the Grid, under chief executive David Jones, was looking to sell a substantial stake in the business, which runs fibre-optic phone wires along electricity cables.

Energis has so far invested pounds 550m in building a 4,500km national fibre- optic trunk network, which includes running phone wires along London tube tunnels. However Mike Grabiner, Energis's chief executive poached last year from British Telecom, has become increasingly frustrated at access charges it has to pay to use BT's local phone network. Out of likely revenues this year of pounds 100m, more than 40 per cent goes directly to British Telecom, which still controls more than 90 per cent of phone lines.

Energis has already complained about the organisation of the UK's local phone network to regulators in the US and the European Commission, which are investigating BT's planned pounds 13bn merger with US long-distance giant MCI.

The US watchdog, the Federal Communications Commission, has said it will only give the BT-MCI deal the go-ahead if the two companies can prove the UK market is as open as in the US.

Mr Grabiner declined to specify which cable operators would take part in partnerships, but said discussions were going on with most companies. "We haven't ruled anything out or walked away from anything."

He said that the deals would be "deeper" than conventional partnerships and would overcome regulatory rules which prevent cable companies selling capacity on their local networks to long distance operators. The Grid apparently remains committed to sell a stake in Energis to an outside investor by the end of this year.

Talks with AT&T, the US's biggest phone company, had started in 1995 but were abandoned many months ago. One reason the Grid has been more laid back about finding a partner is that Energis has been outperforming forecasts under Mr Grabiner after a shaky start.

Observers suggested a series of piecemeal cable deals pointed to Energis allying itself with the gradually consolidating cable industry in a "third force" to compete with BT and the pounds 5bn merged company currently being formed by Cable & Wireless, Bell Cablemedia and Nynex CableComms.

Telewest has so far stayed out of the C&W deal, preferring to invest in a long-distance partnership with Racal.