Energis to buy services from Orange

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Energis, the telephones business likely to be floated this year by National Grid, is in negotiations with Orange which could see the mobile operator offering fixed-line services for the first time.

The deal would be the second link-up with a mobile company for Energis, which is expected to sign a similar agreement with Vodafone within days. Under the plans Orange could sell Energis fixed phone services under its own brand. It would enable Orange, newest of the four mobile operators, to move towards a combined mobile and fixed phone handset.

The deal would enable Energis to gain local links to more customers through the Orange mobile network, which has more than 1 million subscribers. Around 40 per cent of Energis's costs currently stem from paying access charges to route its calls through British Telecom's local network.

Energis is also carrying out trials of wireless technology to transmit fixed phone line signals to bypass the BT network. The technology, similar to that used by Ionica, would help the company push into the small- and medium-sized business market.

Though Energis has amassed 20,000 business customers it has so far concentrated its assault on the lucrative large company market, running large internal phone networks for Boots, Virgin and British Gas. Revenues of pounds 97m last year are expected to grow to pounds 160m this year.

Another area of expansion has come from Internet traffic. Energis is understood to have signed a pounds 10m contract with Demon, the UK's largest independent Internet access provider, offering phone line capacity. Though the flotation plans are advanced, the Grid is not thought finally to have decided on the sale. It could value Energis at up to pounds 1bn.