National Grid Transco sells its telecoms unit for £1

The electricity and gas group National Grid Transco yesterday confirmed the sale of its loss-making telecoms operation 186K to Hong Kong's Hutchison Whampoa for a nominal £1.

But, under the terms of the deal, the utility also agreed to pay Hutchison around £25m to free it from a contract to provide the mobile phone operator 3 with telecoms services.

The 3 venture, which is controlled by Hutchison Whampoa, was 186K's biggest customer, although the size of the contract was never disclosed.

The disposal of the 186K assets marks the end of an unfortunate period of ownership for the utility that is likely to see almost all of the operation's 55 staff made redundant. Only around 10 to 20 of the 186K staff are expected to transfer to Hutchison under the deal.

186K was originally set up in 2000 by Lattice, which later merged with National Grid. About £450m has been invested in the operation to date and the business has so far racked up losses of about £108m, including a £56m loss last year.

National Grid Transco has, however, fully written down the value of the former Lattice telecoms assets, including the 186K operation. Lattice took a write-down of around £250m in May, which was followed by a further £166m write-down last month.

The sale of the 186K assets, in effect a fibre-optic network of 1,800km linking 20 major towns and cities, is expected to be completed by the end of the year.

The deal is part of National Grid Transco's plan to withdraw from the alternative telecoms sector entirely. Among its remaining telecoms interests in the UK is a venture with Thames Water called Urband and a 20 per cent stake in the telecoms business Bulldog.

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