Plusnet surges on talk of acquisition by BT

BT Group is in talks to buy the smaller rival Plusnet, the low-cost broadband supplier and telecoms company. Industry sources said talks between the two companies are at an early stage.

Both BT and Plusnet declined to comment. Plusnet shares surged more than 18 per cent to 179.5p yesterday as rumours of talks emerged in the wake of Carphone Warehouse's £370m purchase of AOL's UK access business. At 179.5p, Plusnet would be valued at around £53m. Plusnet shares traded as high as 411.5p in March when the company commanded a market capitalisation of nearly £120m.

The talks could lead to speculation about a bidding war for Plusnet. German press reports last week suggested the German internet group Freenet.de might look to buy a stake in the Sheffield-based company.

BT already has a relationship with Plusnet as it supplies broadband capacity to the smaller internet service provider. It also uses a piece of Plusnet software called Teleworker to service its blue-chip clients. The call management software, based on Plusnet's Workplace platform, enables a BT customer to better manage remote employees' communications needs. BT has used the software since 2003 and signed a memorandum of understanding with Plusnet in 2004.

Plusnet had more than 198,000 customers at the end of June and sales of £22.5m in the first half of the year. It offers customers broadband access for less than £10 a month and does not require users to sign up for a long-term contract. It regularly tops customer-satisfaction surveys.