Scottish Power poised for $1bn telecoms float

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The Independent Online
SCOTTISHPOWER is poised to go ahead with the pounds 1bn flotation of its telecoms division later this year and launch a new combined Internet and telephone service aimed at its 5.5 million domestic customers.

A decision on the flotation of Scottish Telecom will be taken this summer by the ScottishPower board. Assuming it decides to proceed with a public offer, about 25 per cent of the shares would be sold this autumn, raising around pounds 250m.

Other options include a demerger of the business or a trade sale but the company and its financial advisers are thought to favour a flotation strongly.

Ian Russell, Scottish Power's deputy chief executive and finance director, said a flotation would remove the "conglomerate discount" that the telecom business suffers from as part of a bigger multi-utility.

Scottish Telecom doubled operating profits to pounds 10m last year on sales up by 100 per cent to pounds 220m, helped by the pounds 66m acquisition of Demon Internet last May. In the last 12 months it has also doubled its corporate customer base to 500 and taken on a further 100,000 Internet customers. Total investment so far in the business is pounds 304m.

Scottish Telecom has 25,000 residential customers but ScottishPower may offer a telecom and Internet package to all the 5.5 million homes it serves through its electricity, gas and water supply businesses.

Reporting a pounds 4m increase in pre-tax profits last year to pounds 664m, ScottishPower said its pounds 4bn acquisition of the US utility PacifiCorp remained on course for completion later this year. Despite persistent reports of opposition to the takeover in the six western states served by PacifiCorp, ScottishPower said it was confident that the deal would be completed by late autumn.

The deal, the first takeover of a US utility by a UK counterpart, was announced last December. "Nothing we have seen ... since has given us any surprises," said Ian Robinson, ScottishPower's chief executive. "There are no black holes."

The takeover needs the approval of regulators in six states - Oregon, Utah, California, Wyoming, Idaho and Washington. Mr Robinson said regulatory hearings would be take place in July and August and he expected approval for the deal two months later. ScottishPower expects to make cost savings of $200m from PacifiCorp and has pledged not to implement the steep price rises planned by the previous management.

Meanwhile ScottishPower has gained one million gas and electricity customers since the energy market was liberalised, at an average cost of pounds 35 per customer.