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Scottish Telecom float plan

ScottishPower, the multi-utility group, could float its fast-growing telephones business, Scottish Telecom, as early as next year in a move that would value the business at up to pounds 800m.

Chris Godsmark, Business Correspondent, reports.

Ian Russell, ScottishPower's finance director and head of its telecommunications business, is preparing an offensive next month with big investors and analysts to outline expansion plans for Scottish Telecom, in a bid to reflect the growth of the subsidiary in the utility group's share price.

Speculation about the pounds 1bn flotation of Energis, planned for December, led to a sharp rise in the shares of National Grid, its parent. ScottishPower will tell analysts at a briefing on 1 October that Scottish Telecom would be worth pounds 500m to pounds 800m in a float using a similar method of valuation.

Scottish Telecom is poised to earn revenues of around pounds 110m this year and is on course to make a profit this year, unlike Energis, which is not set to break even until 2000. The company aims to take 10 per cent of the pounds 2bn Scottish phone market over the next two years and is expected to make profits of pounds 20m-pounds 30m in 1998-99.

Created three years ago, Scottish Telecom has similarities to Energis in its use of advanced technology which wraps phone wires around electricity cables. Since April it has expanded into the residential market by launching a fixed-line wireless service which uses ariels to bypass British Telecom's dominant local network. The recently floated Ionica has pioneered the same form of technology in eastern England.

Starting with a service in Edinburgh, Scottish Telecom plans to expand the wireless links to homes in Glasgow next year. It has so far grabbed nearly 7 per cent of residential lines in Edinburgh, a better penetration rate than Ionica in eastern England, and has 300 orders coming in each day.

The company is considering expanding its service to other parts of the UK as part of an annual investment programme worth around pounds 30m. One possibility would be to use its data network in the North-west built by Manweb.