Lattice takes £250m telecoms hit

Lattice, the gas pipeline operator which is merging with National Grid, yesterday paid the price for its ill-fated foray into telecoms by putting the fledgling business up for sale and announcing a £250m write-off.

The write-down in the value of the business, known as 186k, brings the bill to Lattice shareholders to more than £400m since the company decided to build a fibre-optic telecoms network alongside its pipelines 18 months ago.

In addition to the £250m write-down, 186k has also run up cumulative losses of about £130m.

Sir John Parker, the chairman, said the group had already received a number of "serious approaches" for 186k from potential bidders in the UK and overseas and hoped to complete the sale by next March at the latest.

However analysts were sceptical of how much the business would fetch. Lattice has invested £350m to £400m in 186k but it is now valued at just £100m to £150m in its books.

The decision to sell 186k follows what Sir John described as a further "marked deterioration" in the market in the first three months of the year. However he maintains that Lattice had no regrets about having entered the telecoms market in the first place, saying that hindsight was a wonderful thing.

The write-down contributed to a sharp drop in profits for the 12 months to 31 March. Lattice also suffered from the mild weather, higher pension payments and increased corporate costs.

Profits at the pipeline business Transco fell by £115m after a £92m increase in its main replacement costs and a £45m increase in pension charges. The exceptionally mild winter also cost Transco £78m in reduced revenues from gas shippers. In the three-month period to the end of March Transco's profit fell by £233m.

There was better news for shareholders in the shape of a £400m surplus in the Lattice pension fund based on the latest accounting standards FRS70. The pension fund had assets of £11.7bn at 31 March against estimated liabilities of £11.3bn. The fund, which pays out a proportion of the final salary as pension, has 100,000 members but Lattice has closed it to new employees.

The company has so far identified 700 of the 2,400 job losses in February after its regulatory price review and implemented 300. The merger with National Grid will mean a further 100 to 200 job losses with the closure of one of the two companies' Midlands offices.

But Sir John pledged that safety would not be compromised in any way saying a record £2.5bn will be spent over the next five years to renew the main network.