LineOne's future on the line

BT and United News and Media could sell three-year-old ISP

LineOne may face the auction block as parent companies United News and Media and BT (quote: BT) look to raise cash, according to industry sources.

BT has been rumoured to be considering the sale of LineOne for months, after it paid out millions of pounds for a third-generation (3G) wireless licence earlier this year. The company said in September it would attempt to raise at least £10bn by the end of next year to reduce its mountain of debt.

The two parent companies are likely to appoint an investment bank as early as this week to dispose of the ISP, which could raise several hundred million pounds. A BT spokesman declined to comment on the sale. LineOne did not respond to repeated requests for comment.

BT's stake in Internet portal Excite UK is also understood to be a likely sale in the next few months.

Rating agency Standard & Poor's downgraded BT's credit worthiness by four notches in August because of its rising debt and warned it may cut it again if BT delays selling assets.

LineOne was launched in 1997 as a joint venture between BT and Rupert Murdoch's News International, billing itself as the perfect marriage of Internet infrastructure and world-class content. More recently News International's stake was bought out by United News and Media, which last week moved to close down its travel site, uTravel.

Internet service providers such as LineOne are facing massive consolidation with the advent of unmetered Internet access next year. Flat rate subscriptions will force ISPs -- most of which today outsource their networks -- to take on additional network and billing infrastructure. But this task could prove difficult or impossible with the current lack of investment from public and private markets, making it likely many smaller ISPs will either merge or be shut down.

"The unmetered environment favours experience and scale, and LineOne has had to confront that. That is why they are in effect stepping out of the mainstream," said a spokesman for AOL, the world's largest ISP. "Unmetered networks are new to the UK, and they will take a philosophical shift for ISPs."

How can you get online for less? Find out in the Unmetered Access Special.

See techTrader for the latest technology investment news, plus quotes and research.

For complete business coverage, see ZDNet UK's Enterprise Channel.

Have your say instantly, and see what others have said. Click on the TalkBack button and go to the ZDNet News forum.

Let the editors know what you think in the Mailroom. And read other letters.