PlusNet plans flotation on AIM

The company may find the cash useful as consolidation turns the outlook for smaller UK ISPs into a game of PacMan

UK Internet service provider PlusNet is hoping to raise millions of pounds by floating itself on the London stock market.

It is understood to be planning to use the money to snap up a swathe of rival ISPs, at a time when the long-awaited consolidation of Britain's broadband market is beginning.

PlusNet announced on Monday that it intents to become a member of Britain's alternative investment market (AIM). It estimates that it is worth about £35m, so it could raise a substantial seven-figure sum by selling a chunk of itself to outside shareholders.

Given that PlusNet is already profitable, it will be able to use this cash injection to expand by buying smaller ISPs. The ISP is keeping quiet about its plans, pointing out that so far it has only announced an 'intention to float', but acquisitions are on its mind.

"A flotation could act as a catalyst for consolidation," said a source close to the company on Monday.

There are over 100 ISPs selling broadband services in the UK at present. Analysts believe that this isn't sustainable in the long run, and predict that this number will reduce significantly during the next few years.

This process seems to have already begun. Last month Cable&Wireless announced it was buying Bulldog, a rival to BT Wholesale, and in October 2003 Pipex was bought by GX Networks.

Plusnet has about 165,000 customers at present, of which 60,000 are on broadband. This makes the company a second-tier ISP, behind major players such as BT, AOL, Wanadoo and Tiscali.

By going for a cash injection now, PlusNet may be hoping to be a hunter rather than the prey when the consolidation game heats up.

Last week PlusNet launched a pay-as-you-go broadband package under which users are billed depending on how much data they download. A successful flotation could also enable the ISP to launch similar services.

"If you look at the way broadband has developed, it's all about innovation. Price is not the differentiating factor any more," said the source.