The company, owned by Scottish Power, already runs Scotland Online, an ISP and content provider with a £10-a-month online service. Reports that the deal values Demon at £60 million, or roughly £20 a share, are not thought to be accurate.
Rumours had been building all day online, although the reason for the initial reports in The Times linking BT to Demon are unclear. BT and Demon have had many close links in the past. One source told ZDNet News the BT story was a decoy to throw media attention off the truth.
Neither Demon nor Scottish Telecom would comment at the time of writing.