Gas giant's telecoms venture blown out

Lattice Group, the gas pipeline operator in the throes of a £15bn merger with National Grid, has appointed investment bank ABN Amro to sell its telecoms arm, 186k.

A "for sale" sign is expected to be hoisted this month, with a price tag of more than £100m. The news ends an unhappy foray for Lattice into the telecoms sector. Unlike its bedfellow National Grid, which made billions from the formation and flotation of Energis, the loss-making 186k has already absorbed £400m.

186k is thought to have one of the UK's finest optical fibre networks, but because it was launched only last October it has relatively few customers. As a result some analysts believe Lattice may have difficulty finding a buyer.

Rivals Energis and Global Crossing's UK network are also on the stocks, further depressing the price for telecoms companies. Announcing a £250m write-down against 186k last month, Lattice chairman Sir John Parker claimed: "We have had a number of approaches already from fairly serious players." He said the build-out of the 186k network was largely complete.

The venture capital community, which has several billion pounds to spend on distressed telecoms companies, is likely to be interested in 186k. Apax Partners, run by Sir Ronald Cohen, has been linked to both Energis and Global Crossing's UK business.

Some analysts believe the mobile operators may run the slide-rule over 186k because their third-generation masts need linking via a high-speed fixed network.

Speculation is likely to focus on Hutchison 3G, a 186k customer, which plans to launch its third-generation services late this year.