Web-exchanges operator Telecity plans £1bn summer flotation

Undeterred by the falls in technology shares, TeleCity, an internet infrastructure company, is planning a possible £1bn float this year which would make a paper millionaire of the former university computer technician who founded it in 1998.

TeleCity operates internet exchanges which physically connect companies and internet service providers to the worldwide web. Michael Murphy, the former managing director of British Telecom, has been appointed chairman.

Mike Kelly, TeleCity's founder and chief executive, said the recent volatility afflicting technology shares did not pose a threat to the company's plans to raise money. "Customer demand for our services is strong and it's very important to be first in this business," he said.

TeleCity services 70 customers from its six sites, and plans to have 12 sites by the end of the year, doubling them again in 2001. Each site costs at least £6m to construct.

It is thought that TeleCity could be valued at as much as £1bn. The company's rivals include Redbus Interhouse, which is valued on the London Stock Exchange at £284m, and Exodus Communications, a US company with a market capitalisation of $16bn (£10bn).

Mr Kelly, who is thought to own about 25 per cent of the company, said he would not sell any shares when TeleCity floats. He set up the company after realising that internet infrastructure would become concentrated in a handful of fixed sites generating huge demand for outsourced services. 3i contributed £24m through three fundraisings, giving it a 45 per cent stake in the business. The managers put in £100,000 between them.

Mr Kelly said he would be looking to recruit from Manchester University, where he conceived of the company during his tenure as the computing department's business development officer.