Demon woos telecoms giants to lead market

ISP looks for partner to bolster its position as bigger players move into the sector

The largest UK-owned internet service provider (ISP), Demon, is seeking a strategic partner to give it the necessary funds and clout to dominate the market

According to sources, Demon has sent out a prospectus to large industry players, including Deutsche Telekom AG and UK mobile phone operator Orange, in a bid to sell up to a 49 per cent stake in the company.

In a statement, Cliff Stanford, Demon?s founder and owner of over 50 per cent of the company, said: ?We are entering a new era for ISPs in Europe and therefore it is imperative that Demon has the right strategic partner to take advantage of the growth in the market and the forthcoming liberalisation in European telecoms.?

The company has claimed that it is not having financial problems, but that the planned sale of the stake is to provide funds to become a more aggressive player.

Stanford hinted that the partner sought would be a telecom company with the clout to provide a worldwide infrastructure. US analysts have argued that another likely partner would be AT&T, which has already made clear its intention to get into the ISP market. Last year, the US telecommunications company bought a small UK ISP but has yet to make a significant dent in the market.

Ashim Pal, an analyst at Ovum, said: ?The number of ISPs that are viable is reducing all the time. As more big players have entered the field there?s been a lot of consolidation and smaller players do not have the infrastructure to survive. Demon is seeing and feeling threatened by that.?

James Gardiner, Demon internet marketing manager, said the company would launch a programme to recruit Vars to sell Demon?s small business connectivity suite, Network Dial-up, within the next month.