HOWZAT

Yesterday Thus admitted that it was struggling to cope with the acceleration of broadband and the way that it is drawing customers away from dial-up internet services. That admission, as much as another profit warning, explains why the shares lost another third of their value.

Spinning Thus out of ScottishPower was at the time a clever attempt to cash in on the market’s enthusiasm for all things linked, even tangentially, with the internet. Today, however, there are just too many companies vying to provide similar services. The cable companies are blitzing the residential market in particular with special deals if they sign up for mixed packages of television, telephony and internet access. On the corporate front, Thus faces tough adversaries in BT and Cable & Wireless, and smaller players such as COLT and Energis continue to tout for a share of the business.

Thus has been successful in picking up some big name customers but yesterday it had to revise down its profit forecast again. The company is not quite on its knees: cashflow for the first half is expected to be positive and top line growth is around 12 per cent. But corporate customers are having to keep a close watch on expenditure and they are constantly searching for the most attractive deals in telecoms. For a smaller player to provide that is not easy.

Consolidation in the sector has been a long time coming but it does appear to be inevitable. The question is when and at what price. Archie Norman, sitting at the helm of the restructured Energis, probably has plans for being a consolidator rather than consolidated. COLT, with a City franchise that made it look a tasty morsel for one of the bigger players, has been offered temporary protection by its backers, Fidelity, but that has to be of limited duration.

William Allan, Thus’s chief executive, is not yet ready to throw in the towel but with margins continuing to come under pressure, he looks to be in a vulnerable position.

'A third of internet users now shop online regularly . . . It suggests internet shopping has reached critical mass'

SURFING the internet at home is a bit like walking down a dodgy street at night. Surfers keep having to keep looking over their shoulder for electronic pickpockets, muggers, conmen, psychopaths and flashers. Otherwise, millions more would do their shopping by internet. Those prepared to take the electronic risks can at least avoid the real ones. They can also buy at all hours, have goods delivered, enjoy wider choice, find lower prices and not have to pay a £2 parking fee to pop into a bookshop. Not surprisingly, shoppers who do take the plunge online are now beginning to get the habit in a much bigger way. A survey of 2,000 adults for Alliance & Leicester has found not only that more shoppers are now prepared to buy online, but that those who do so buy much more than they did when the internet revolution was being so prematurely hailed.

The average spend in the past year was £770, a substantial sum given that online grocery shopping is still in its infancy. Nearly half of internet shoppers had bought a flight or holiday accommodation online in the past 12 months, which accounts for a chunk of the average spend. Almost as many, 45 per cent, had bought CDs, which suggests that the rapprochement between record companies and internet pirates may be working.

Travel agency shops have suffered as much as any, not just because they tend to be on secondary shopping streets with no adequate parking provision. This is also a sector where the internet scores heavily on choice and speed, for those who plan instant breaks on the bus back from a bad week at work. And it demonstrates yet again that improved distribution methods can allow an industry to grow much faster.

About a third of internet users now shop online regularly, with a similar proportion buying electrical equipment, appliances, clothes and shoes. This is more surprising than buying CDs and books, where the goods come in standard form. It suggests that internet shopping has reached critical mass, that it will grow by bringing in more people, as well as by surfers spending more, and that those who expect high street rents to keep rising right up through the atrium level self-service restaurant are likely to be disappointed.

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