Thus, the telecoms group that last month failed to buy much larger rival Energis, made clear today that it is in the market for acquisitions as the sector races to consolidate.

As it predicted that it would "significantly" stem operating losses in its first half compared with last year, Thus reiterated its determination to take part in mergers and acquisitions in the telecoms sector.

The group, led by chief executive William Allan, said: "We expect the UK telecommunication market to rationalise its structure and improve its overall financial viability through sector consolidation.

"Against this background, we are continuing to explore opportunities to create additional value for shareholders from acquisition opportunities but only if this offers the potential to accelerate our strategy and business plan to secure our long-term objective of a return on capital employed [that is] greater than our cost of capital."

Mr Allan added: "We remain confident that Thus has the strength and flexibility to succeed as the market transitions from legacy to new generation services where we have focused our capital investment on network and service capability.

"We have successfully delivered positive Ebitda [pre-tax profits before exceptionals] and cashflow on a sustainable basis, and we now expect to achieve positive operating profits during the second half of this financial year."

In August, Thus launched an audacious - but ultimately doomed - takeover attempt on Energis, which was already in advanced negotiations with Cable & Wireless.

Even though Thus offered more - some £800 million against C&W's indicated £780 million - Energis shareholders overwhelmingly backed its rival.

C&W eventually snapped up Energis for £709 million.

Thus at the time had a market capitalisation of about £212 million.

This morning, as the company said it was expecting to generate positive free cashflow for the second year in a row, its shares were unmoved at 14p in early deals amid muted trading volume. Based on last night's close Thus is worth just £188.8 million.

Despite its efforts to cut costs to improve its bottom line, Thus said this morning that pre-tax profits for the first half would be broadly unchanged on last year.

Pre-tax earnings before exceptionals for the year to the end of March were £39.9 million.

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