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Business Serve Acquisition, placing and trading update


Business Serve plc (“Business Serve” or “the Group”), one of the UK’s leading ISPs (Internet Service Providers), has today acquired the telecommunication group of affiliated companies, Pipemedia, which comprises Pipemedia Limited, Pipecall Limited and Pipemedia Communications Limited.

Pipemedia is one of the UK’s market leaders in the provision of Voice Over Internet Protocol (VoIP) and broadband telephone services to both corporate and carrier customers. Its acquisition enables Business Serve to transform into a converged communications provider spanning both the telecommunication and ISP marketplace, as well as providing immediate access to a new and rapidly growing customer base.

Business Serve has acquired Pipemedia for an initial consideration of £300,000 together with 692,841 ordinary shares of 1p each. In addition to the initial consideration, deferred consideration of up to a maximum of £1.5 million, settled equally between cash and shares, may become payable over the next two years, should Pipemedia achieve certain performance targets.

The cash element of the acquisition has been funded by a placing of 2,288,479 new ordinary shares at 43p per share by Teather & Greenwood raising approximately £1 million before expenses. This represents approximately 10% of the Group’s issued share capital. Certain Directors of the Group participated in the placing, together subscribing for approximately 186,000 shares. Application has been made for these shares to be admitted to trading on AIM.

Pipemedia was one of the first companies in the UK telecoms market to develop a converged VoIP and traditional telephone service called PipeCall. PipeCall enables business and residential customers to make and receive telephone calls, without the need or cost of a traditional telephone lines, through the use of a broadband connection.

Subscribers to Pipecall pay a minimal set-up fee and a low monthly line rental charge. Business Serve anticipates that users will be able to make cost savings of up to 75% on their traditional landline services. Calls between Pipecall subscribers are free.

Based on unaudited management accounts Pipemedia had revenues of £2.64 million, a loss before tax of £122,000 and net assets of £150,000 as at May 31 2004. For the first three months of the year to 31 August 2004, Pipemedia’s unaudited management accounts showed a profit before tax of £45,000 and net assets of £110,000.

The Group continues to trade in line with the Board’s expectations.

Simon Cleaver, Chief Executive of Business Serve plc, said:

“Pipemedia is an extremely exciting acquisition for Business Serve. We will now be able to offer “a one-stop-shop” for the provision of both traditional ISP products such as web hosting and broadband, as well as telecommunication services such as carrier pre-selection and VoIP - with all the substantial cost savings that this new service brings.”

“This acquisition enables Business Serve to become the UK’s leading converged communications Group which differentiates us significantly from competitors within both the ISP and telco marketplaces. We will be able to offer new services to both marketplaces. Our immediate aim is to fully integrate Pipemedia so that we can concentrate as quickly as possible on the cross-sell opportunities between the two customer bases and take full advantage of the opportunities that are emerging from within the VoIP marketplace.”

“In the same way this emerging technology has transformed the USA and Japanese telecoms market, it is set to do the same for the UK, which makes for an exciting future for Business Serve.”


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