BG Group, the former British Gas, has held talks with the gas and electricity regulator.

It plans to run telephone lines alongside its vast Transco pipelines network. Chief executive David Varney confirmed the company would soon be making a decision on such a move, adding that a number of telecoms companies had shown a strong interest.

He said: "We've been talking to Ofgem about using Transco assets in a telecom venture. We are also talking to a variety of telecoms companies but under confidentiality agreements. Within the year we will move to a decision. It is a fast moving market and we want to be sure we have the technology."

He expected no regulatory problems stemming from such tie-ups, citing the case of Energis, the telecoms company which built its infrastructure alongside National Grid electricity cables.

Such a move would invigorate BG's profits, which fell last year after accounting changes and a fall in earnings from the Transco pipelines business.

Price cuts to meet regulatory demands contributed to an underlying £82 million fall in Transco operating profits in the fourth quarter of the year alone, despite 13 per cent more gas being pumped to customers.

Much of the growth in volume came from the massive gas users such as power stations, which are charged less. Pre-tax profits for the year to December 31 came in at £1.2 billion against £1.23 billion the previous year.

Shareholders will pick up a total dividend of 9.2p a share, compared with 8.6p in the previous year. Earnings per share for 1999, excluding disposals, rose by 5 per cent to 19.6p.

Group cash flow from operating activities before exceptional items fell from £2,366 million in 1998 to £1,694 million in 1999, mainly reflecting the cessation of the Centrica prepayment operation.

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