1 February 2006

THUS GROUP PLC TRANSFORMATION

THUS today announces a series of steps which will significantly increase the scale of its UK business telecommunication activities, accelerate growth in the UK market and increase focus on its core UK operations:

1. Acquisition of your communications for initial consideration of 391,532,852 new ordinary shares to add scale to the business
2. Recommended cash offer for legend communications plc (“legend”) to accelerate the growth of demon UK
3. Placing of 67,430,657 new ordinary shares to finance part of the legend offer
4. Intention to sell demon Netherlands to focus on the UK
5. 1-for-10 share consolidation

1. Acquisition of Your Communications

The most significant element of this transformation of THUS is the proposed Acquisition of Your Communications from United Utilities for an initial consideration of 391,532,852 new ordinary shares, equating to £58.8 million (based on the five day volume-weighted average share price of THUS’s shares up to and including 31 January 2006, representing a price of c. 15.0p per share). Your Communications is an alternative carrier for business customers and the public sector, predominantly in the North West of England. It provides fixed line voice and data services and operates a mobile business which is Vodafone’s largest independent UK business-to-business service provider.

The initial consideration will be payable through the issue of 391,532,852 new ordinary shares to United Utilities, meaning that United Utilities will control 22.5% of the enlarged issued share capital before the Placing explained below (21.7% following the Placing). There is a possible further allotment of ordinary shares in the Company depending on whether THUS’s share price reaches certain Strike Prices any time on or before 31 December 2007. Specifically, before adjusting for the Share Consolidation, United Utilities will be entitled to a further 22,747,010 shares if the price exceeds 19p; plus 23,349,570 shares if the price exceeds 20p; plus 23,976,410 shares if the price exceeds 21.5p; plus 24,628,830 shares if the price exceeds 24p; plus 25,308,240 shares if share price exceeds 27p. Taken together, if the share price reaches or exceeds 27p, United Utilities will be entitled to a total of 120,010,060 new ordinary shares, taking its shareholding to maximum of 27.5% or 26.5% (before and after the Placing respectively).

2. Recommended cash offer for Legend

In addition, THUS today announces a recommended cash offer for the entire issued and to be issued share capital of Legend at 40p per share, valuing the current issued share capital of Legend at £11.5 million. Legend provides a range of internet service provider (ISP) services to business customers in the North of England. Full details of this transaction are included in a separate Legend Offer Announcement released today.

3. Placing of 67,430,657 new ordinary shares

The Legend transaction will be financed from existing cash resources and a Placing of new ordinary shares representing 5% of THUS’s share capital (67,430,657 new ordinary shares).  The Placing is not conditional on successful completion of the Legend acquisition.

4. Sale of Demon Netherlands

THUS also today announces its intention to sell Demon Netherlands, which offers Internet services in the Netherlands. Demon Netherlands had turnover of £20.4m in the year to 31 March 2005.

Taken together, these four steps will create a stronger, more focused participant in the UK business telecoms market, with the financial resources, scale, product set and customer base to continue the company’s growth path and deliver returns for all shareholders.

5. 1-for-10 share consolidation

Finally, it is proposed that the share capital of the Company be consolidated on the basis of one new ordinary share of 25 pence for every ten existing ordinary shares, to reduce the volatility of the Company’s shares..

FURTHER DETAILS ON THE YOUR COMMUNICATIONS ACQUISITION

Benefits of the Your Communications Acquisition

The Board believes that the Acquisition will:

• Accelerate THUS’s existing business plan to create a leading nationwide alternative carrier for business customers
• Deliver over £25 million of annual operational cost synergies upon full integration (at one-off cost of approximately £30 million incurred largely over next 12 months)
• Provide opportunities for selling THUS’s suite of next-generation, IP-based services to Your Communications’ existing voice customers
• Establish THUS as the preferred supplier of telecom services to United Utilities and strategic partner to Vertex, United Utilities’ outsourcing services subsidiary
• Increase THUS’s network reach and density across the UK, particularly in the North West of England
• Increase the ability of the Enlarged Group to win larger customer contracts through greater scale and market presence

Structure of the Enlarged Group

• United Utilities to become a shareholder in THUS with an interest of 22.5% (21.7% following the Placing for the Legend acquisition)
• Simon Batey, Group Finance Director of United Utilities, to join the Board as a non-executive director

Ongoing financing arrangements

• Existing £55 million facility extended by £30 million principally to provide funding for integration following completion of the Acquisition

Outlook for Enlarged Group

• Increased scale, customer base and incremental revenue to the Enlarged Group
• Positive impact on THUS earnings following integration
• Well-positioned to improve financial and trading performance once integration and majority of synergies successfully achieved

Timetable for Your Communications Acquisition

• Intention to complete by the end of February 2006

Commenting on the Your Communications Acquisition, John Roberts, Chief Executive Officer of United Utilities, said:

“As I indicated in the announcement of United Utilities’ results for the six months to 30 September 2005, market conditions continue to be difficult for the telecommunications sector, including Your Communications.

I strongly believe that by joining forces and integrating Your Communications into THUS’s strong product platform, under Bill Allan and his management team, we will create a firm foundation for future growth, creating value both for existing THUS shareholders and for United Utilities.

As further evidence of our confidence in the combined business, United Utilities has today announced that THUS has been appointed the preferred supplier of telecoms services to United Utilities and has formed a strategic partnership with Vertex, United Utilities’ outsourcing services subsidiary.”

FURTHER DETAILS ON THE RECOMMENDED CASH OFFER FOR LEGEND

THUS also announces the terms of a recommended cash offer to be made by PricewaterhouseCoopers on its behalf for all of the issued and to be issued share capital of Legend.

The acquisition of Legend, if completed, will deliver a number of additional benefits to THUS:

• Accelerate the growth of Demon UK through the addition of a business customer base focused on SMEs, in particular adding c. 14,000 DSL customers to Demon’s existing c. 106,000 UK DSL customers
• Strengthen Demon UK’s hosting presence and capability
• Complement existing geographic customer distribution and sales presence
• Deploy each company’s best-of-breed product set, including Legend’s DSL VoIP capability

Further details of the offer for Legend are set out in the Legend Offer Announcement released today.

CONCLUSION

Commenting on the proposed transactions, Philip Rogerson, Chairman of THUS, said:

“The Acquisition of Your Communications will add scale to our business, bring new customers and create significant operational synergies.  The Acquisition is part of a trend towards consolidation in our industry that, we believe, offers the potential to create a more sustainable industry structure and improve returns.  The trend towards consolidation coincides with decline in demand for traditional telecommunication services and an increase in demand for more innovative, next-generation services.  Ahead of our peers, THUS already has a next-generation network and service capability in place allowing the Enlarged Group to move forward and build its position in the market with confidence.  We look forward to welcoming our new customers.

In addition, the acquisition of Legend Communications will add incremental scale and augment Demon UK’s existing operations.  Finally, we have today announced the intention to sell Demon Netherlands in line with our focus on UK telecommunication activities.

Taken together, these transactions will transform the THUS Group, creating a larger, stronger and more focused participant in the UK telecommunication market.”

An analysts' conference will be held this morning at 9.00am for 9.30am at City Presentation Centre, 4 Chiswell Street, Finsbury Square, London EC1Y 4UP.  A simultaneous webcast of the conference will be screened, please visit www.thus.net/transformation for further details.

For further information on the Your Communications Acquisition, please contact:

THUS Group plc

Greenhill & Co.

Smithfield

For further information on the Legend acquisition, please contact:

THUS Group plc

PricewaterhouseCoopers LLP

Citigroup

Smithfield

Greenhill & Co. International LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively as sponsor and financial adviser to THUS Group plc and no-one else in relation to the Acquisition of Your Communications and the share consolidation only.  Greenhill will not be responsible to anyone other than THUS Group plc for providing the protections afforded to its clients or for providing advice in relation to the Acquisition of Your Communications, the share consolidation or any other matter referred to in this announcement

PricewaterhouseCoopers LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority for designated investment business, is acting exclusively as financial adviser to THUS Group plc and no-one else in relation to the offer for Legend Communications plc only.  PricewaterhouseCoopers LLP will not be responsible to anyone other than THUS Group plc for providing the protections afforded to its clients or for providing advice in relation to the offer for Legend Communications plc or any other matter referred to in this announcement

Citigroup, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively as corporate broker to THUS Group plc and no-one else in relation to this announcement.  Citigroup will not be responsible to anyone other than THUS Group plc for providing the protections afforded to its clients or for providing advice in relation to the contents of this announcement

This announcement does not constitute or form part of an offer or a solicitation of an offer to purchase or subscribe for, underwrite or otherwise acquire, any rights, shares or other securities.  These may only be made on the basis of information that will be contained in the circular and prospectus to be published in connection with the proposals and any supplement thereto.

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America (including its territories and possessions, any state of the United States and the District of Columbia). This announcement is not an offer of securities for sale into the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States.

1 February 2006

THUS GROUP PLC TRANSFORMATION

Introduction

THUS today announces a series of steps which will significantly increase the scale of its UK business telecommunication activities, accelerate growth in the UK market and increase focus on its core UK operations:

1. Acquisition of your communications for initial consideration of 391,532,852 new ordinary shares to add scale to the business
2. Recommended cash offer for legend communications plc (“legend”) to accelerate the growth of demon UK
3. Placing of 67,430,657 new ordinary shares to finance part of the legend offer
4. Intention to sell demon Netherlands to focus on the UK
5. 1-for-10 share consolidation

1. Acquisition of Your Communications

The most significant element of this transformation of THUS is the proposed Acquisition of Your Communications from United Utilities for an initial consideration of 391,532,852 new ordinary shares, equating to £58.8 million (based on the five day volume-weighted average share price of THUS’s shares up to and including 31 January 2006, representing a price of c. 15.0p per share).  Your Communications is an alternative carrier for business customers and the public sector, predominantly in the North West of England.  It provides fixed line voice and data services and operates a mobile business which is Vodafone’s largest independent UK business-to-business service provider.

The initial consideration will be payable through the issue of 391,532,852 new ordinary shares to United Utilities, meaning that United Utilities will control 22.5% of the enlarged issued share capital before the Placing explained below (21.7% following the Placing).  There is a possible further allotment of ordinary shares in the Company depending on whether THUS’s share price reaches certain Strike Prices any time on or before 31 December 2007.  Specifically, before adjusting for the Share Consolidation, United Utilities will be entitled to a further 22,747,010 shares if the price exceeds 19p; plus 23,349,570 shares if the price exceeds 20p; plus 23,976,410 shares if the price exceeds 21.5p; plus 24,628,830 shares if the price exceeds 24p; plus 25,308,240 shares if share price exceeds 27p.  Taken together, if the share price reaches or exceeds 27p, United Utilities will be entitled to a total of 120,010,060 new ordinary shares, taking its shareholding to maximum of 27.5% or 26.5% (before and after the Placing respectively).

2. Recommended cash offer for Legend

In addition, THUS today announces a recommended cash offer for the entire issued and to be issued share capital of Legend at 40p per share, valuing the current issued share capital of Legend at £11.5 million.  Legend provides a range of ISP services to business customers in the North of England.  Full details of this transaction are included in a separate Legend Offer Announcement released today.  

3. Placing of 67,430,657 new ordinary shares

This transaction will be financed from existing cash resources and a Placing of new ordinary shares representing 5% of THUS’s share capital (67,430,657 new ordinary shares).  The Placing is not conditional on successful completion of the Legend acquisition. In the event the acquisition of Legend does not complete, the proceeds from the placing will be used by THUS for general corporate purposes.       

4. Sale of Demon Netherlands

THUS also today announces its intention to sell Demon Netherlands, which offers Internet services in the Netherlands.  Demon Netherlands had turnover of £20.4m in the year to 31 March 2005.

Taken together, these four steps will create a stronger, more focused participant in the UK business telecoms market, with the financial resources, scale, product set and customer base to continue the company’s growth path and deliver returns for all shareholders.

5. 1-for-10 share consolidation

Finally, the Board wishes to effect a Share Consolidation.  The Directors believe that the share price at which the Company’s shares are currently trading is restricting THUS’s ability to attract new investors and to use its own shares to make acquisitions should it wish to do so. The Directors propose to effect the Share Consolidation in order to, inter alia, reduce the number of shares in issue, to reflect the new circumstances of the Group and in an attempt to reduce the volatility of the Company’s shares. Therefore, the Company proposes that, conditional upon Shareholder approval, every ten existing ordinary shares and new ordinary shares be consolidated into one ordinary share of 25 pence.

ACQUISITION OF YOUR COMMUNICATIONS

Background to and reasons for the Acquisition of Your Communications

Your Board believes that the Acquisition will accelerate the realisation of THUS’s existing business plan, creating a leading alternative carrier for business customers throughout the UK and delivering value to THUS shareholders.  In particular, the Board believes that the Acquisition will:

• Create an opportunity to realise significant cost and operating synergies estimated to reach over £25 million per annum as the full benefits of combination are delivered;
• Broaden THUS’s customer base, providing an opportunity to cross-sell and up-sell THUS’s suite of next generation products and services to Your Communications’  existing customers;
• Increase THUS’s network reach and density, particularly in the North West of England, opening up new opportunities for the Enlarged Group to grow; and
• Forge strategic relationships between THUS and United Utilities and its subsidiaries in its roles as preferred supplier of telecommunications services to United Utilities and strategic partner to Vertex, United Utilities’ outsourcing services subsidiary.

Synergies

The Directors believe that there is significant potential to achieve operational cost synergies of over £25 million upon full integration of the business.  The total cost of achieving these operational synergies is expected to be approximately £30 million, split between £18 million of operating costs and £12 million of capital costs.  This cost is expected to be reported separately by the Enlarged Group and will largely be incurred during calendar year 2006.

The Directors believe that these cost synergies will be achieved from:

• Reduction of costs from the mutual traffic between Your Communications’ and THUS’s networks and rationalisation of third party costs, for example those arising from leased lines;
• Integration and rationalisation of staff and an increase in staff utilisation;
• Reduction of duplicated corporate overheads;
• Reduction of duplicated capital expenditure and investments in next generation IP technology; and
• Optimisation and rationalisation of use of premises.

Information on Your Communications

Your Communications is a telecoms provider for business customers and the public sector, predominantly in the North West of England.  It provides fixed line voice and data services and also operates a mobile business which is Vodafone’s largest independent UK business-to-business service provider.

Your Communications was acquired by United Utilities in 1995 through the merger of North West Water and Norweb (its then parent).  In 2000, it acquired Intercell, a mobile reselling business, which gave the Group mobile capability.  Your Communications acquired Eurocall in 2004 and thereby significantly extended its customer base. In the audited results for the 12 months to 31 March 2005, Your Communications generated an operating loss of £21.8 million on revenues of £233.5 million and EBITDA of £11.5 million. As of 31 March 2005, Your Communications had audited gross assets of £283.2 million.

Your Communications operates from five geographical locations in Manchester, Bolton, Birmingham, Sheffield and London.  As of 31 December 2005, the Group had a total of 634 employees, and operated a 4,200km national network with 142 Points of Presence, with the greatest fibre density in the North West of England.

Your Communications’ core business focus is on providing voice services, with the majority of revenues coming from direct and indirect voice, number translation services (NTS), premium rate services (PRS), leased line, carrier and reseller services. Your Communications has a strong focus on customer service, which has delivered a diverse and loyal customer base, with a low churn rate for business customers.  Mobile customers and associated revenues have increased rapidly over the last five years and Your Communications has successfully maintained steady growth in its mobile business this year despite difficult market conditions.

In October 2005, the Your Communications successfully completed its project with the North West Development Agency to provide broadband access in Cumbria.  Around 95 per cent of businesses, public sector organisations and households in this region now have broadband access and this facility provides Your Communications with a good opportunity to generate further revenues by extending its service throughout Cumbria.

Information on THUS Group

THUS was founded in 1994 as Scottish Telecom, a subsidiary company of ScottishPower.  Following the purchase of Demon Internet in 1998 and a subsequent strategic review of the business, Scottish Telecom was rebranded as THUS plc in October 1999, and refocused as a national provider of telecommunication services to businesses. After an initial listing of THUS plc shares on the London Stock Exchange in November 1999, THUS plc was fully demerged from ScottishPower in March 2002 to create THUS Group plc.

THUS is a leading alternative provider of fixed-line telecommunication services for business customers and public sector organisations in the UK, by revenues.  It has a comprehensive product portfolio which covers four key areas: voice, data, Internet and hosting. 

The portfolio includes ‘traditional’ telecommunication services such as circuit switched voice, dial-up Internet access, leased lines, frame relay and ATM-backed data transport services.  It also encompasses ‘next-generation’ services including recent innovations such as broadband, Ethernet and Multi Protocol Label Switch (MPLS) enterprise networks.  To complement its product portfolio, THUS offers customers a range of Managed Solutions, whereby it can manage all or part of a business’s communications infrastructure.

Whereas traditional services are carried over multiple networks and different protocols, next-generation services are based on Internet Protocol (IP) and are carried over a single, integrated network.

The telecoms market is in a period of transition as the revenue and margin from traditional services are replaced by next-generation services. Managing this transition presents a challenge for all telecommunication providers, including THUS.  However, unlike many other operators, THUS has already developed and deployed a high-capacity, scalable, next-generation IP-based network with MPLS capability.  Comprising 7,300km of fibre optic cable with more than 100 points of presence throughout the UK, the THUS next-generation network is well placed to meet changing demand patterns.

THUS counts some of the largest UK corporate and public sector organisations among its customer base, including British Sky Broadcasting Group plc, radio broadcasters Capital Radio and GWR (now trading as GCap Media PLC), Chrysalis Group plc and SMG plc, newspaper publishers Johnston Press plc, The Royal Bank of Scotland plc, Standard Life Group Limited, ScottishPower plc, Southern Water Limited and Glasgow City Council. THUS has 1,200 employees and offices throughout the UK, including primary locations in both Glasgow and London.  The Company also offers Internet services in the Netherlands through its Internet Service Provider, Demon Netherlands.

In the year ended 31 March 2005, THUS reported in its audited accounts (under UK GAAP) £340.6 million of turnover and £39.9 million of EBITDA from its continuing operations, as well as reporting its first full year of positive free cash flow.  In this financial year 94% of turnover was in the UK, with Demon Netherlands accounting for 6%.  In the half year to 30 September 2005, THUS reported in its unaudited interim reports (under IFRS) £174.5 million of turnover and £18.1 million of EBITDA from its continuing operations. At 30 September 2005, net debt was £30.1 million and gearing 9%.

Terms of the Acquisition

The initial consideration payable by THUS for Your Communications will be the allotment to the Sellers or their nominee(s) of 391,532,852 Consideration Shares (equivalent to £58.8 million,  based on the five day volume-weighted average share price of THUS’s shares up to and including 31 January 2006, representing a price of c. 15.0p per share), subject to a possible cash adjustment which will be made if there is any difference between the actual amount of operational working capital and a target level of operational working capital (£15 million) which the parties have agreed should be retained in the business at Completion.

The Acquisition which is intended to be completed by the end of February 2006, is conditional, among other things, on the approval of shareholders at the EGM. If the conditions to the Acquisition are not satisfied (or, if applicable, waived by the Purchaser) on or before 31 March 2006, the Share and Asset Purchase Agreement will automatically terminate.

On Completion, United Utilities will control approximately 22.5% of THUS’s issued share capital (21.7% following the Placing).  The Consideration Shares will, when issued, rank pari passu with the existing shares including the right to receive all dividends declared, made or paid after Completion.  Application has been made for the Consideration Shares to be admitted to the Official List and to trading on the London Stock Exchange.

There is a possible further allotment of ordinary shares in the Company depending on whether THUS’s share price reaches certain Strike Prices at any time on or before 31 December 2007.  Specifically, before adjusting for the Share Consolidation, United Utilities will be entitled to a further 22,747,010 shares if the price exceeds 19p; plus 23,349,570 shares if the price exceeds 20p; plus 23,976,410 shares if the price exceeds 21.5p; plus 24,628,830 shares if the price exceeds 24p; plus 25,308,240 shares if share price exceeds 27p.  Taken together, if the share price reaches or exceeds 27p, United Utilities will be entitled to a total of 120,010,060 new ordinary shares, taking its shareholding to maximum of 27.5% or 26.5% (before and after the Placing respectively).

United Utilities has also entered into a Relationship Agreement with THUS.  Under the Relationship Agreement, United Utilities is prevented, subject to certain specific exceptions, from disposing of the ordinary shares allotted to it under the Share and Asset Purchase Agreement for a period of 12 months from completion.  By the terms of the Relationship Agreement, United Utilities has the right to nominate one Director.  United Utilities has nominated Simon Batey, Group Finance Director of United Utilities, for appointment to the THUS Board.

Ongoing financing arrangements

On 31 October 2005, THUS entered into a Loan Agreement for £55 million credit facilities with The Royal Bank of Scotland plc and Rabobank International.  On 23 December 2005, THUS extended the facilities under the Loan Agreement by £30 million principally to provide funding for the integration of the Acquisition. 

Current trends in trading and prospects

THUS

The half-year results to 30 September 2005 (announced on 21 November 2005) showed overall growth in continuing operations year on year, driven forward by a good performance in both the Managed Solutions and Data and Telecoms divisions.  Internet saw sustained expansion in UK broadband customers and turnover but this was offset by the expected decline in traditional, dial-up Internet access.  As turnover from the Netherlands was stable, turnover for the overall division was down slightly. 

THUS expects the continuation of similar trends into the second half of the financial year 2006.  While THUS believes market conditions will remain challenging, it expects to continue to grow and to generate positive free cash flow for the second half and the full year.

Since the date of the interim results, current trading has continued in line with the trends noted in its Interim results statement.  The Board believes that on a stand-alone basis whether or not these transactions complete in whole or in part, the Company will be well positioned for continuing growth in the current financial year and beyond.

Your Communications

Your Communications’ trading performance has deteriorated significantly since 31 March 2005, the end of the financial period for which audited financial statements have been prepared.  In the announcement of its half-year results United Utilities indicated that Your Communications’ “turnover for the six months to 30 September 2005 has fallen by 11.5% to £98.2 million, compared with the second half of 2004/05”.  There has been no corresponding reduction in the operating cost base and consequently the business is currently no longer generating positive EBITDA and cashflow.   Revenue has continued to be under pressure since 30 September 2005.

This disappointing performance partially reflects changes to the tariff for fixed to mobile calls, but also the continuation of intense competition in the UK telecommunication sector, resulting in significant downward price pressure in corporate contract renewals and in competition for traditional telecommunication services.  The business also experienced a faster than anticipated customer churn due to its focus on legacy voice services in a market where customers are shifting towards next-generation technologies and converged solutions. 

The Business Communications segment (servicing retail business customers) reported a reduction in revenues in the half-year to September 2005 compared to the half-year to March 2005 due to the loss of the MyTravel account (the company’s second largest corporate customer), while there was a decline in the level of ad-hoc project work with United Utilities.  The Wholesale segment reported a revenue decline driven mainly by a drop in wholesale indirect revenues (general market conditions) and premium rate services (PRS).  PRS, which is low margin, can be very volatile with volumes driven by the timing of customer campaigns.   Performance in the Mobile segment has been stable with revenues and margins broadly flat over the last 18 months.

The operating cost base has remained broadly flat in the 6 months to 30 September 2005.  People costs have increased (more temporary staff at higher average cost) as have maintenance costs (costing more to support older legacy systems) and publicity costs (in an attempt to arrest revenue decline).  These increases have been offset by a reduction in dealer commissions (a number of dealers have been transferred to resellers resulting in lower commissions paid) and bad debts.  Over the past 4 months, revenue has continued to come under pressure, whilst EBITDA has broadly stabilised.

On 1 December 2005 United Utilities announced that in accordance with IFRS, Your Communications had been classified as a business held for sale in the context of United Utilities’ consolidated accounts.  A net reduction in the carrying value of Your Communications of £98.6 million, from a net asset value (excluding inter-company liabilities) of £196 million as at 30 September 2005, had been recorded.  The Directors therefore anticipate that the fair value of the net assets being acquired will be substantially less than the net asset position (excluding inter-company liabilities) recorded in Your Communications’ 31 March 2005 financial statements.

Whilst THUS expects intense competition and downward price pressure to continue unabated following the Acquisition and for the foreseeable future, the Directors believe that the integration of Your Communications with THUS’s existing business will address the challenges it has faced which have led to its unsatisfactory financial performance.

The Enlarged Group

No organic growth in revenues is forecast for the next twelve months whilst the Enlarged Group focuses on delivering the integration of Your Communications. The Board believes that, once such integration has been successfully implemented and the majority of the anticipated synergies have been achieved, which is expected to be undertaken during a twelve month period, the Enlarged Group will be well positioned to improve its financial and trading performance.

RECOMMENDED CASH OFFER FOR LEGEND COMMUNICATIONS PLC

THUS has agreed the terms of a recommended cash offer with the Board of Legend for the entire issued and to be issued share capital of Legend at 40p per share, valuing the current issued share capital of Legend at c. £11.5 million.  Legend provides a range of ISP and hosting services to business customers in the North of England. 

Full details of this transaction are included in the Legend Offer Announcement also released by THUS today.  

SHARE PLACING

The acquisition of Legend will be financed from existing cash resources and a Placing of 5% of THUS’s share capital (67,430,657 new shares; the "Placing Shares").  Citigroup Global Markets U.K. Equity Limited ("Citigroup") is acting as Sole Bookrunner for the .  The issue of the Placing Shares will take place at a price established through an accelerated bookbuilding process to be made available to eligible institutional investors.  The books will open with immediate effect and it is expected that the books will close no later than 4.30 p.m. (GMT) today. The terms and conditions of the Placing are set out in full in Appendix II to the Legend Offer Announcement made by THUS earlier this morning.  The Placing is not conditional on the completion of the offer for Legend.  In the event that the offer for Legend does not complete, the proceeds from the Placing will be used for general corporate purposes.

Placees invited to participate in the Placing will be deemed to have read and understood Appendix II to the Legend Offer Announcement in its entirety and to be accepting a participation in the Placing on the terms and conditions, and to be providing the representations, warranties and acknowledgements and undertakings, contained in Appendix II to the Legend Offer Announcement.

The Placing is being made outside the United States in offshore transactions (as defined in Regulation S) meeting the requirements of Regulation S under the US Securities Act of 1933, as amended.

The Placing Shares will be issued credited as fully paid and will rank pari passu in all respects with the existing Ordinary Shares including the right to receive all dividends and other distributions declared, made or paid after the date of issue of the Placing Shares. Application will be made for the Placing Shares to be admitted to the official list maintained by the FSA (the "Official List"), and to be admitted to trading by the London Stock Exchange on its market for listed securities.  It is expected that Admission will become effective and dealings in Placing Shares will commence on 6 February 2006.

INTENTION TO SELL DEMON NETHERLANDS

THUS is today announcing that it intends to sell Demon Netherlands, which offers Internet services in the Netherlands.  Demon Netherlands had turnover of £20.4m in the year to 31 March 2005.

SHARE CONSOLIDATION

The issue of the Consideration Shares under the Acquisition will result in an enlarged issued share capital.  The Directors believe that the current trading price of the Company’s shares is restricting THUS’s ability to attract new investors and to use its shares to make acquisitions, where appropriate. The Directors also believe that the Share Consolidation proposed below should reduce the volatility of the Company’s shares.

The proposed Share Consolidation will replace every 10 existing ordinary shares of 2.5 pence with 1 new ordinary share of 25 pence.  The Share Consolidation is conditional upon Shareholder approval.

The Share Consolidation is intended to take effect at the beginning of March 2006.

ACTION TO BE TAKEN

Of the events set out above, the Acquisition of Your Communications, the Share Issue Authorisation and the Share Consolidation require Shareholder approval.

Extraordinary General Meeting

An Extraordinary General Meeting is expected to be convened at which resolutions will be proposed 1) to approve the Acquisition; 2) conditional upon the Acquisition, to authorise the allotment of ordinary shares up to an aggregate nominal amount of £4m (the “Share Issue Authorisation”), sufficient additional authority for the Your Communications consideration and general corporate purposes; 3) as well as separately, to approve the Share Consolidation.

A circular and prospectus containing details of the Proposals and convening the EGM is expected to be posted to Shareholders as soon as practicable.

Recommendation and voting intentions

The Board, which has been advised by Greenhill, considers that the Acquisition, the Share Issue Authorisation and the Share Consolidation are in the best interests of the Company and Shareholders as a whole.  In providing its advice, Greenhill has relied upon the Directors’ commercial assessment of the Acquisition, the Share Issue Authorisation and the Share Consolidation and the future strategy for the Enlarged Group.

Accordingly, the Board considers that the Resolutions are in the best interests of the Company and the Shareholders as a whole and it unanimously recommends that the Shareholders vote in favour of the Resolutions at the EGM as the Directors intend to do, in respect of their own beneficial shareholdings, which amount in aggregate to 884,958 Ordinary Shares representing approximately 0.066% of the existing issued share capital of the Company.

An analysts' conference will be held this morning at 9.00am for 9.30am at City Presentation Centre, 4 Chiswell Street, Finsbury Square, London EC1Y 4UP.  A simultaneous webcast of the conference will be screened, please visit www.thus.net/transformation for further details.

Greenhill & Co. International LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively as sponsor and financial adviser to THUS Group plc and no-one else in relation to the Acquisition of Your Communications and the share consolidation only.  Greenhill will not be responsible to anyone other than THUS Group plc for providing the protections afforded to its clients or for providing advice in relation to the Acquisition of Your Communications, the share consolidation or any other matter referred to in this announcement

PricewaterhouseCoopers LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority for designated investment business, is acting exclusively as financial adviser to THUS Group plc and no-one else in relation to the offer for Legend Communications plc only.  PricewaterhouseCoopers LLP will not be responsible to anyone other than THUS Group plc for providing the protections afforded to its clients or for providing advice in relation to the offer for Legend Communications plc or any other matter referred to in this announcement

Citigroup, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively as corporate broker to THUS Group plc and no-one else in relation to this announcement.  Citigroup will not be responsible to anyone other than THUS Group plc for providing the protections afforded to its clients or for providing advice in relation to the contents of this announcement

This announcement does not constitute or form part of an offer or a solicitation of an offer to purchase or subscribe for, underwrite or otherwise acquire, any rights, shares or other securities.  These may only be made on the basis of information that will be contained in the circular and prospectus to be published in connection with the proposals and any supplement thereto.

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America (including its territories and possessions, any state of the United States and the District of Columbia). This announcement is not an offer of securities for sale into the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States.

Definitions
The following terms apply throughout this document unless the context otherwise requires:

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