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Thus said it expected to deliver operating profits in the second half of the year and was continuing to explore acquisition opportunities after its failed bid for larger rival Energis last month.

The alternative telecommunications network operator said in a pre-close trading update for the first six months of the year, that it would significantly reduce first-half operating losses compared to last year and generate its fourth successive half year of free positive cash flow despite challenging trading conditions.

Despite cost cutting, however, Thus said earnings before interest, tax, depreciation and amortisation would be similar to last year as the company managed the transition to new generation services and competitive pricing in the market.

As other telecoms carriers, Thus has been subject to a fierce price war in a sector with overcapacity and has called for sector consolidation. In August, the company, which has a market capitalisation of slightly more than £200m, proposed an £800m bid for Energis that came as a surprise to some shareholders. It lost the fight to much larger rival Cable & Wireless.

Thus said on Friday that it would pursue acquisitions but only if it secured its long-term objective of a return on capital employed greater than cost of capital.

Bill Allan, chief executive, said: “While we expect market conditions to remain challenging, we have been encouraged by the growth from existing and new customer contracts and anticipate an acceleration in business in the second half to meet full year market expectations.”

New corporate customers won in the first-half period included GNER and British Waterways.

Shares were steady at 14p in early morning in London.

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