Business Serve Acquires Affiliate Group

Business Serve plc ("Business Serve" or "the Group"), one of the UK's leading ISPs (Internet Service Providers), 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.

"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."

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.

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.

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.

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.