"It has been a challenging period for the group, as the UK economy has deteriorated rapidly and business to business service providers have struggled to maintain growth, particularly in the second quarter," Kenneth McGeorge, non-executive chairman, said in a statement on Friday.

Alternative Networks, which offers a range of fixed line, mobile, voice and data products, however, said it was well positioned for organic growth and to pursue acquisitions.

The company raised its interim dividend to 1.6 pence per share, from 1.5 pence a year ago, due to the beneficial impact of the shares which were repurchased and cancelled within the last 12 months.

The company said it has been successful in maintaining low levels of customer attrition, adding that it continues to win large customers.

For the six months ended March 31, underlying pretax profit was 4.4 million pounds, compared with 5.1 million pounds a year ago.

Sales fell 1 percent to 45.6 million pounds.

Shares of the company closed at 98 pence on Thursday on the London Stock Exchange.

(Reporting by Purwa Naveen Raman in Bangalore; Editing by Himani Sarkar)