Tiscali UK bought for £236 million by Carphone Warehouse

In a new deal that will make it the second largest broadband company in the UK, Carphone Warehouse has ended what has been a drawn out bidding process for the UK arm of the debt-laden Italian Internet service provider and purchased Tiscali UK for £236 million.

A total of 4.25 million customers, which is over 25 percent of the UK’s residential market, will be part of the TalkTalk broadband division as this acquisition will add 1.45 million new customers say the group. With funding coming form Carphone Warehouse’s existing debt facilities it is expected that the deal will be completed by June.

March 2008 saw the initial interest expressed by Carphone Warehouse in Tiscali UK, although a few months after this it backed out of the proceedings. Advanced talks were underway with BSkyB, the broadcasting and media giant this year before it dropped out over its price offer, which had dropped drastically from last years figure of £550 million, due to €601 million debt owed by the struggling Italian parent.

The chief executive of Carphone Warehouse, Charles Dunstone said: “It has been the longest deal I have ever worked on. I think it has been hard for the shareholders of Tiscali because during the process we had the collapse of the banking world and then the decline in the pound to the euro so we think this price is low.”

Tiscala UK also has 0.1 million wholesale customers and 0.3 million voice and dial-up customer on top of its 1.45 million broadband customers. The long-term cost of organically acquiring customers would have been much higher than the price that Carphone paid in the takeover say city analysts.

The main driving force behind the deal was scale according the Mr Dunstone, who said that the return it would make on its investment in telephone exchanges would be higher the larger its customer base was.