Tiscali UK sells for bargain price

Chris Forrester

Carphone Warehouse bought Tiscaliís UK broadband assets for a knock-down £236m, in cash. This price is a 50% discount on the original price for the assets barely a year ago, and represents a superb deal for Carphone.

Once the deal closes it will propel Carphone to the second position in Britainís broadband league table, behind British Telecom, but ahead of Virgin and BSkyB.

Carphone Warehouse, in a statement, said it will be adding some 1.45m accounts to its ĎTalk Talkí broadband offering, taking it to a total of 4.25m subscribers, representing about 25% of the UK residential market.

Charles Dunstone, the chief executive of Carphone Warehouse, 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."

In addition to the 1.45 million broadband customers, Tiscali UK also has 300,000 dial-up and voice customers and 100,000 wholesale broadband customers. City analysts said the takeover price paid by Carphone is lower than the long-term cost of acquiring customers organically.

Thatís true by any measure. The deal should also do much to stem the drift away from Tiscali as the recent uncertianty has fueled churn. The extra clout that Carphone now has should enable a stronger negotiating position, extra services and the ability to cross-sell new products to a wider audience.

However, the deal isnít without risk. Tiscali had itself acquired broadband TV assets of Video Networks/Home Choice, which had been through a couple of bankruptcies in the companyís long history of trying to persuade customers to pay for subscription TV. Now Carphone has to prove that it can also significantly improve on Tiscaliís miserable performance as far as customer service is concerned, reduce churn, and start making some money.