Carphone buys £236m Tiscali

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Carphone Warehouse has snapped up UK broadband supplier Tiscali for £236 million.

Tiscali will be join with Carphone’s own fixed line broadband division TalkTalk, scheduled to be demerged from its retail operation by the end of the year, making it the UK’s largest residential broadband provider with 4.25 million subscribers.

Tiscali is the UK’s fifth largest internet service provider, with 1.45 million subscribers. TalkTalk has 2.8 million broadband customers. Tiscali also supplies services to 300,000 dial-up and voice customers, and around a further 100,000 wholesale broadband customers. Tiscali also runs a business services division, principally serving SMEs.

Carphone said around 50 per cent of Tiscali’s UK broadband base is unbundled today, compared to 78 per cent of TalkTalk’s base. It said within 24 months, when the billing and network integration completes, over 80 per cent of the combined base will be on a single, unbundled network, producing significant savings.

It also said savings will come from network integration, enabling efficiencies in backhaul, the core network and individual exchange costs.

Carphone chief Charles Dunstone (pictured) said: “We know the business well and the fit with TalkTalk is perfect. In one step, it makes TalkTalk the UK’s largest residential broadband provider with over 25 per cent residential market share and a total of 4.25 million customers.

“It also delivers clear shareholder value with significant enhancement to this year’s earnings per share and substantial synergies to be achieved next year and beyond. We very much welcome Tiscali’s UK customers and staff to TalkTalk. Together we intend to continue leading the way in UK broadband.”

Tiscali UK chief Mary Turner said: “It’s good news for our customers who will increasingly benefit from a group that has consistently championed best value and award-winning customer service.

“Internet use continues to grow very rapidly with customers expecting to enjoy an ever increasing diversity of content. The combination of TalkTalk and Tiscali will offer our customers, both residential and business, Britain’s largest and best fully unbundled network.

“The enlarged TalkTalk is perfectly positioned to meet and anticipate these demands.”

The £236 million deal is funded by Carphone debt. Carphone said it will realise £40-£50 million of annualised network and other synergies by March 2011, in addition to tax losses of more than £200 million, and increase in earnings per share of 10 per cent by March 2010.

Completion of the deal is subject to EU competition authority clearance. Completion is expected by the end of June.

 

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