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Virgin Media 'front runner' in Pipex bidding war

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Away from its high-profile battle with the Murdoch empire, Virgin Media is preparing to swallow second division ISP Pipex, according to reports.

An unattributed Daily Telegraph tip claims Virgin is the front runner in deal broker UBS' tender process, which closes on Friday. Pipex invited bids last week, following a review of the business instigated in January by chairman Peter Dubens.

BT is thought to have made another leading approach for Pipex. The David Hasslehoff-endorsed broadband outfit was linked to a BT takeover just over a year ago, which never completed. The rapidly consolidating broadband market means other top tier providers TalkTalk, Orange, and Sky have been put in the frame this time too.

If the sell-off goes ahead, the lucky suitor is expected to lay down about £335m, less than the £350m BT was said to be ready to pay last time round. Pipex has been hemorrhaging subscribers: in January 2006 it claimed more than 280,000, but just over a year on has shrunk to about 170,000, though it has bolstered that figure to 500,000+ with the acquisitions of Bulldog and Toucan.

A bigger attraction may be the national licence which has meant Pipex was set to be at the vanguard of rolling out WiMAX networks. As a holder of one of only two early passes, Pipex has been slow to capitalise however, announcing a second commercial trial of the service in Warwick this January. Other parties interested in WiMAX have been forced to await Ofcom's mooted spectrum auction, which was due to exit the consultation phase on 9 March.

For debt-ridden Virgin Media, skipping the auction would provide a fast and less cash-intensive route to broadening coverage than digging up roads. BT has said WiMAX will be key technology for its network convergence plan, but last time indicated it was willing to obtain a licence through processes other than a Pipex takeover.

All parties sniffing at Pipex are staying schtum this time round.

The takeover talk may not have done any harm to the price UBS can score for Pipex. At time of writing the firm's shares were trading up more than seven per cent, at a level last seen when talk of a takeover last did the rounds. ®

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