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Carphone Warehouse buys Tiscali UK

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Carphone Warehouse has bought Tiscali's UK businesses for £236m after lengthy on-again off-again negotiations.

The cash deal, announced this morning, will see Talk Talk and Tiscali's networks integrated within two years. Service will not be interrupted by the deal, and for now Tiscali customer service remains the point of contact for subscribers.

Tiscali UK CEO 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."

The size of Tiscali's customer base has fallen in the last two quarters as customers seek better customer service.

The firm's Italian parent group put it up for sale more than a year ago. Talks with Sky and Vodafone collapsed as bosses reportedly sought about £600m for Tiscali UK's 1.76 million subscribers (including about 300,000 on dial-up).

They have been forced to accept a much lower price by the group's massive debts, which led auditors to cast doubt on Tiscali's survival prospects last month.

The Carphone Warehouse deal, announced this morning, means the combined company will have more than 4.25 million broadband subscribers. It will rank second in the overall market.

Carphone Warehouse said it expects to make integration savings of between £40m and £50m by March 2011. It said they will come from migrating 80 per cent of customers to a single, unbundled network and "efficiencies associated with backhaul, the core network and individual exchange costs". Billing systems will also be combined.

Charles Dunstone, Carphone Warehouse CEO, said: "We are delighted to be acquiring Tiscali's UK business - 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."

The deal is subject to regulatory approval and is expected to go through in June. ®

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