Carphone Warehouse acquires Tiscali UK for a knock-down £236m

By James Thompson
ON 9 MAY 2009
Carphone Warehouse has acquired Tiscali UK for £236m, in a deal that catapults it into second place in the UK broadband market and ends the protracted bidding process for the UK operations of the debt-laden Italian internet service provider.

The group said the acquisition will add 1.45 million customers to its TalkTalk broadband division, giving it a total of 4.25 million customers and more than 25 per cent of the residential UK market. The deal is expected to complete in June and will be funded from Carphone Warehouse's existing debt facilities.

Carphone Warehouse first expressed an interest in Tiscali UK in March 2008, but dropped out of the running a few months later. The struggling Italian parent, which has debts of €601m, was in advanced talks with the media and broadcasting giant Sky this year before they collapsed over its price tag, which has plummeted from £550m last year.

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 0.3 million dial-up and voice customers and 0.1 million wholesale broadband customers. City analysts said the takeover price paid by Carphone is lower than the long-term cost of acquiring customers organically.

Mr Dunstone said scale was the driver behind the deal, explaining the larger its customer base, the better the return on its investment in telephone exchanges. The acquisition will help to alleviate concerns of Tiscali UK customers over the continuation of their service.