CPW Snaps up Tiscali

Carphone Warehouse is to buy the UK assets of Italian internet service provider Tiscali for £236m. The deal, which is expected to be completed by the end of June, will create the UK’s largest home broadband provider with 4.25m subscribers.

Tiscali had previously been in talks with BSkyB, but negotiations broke down earlier this year.
Carphone Warehouse currently provides broadband services under its TalkTalk brand and also owns AOL UK.

Carphone chief executive Charles Dunstone said that the company would eventually just have a single brand but added that Tiscali e-mail addresses would survive.

“We know the business well and the fit with TalkTalk is perfect,” Dunstone said. Completion of the deal will give TalkTalk more than 25% of the residential broadband market. Carphone expects it to boost its earnings by 10% in the next year.

Speaking exclusively to Comms Business Magazine, Paul Lawton, Managing Director of Opal, said that the deal to purchase the whole of Tiscali’s UK operation provided the company enormous scale and opportunity.

“In the residential market we will be adding a further 1.7million customers making us a bigger broadband supplier than BT and the largest in the UK. Additionally we gain another 100,000 directly managed small business customers on top of the 100,000 we already have. More importantly, it give us real data credentials for the wholesale market making us more attractive as a partner for VARs, systems integrators and voice resellers looking for a more savvy data partner.”

B2B sales now contributes more than one third of profits for the Carphone Group; we are already a £100 million to channel business and known as being a good bunch of people to deal with for voice. The recent push for Opal Business Broadband has added 20,000 new customers over the last couple of months since we opened it out to the channel. This opportunity now gives us another level of data expertise.

Tiscali had real vision for working with systems integrator partners and delivering networking solutions. They were ahead of the game in opening up their network to channel partners and we really hope to maintain that momentum and add our own firepower.

From the channel perspective we now have more product development and more product sets, especially in the data and IP VPN arena. We will not go out and talk to another breed of partner who have been interested in Opal but perhaps not so confident in dealing with Opal. In direct terms, we have gained real scale and expect to gain economies of scale. We have recently launched some very competitive broadband pricing; the opportunity is to now sell voice services in to Tiscali customers. We have more than 100 resellers, Tiscali has another 50 key resellers and we have a broader range of products to sell those resellers. We remain a very channel friendly business.”

Michael Phillips, product director of BroadbandChoices.co.uk comments:

“In our two most recent Customer Satisfaction Surveys, TalkTalk has repeatedly scored higher than Tiscali so this should bode well for Tiscali customers who will now be part of the same group.”

“However, AOL – also under Carphone Warehouse Group ownership – has consistently languished at the bottom of our Customer Satisfaction Surveys so service integration post acquisition will be crucial to determining the customer experience.”

On news of the deal shares in Carphone Warehouse were up 3.8% by midmorning whilst Tiscali shares, which were earlier suspended in Italy pending the statement, were up 8%.