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Carphone Now No.1 with Tiscali Buy

Carphone Warehouse (CPW.L) has agreed to buy Tiscali's (TIS.MI) UK broadband business for £236m, a move that will make it the largest domestic broadband provider in the UK.

The deal, announced on Friday, puts an end to more than a year of speculation over the future of Tiscali's UK operations. Tiscali's service will be integrated with Carphone Warehouse's residential broadband business, TalkTalk. According to Carphone Warehouse, the combined operation will have 4.25 million residential subscribers.

Carphone Warehouse has also claimed the acquisition will help spur a nationwide rollout of fibre access to the home.

In a conference call on Friday morning, Carphone Warehouse chief executive Charles Dunstone said his company had always been "very clear that we know the price that we're happy to pay for this business and we won't overpay... We feel very pleased that the judgements we made proved to be right".

The acquisition is expected to be completed around the end of June. Carphone Warehouse will have to notify the European Commission of the deal, but Dunstone said it was his understanding that its acceptance of the purchase would be a formality.

"On or around completion, we are counting that we will get 1.45 million broadband customers, 300,000 dial-up and voice-only customers and around 100,000 wholesale customers," Dunstone said.

He added, however, that Carphone Warehouse had not counted Tiscali's wholesale customers in the total of 4.25 million subscribers because the company didn't really understand the economics of the wholesale business.

"We don't understand how profitable [Tiscali's wholesale customers] are," Dunstone said. "There is a risk that you're giving people bullets to shoot back at you."

Tiscali UK's business-to-business division will "bulk up" Opal, Carphone Warehouse's business division, according to Dunstone. He also expects Carphone Warehouse's new status as the largest residential broadband supplier in the UK will give it added influence with the telecoms regulator, Ofcom.

Carphone Warehouse is working with BT on a strategy for delivering fibre-based connectivity, Dunstone added. "We now have the scale together [with BT] to justify the investment that we need to make in putting the fibre in the ground, and are working very closely with BT to deliver that," he said.

Dunstone said it is Carphone Warehouse's intention to merge the Tiscali and TalkTalk operations and move to having just one brand over time.

"Tiscali customers will continue their Tiscali email addresses and the portal will continue," Dunstone said. Carphone Warehouse's work on its next-generation backhaul capacity should lead soon to an improvement in quality of service for Tiscali customers, he said.

Carphone Warehouse and Tiscali's two core networks will be rationalised into a single network, Dunstone said. He pointed out, however, that migrating Tiscali's customer base onto Carphone's billing systems will be "hard work" because many of Tiscali's billing systems are currently based in Sardinia.

Original article: Carphone Warehouse buys Tiscali for £236m from ZDNet UK

Provided by—Driving Business Through Technology

Meyer is a senior writer for Gigaom.

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