Tiscali Set for US$426-mil. Takeover of Pipex

The Italy-based pan-alternative internet service provider, Tiscali, is set to win the battle to take over the broadband and voice assets of rival U.K. broadband provider Pipex, in a deal worth about £210 million (US$426.6 million), the British Times newspaper reported today. The paper reports that Tiscali will announce today that it has reached an agreement to switch Pipex's one million consumer and small-business customers to its Italian rival, adding that Tiscali won the bid as other interested buyers were deterred by the difficulty and cost of integrating Pipex's broadband customers into their own businesses. Pipex offers fixed-voice, broadband, mobile and internet hosting services under several brands, including Freedom2Surf and Toucan. The company is also one of the only two WiMAX licensees in the United Kingdom and has a WiMAX joint venture with the global chip maker, Intel (see United Kingdom: 21 May 2007: Tiscali Confirms Talks with Pipex, Eyes IP TV Content Deal with BSkyB).

Pipex, the United Kingdom's fifth-largest broadband provider, slammed a "for sale" sign on itself in March 2007, hiring investment bank UBS to investigate a number of strategic options, which could include a sale of the company. The Italian stock market operator, Borsa Italiana, announced this morning that Tiscali's shares have been temporarily suspended pending an announcement (see United Kingdom: 13 March 2007: Pipex Confirms Takeover Speculation, Hires Financial Adviser).

Outlook and Implications

Tiscali Attacks to Defend Itself: Tiscali's expected takeover of Pipex is an eloquent example of adopting an attacking approach to defend one’s position. Tiscali has long been expected to disappear from the European internet scene following the emergence of broadband and the increasing dominance of big-name telcos in Europe's broadband space. Despite being one of the most adventurous players in the nascent internet market in the late 1990s, Tiscali has had to sell its operations across much of Europe, including in Germany, Netherlands and France, with its footprint shrinking from a high of 15 European countries between 2000-2003 to only the Czech Republic, Italy and the United Kingdom by mid-2007. But Tiscali has resolutely refused to be written off, insisting that it was not for sale and lambasting any talk of a potential sale. In February 2007, Mary Turner, the chief executive of Tiscali UK, the group's largest operation, slammed continuous media rumours of a takeover and laid out the group's desire to enter the U.K. IP TV market and, subsequently, the mobile market. Soon afterwards, in March 2007, the company launched its IP TV service based on the HomeChoice network, which it acquired in August 2006. Since then, the company's IP TV service has been expanding and the service is poised to win a major battle against BT's Vision and Virgin Media as it gets access to some premium TV programmes from the United Kingdom's satellite pay-TV provider, BSkyB (see United Kingdom: 26 February 2007: Tiscali UK Slams Takeover Rumors, Outlines Plans for IP TV, 7 February 2007: Tiscali UK to Launch IP TV in March and 14 August 2006: Tiscali Dials into Triple-Play with US$189 mil. Swoop for HomeChoice).