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Cable Technology Feature Article

November 07, 2008

Rumors Confirmed: BSkyB in Talks to Buy U.K. Arm of Tiscali

By Mae Kowalke, TMCnet Senior Editor

The global economic system might be in somewhat of a tailspin, but that doesn’t mean business has come to a standstill in all industries or all markets. In fact, some segments are experiencing financial success, and within those some companies are pushing ahead with a variety of growth plans, both organic and inorganic.
Take BSkyB, for example. Earlier this week the satellite services company confirmed it is in talks to acquire U.K.-based assets of broadband provider Tiscali. According to a report from The Press Association, the two companies confirmed they’ve been holding talks regarding a potential £450 million ($707 million) deal.
If the deal goes through, it would make BSkyB the third biggest broadband provider in the U.K., behind British Telecom (BT (News - Alert)) and Virgin Media, The Press Association said. Ovum senior analyst Charlie Davis commented Friday that the acquisition would heat up the triple play market in the U.K., creating a triumvirate of dominating players, with Carphone Warehouse and Orange making up a “second league” of providers.
This particular market, Davis said, has experienced quite a bit of consolidation of late and, with most such activity now dying down, a BSkyB (News - Alert)/Tiscali deal might well be the “crescendo of a wave of acquisition activity over the past two or so years.”
“Last July, it was Tiscali that acquired Pipex’s broadband unit for £210 million [$330.6 million], which itself had previously embarked on a string of small acquisitions,” Davis said in the Friday statement.
He added that there were rumors earlier in the year about a possible Tiscali buyout, but that company rejected bids of £500 million ($787.4 million) as too low. That is might now be considering an even lower bid speaks to both the economic climate as a whole, and fluctuations in U.K.’s triple play market. Tiscali also might be considering less than it earlier preferred, Davis said, because it has an established relationship with BSkyB; a deal was cut last year “enabling Tiscali to deliver Sky channels via its Homechoice IPTV (News - Alert) service — this would also have helped develop ties between the two companies.”
Tiscali has been on the auction block, so to speak, since last February, The Press Association said. The company has a broadband customer base in the U.K. of 1.8 million. It also has operations in Italy, which reportedly are being eyed by Wind and Swisscom. Vodafone expressed interest earlier, but now apparently has pulled out along with BT and Carphone Warehouse (News - Alert).
If BSkyB does succeed with its bid to buy out Tiscali, the company might be taking somewhat of a risk, but more likely the move would ultimately be a positive one. The Press Association reported that BSkyB currently has a total customer base of nine million (1.8 million for broadband services). During the period ended September 30, the company delivered its most solid first-quarter results in five years.
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Mae Kowalke is senior editor for TMCnet, covering VoIP, CRM, call center and wireless technologies. To read more of Mae's articles, please visit her columnist page. She also blogs for TMCnet here.

Edited by Mae Kowalke