Tiscali has confirmed that it is to acquire rival Pipex, one of the last independent broadband providers, for £210m (A$279m).
The deal means that Tiscali will have 1.9 million UK customers and switching equipment in 800 exchanges, giving it access to 55 percent of the UK population. The deal will have to be approved by the Office of Fair Trading.
"Significant synergies and efficiencies can be achieved through this acquisition, in particular through network integration, customer migration and indirect cost efficiencies," said Mary Turner, chief executive at Tiscali.
"Over a four-year period we estimate cumulated synergies in the region of £150m (A$279m) at EBITDA level and £50m (A$116m) to secure the synergies and efficiencies.
"This acquisition provides us with an even greater opportunity in rolling out our double and triple play offers."
But the deal has caused some to question whether Tiscalli will retain its customer base. The UK has one of the most fickle set of customers in the business and the rate at which they switch providers, so-called churn, is increasing.
"Tiscali acquiring Pipex will create massive customer churn in the consumer broadband market," said Neil Armstrong, product director at PlusNet.
"Pipex is ranked fifth for customer service by Uswitch and Tiscali is ranked seventh, and we expect that Pipex customers will react to this move by voting with their feet.
"Broadband users want speed, reliability and first-class customer service, not mass market offerings."
Tiscali announced that profits for the last quarter were up 45 percent at £40.7m (A$94m).
Tiscali confirms £210m (A$489) Pipex buy
By Iain Thomson on Jul 16, 2007 4:51PM