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July 25, 2007

OFT investigation into merger of Tiscali and Pipex

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by Lin Freestone

The Office of Fair Trading is to investigate the recent acquisition by Tiscali of the broadband and voice customers of Pipex, the UK’s sixth largest broadband provider. The investigation, which will be looking for any potential competition issues, could delay the £210m merger for some time.

The OFT is inviting comments on the merger to be submitted by 17 August. Conditions could be imposed on the merger by the OFT, or it could refer the deal to the Competition Commission for further investigation. The agreement between Tiscali and Pipex involves one million consumer and small business voice and broadband base users.

It is understood that the two parties referred the merger agreement to the OFT voluntarily, in order to prevent a later investigation.

Pipex placed its entire business on the market in March 2007, and had put a price on the whole group in the region of £400m. In addition to supplying broadband services to consumers and small businesses, Pipex provides internet hosting services. It also has a Wi-Max venture with Intel. Its brands include Freedom2surf and Toucan. The company is continuing to work with its advisers, UBS, to find a buyer for the rest of the business, which has been built up over several years through a series of acquisitions.

Tiscali is the UK’s fourth largest broadband provider, with an 11% share of broadband customers. Pipex has approximately a 4% share of the market.

The acquisition of Pipex’s broadband and voice division will cement Tiscali’s position as a fully integrated telecom and media operator in the UK market, and will underline the company’s reputation as a major investor and innovator in the full range of broadband services. It is expected that significant synergies and efficiencies can be achieved through the acquisition through network integration, customer migration and indirect costs efficiencies.

At the end of March 2007, Tiscali had 3.4 million active users in Italy and the UK. More than 1.9 million were ADSL customers, of which 700,000 received unbundled services.

Story link: OFT investigation into merger of Tiscali and Pipex

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