TalkTalk To Acquire Tiscali’s UK Operations
TalkTalk To Acquire Tiscali’s UK Operations
11th May , 2009
UK : The Carphone Warehouse and Tiscali S.p.A. (MI:TIS) have reached agreement for TalkTalk to acquire Tiscali’s UK operations for a total cash consideration of £236 million, funded entirely from existing Group debtfacilities.
Completion is subject only to EU competition authority clearance and Tiscali S.p.A. obtaining formal approval pursuant to its debt restructuring plan. Completion is expected by end of June 2009.
Charles Dunstone ( inset ), CEO of Carphone Warehouse Group PLC, said: “We are delighted to be acquiring Tiscali’s UK business - we know the business well and the fit with TalkTalk
is perfect. In one step, it makes TalkTalk the UK’s largest residential broadband provider with over 25% residential market share and a total of 4.25 million customers. It also delivers clear shareholder value with significant enhancement to this year’s earnings per share and substantial synergies to be achieved next year and beyond. We very much welcome Tiscali’s UK customers and staff to TalkTalk. Together we intend tocontinue leading the way in UK broadband.”
Tiscali is the UK’s fifth largest internet service provider, providing broadband and IPTV services to 1.45m
subscribers. It also supplies services to a reducing base of 0.3m dial-up and voice customers, and around a
further 0.1m wholesale broadband customers. Tiscali’s other assets include its business services division,
principally serving SMEs. The acquisition is in respect of the entire issued share capital of Tiscali UK Limited
and as at December 2008, the gross assets of the business to be acquired were £457m and the profit before
tax attributable to such assets was £9.7m in the year to December 2008.
Mary Turner, CEO of Tiscali UK, said:
“We are delighted to become part of TalkTalk. It’s good news for our customers who will increasingly benefit
from a group that has consistently championed best value and award-winning customer service. Internet use
continues to grow very rapidly with customers expecting to enjoy an ever increasing diversity of content. The
combination of TalkTalk and Tiscali will offer our customers, both residential and business, Britain’s largest
and best fully unbundled network. The enlarged TalkTalk is perfectly positioned to meet and anticipate these
demands.”
Rationale for the transaction
Since 2003, TalkTalk has built a leading position in the UK telecoms market, with over 2.8m broadband
customers. Today’s acquisition will take the combined base to 4.25m broadband customers and establishes
TalkTalk as the largest residential broadband provider in the UK, with over 25% residential market share.
The acquisition will enable TalkTalk to realise annualised savings of between £40m and £50m by March
2011. In particular these synergies will come from:
· Customer Migration – Approximately 50% of Tiscali UK’s broadband base is unbundled
today, compared to 78% of TalkTalk’s existing base. Within 24 months, it is expected that
over 80% of the enlarged TalkTalk Group will be on a single, unbundled network, and this will
produce significant savings.
· Network Integration and Simplification - Significant cost benefits can be gained by creating
one integrated and simplified network. In particular, this will enable efficiencies associated
with backhaul, the core network and individual exchange costs.
· Billing Integration – TalkTalk expects to migrate the Tiscali customer base onto its own
existing billing and customer relationship platform over the next 24 months.
Financial impact and upgraded guidance
The total cash consideration of the transaction is £236m, funded entirely from existing debt facilities. Tiscali’s
UK assets are to be acquired on a debt-free basis. Completion is subject only to EU competition authority
clearance and Tiscali S.p.A. obtaining formal approval pursuant to its debt restructuring plan. Completion is
expected by end of June 2009.
At this point, it is anticipated that the acquisition will enhance EPS for the current year to March 2010 by
approximately 10%. Tax losses, estimated at more than £200m, will be inherited as part of this transaction.