Tiscali UK to Aquire HomeChoice

August 14, 2006 - Italian Internet firm Tiscali is set to aquire privately owned HomeChoice, which offers TV, broadband and telephone services.

The move comes as competition heats up in the broadband sector, with companies like BT, NTL and BSkyB competing for dominance by offering a bundle of services, putting standalone Internet firms like Tiscali under pressure.

Tiscali has a 10 percent market share in the UK, behind BT, NTL and AOL. The UK unit made up 44 percent of Tiscali’s revenues and nearly half its earnings before interest, tax, depreciation and amortisation last year.

Sources reveal that under the terms of the deal, the combined HomeChoice-Tiscali UK entity would be valued at about 500 to 700 million pounds. Video Networks’ controlling shareholder Chris Larson would receive an 11.5 percent equity stake in the new entity, with a chance to increase this to 20 percent over time if profit targets are met.

HomeChoice was among the first companies to offer TV over a broadband connection, but it has struggled to reach critical mass. Its service is available to about 2.4 million households, mostly in London, but it had only 45,000 subscribers as of June.

"They started a marketing push that coincided with a broadband meltdown, with Sky, (France Telecom’s) Orange and Carphone Warehouse entering the sector," said Daiwa Securities telecom analyst James Enck. "It’s very difficult to build a brand and get any traction in this environment."

Enck said many analysts expected Tiscali eventually to sell off its operations outside of Italy, but said that could still happen after the deal with HomeChoice.

For more information visit: www.tiscali.co.uk