Tiscali UK up for sale?

Industry analysts at Ovum have heard that Tiscali is looking to sell its UK division with a speculative price tag of around £600m.

If true, the news comes as something of a surprise. Only a couple of months ago, Tiscali revised its group strategy to focus on its core markets of Italy and the UK and was also seen cosying up to TV, broadband and telephony player HomeChoice in the UK.

Tiscali has around 1.4 million broadband subscribers and 50,000 TV customers in the UK and Ovum analyst Sally Banks comment that at first glance the move seems a little rash.

“Having purchased Video Networks, a TV-over-DSL provider, in August 2006 the company was in a good position to offer triple-play packages to its customers, which would increase ARPU and customer loyalty,” Banks said.

“However, we did state in our recent company evaluation of Tiscali that reducing its scale so significantly to just two markets would make it a potential target for acquisitions and it appears that Tiscali has conceded defeat against the likes of BT and BSkyB, as it lacks the scale needed to compete effectively in this market.”

Banks believes it is likely that Tiscali is looking to raise substantial cash in the short term in order to either invest solely in the Italian market where there is still enormous growth potential, or possibly focus on alternative markets where there is significantly more growth potential than in the UK.

Potential suitors for the UK unit are many and varied, including Carphone Warehouse, BSkyB and Orange although Carphone is still digesting AOL UK. Alternatively, BT or NTL/Telewest could be interested, as well as O2, which picked up Be in June. It should also be noted that T-Mobile currently has no UK fixed broadband offering.