Pipex Communications plc, a major provider of telecommunications and internet solutions including broadband, voice, web hosting and network services, today announces that it has entered into an agreement for the sale of its subsidiaries owning its consumer Broadband and Voice division to Tiscali S.p.A. (Borsa Italiana, Milan: TIS) for a total consideration of approximately £210 million, on a debt-free basis, before adjustments. The corporate broadband customers will remain within the Pipex Group.

The subsidiaries being sold to Tiscali are: Switch2 Telecoms Limited, Pipex Homecall Limited, Toucan Residential Limited, Pipex Internet Limited and Toucan Residential Ireland Limited.

The transaction, which constitutes a fundamental change of business for the purpose of the AIM rules, is conditional, inter alia, on shareholder approval and also competition clearance being received.

The continuing group

Following the disposal of the Broadband and Voice division, the Group will consist of 3 divisions namely Web Hosting, Business Services and Pipex Wireless (WiMAX).

Peter Dubens, Executive Chairman of Pipex, commented: "Over the past 3 years, Pipex has successfully transformed the scale and quality of its Broadband and Voice customer base. In the consolidating UK market, today’s announcement crystallises value for shareholders, and ensures that Pipex’s customers will continue to receive a wide range of competitive, high quality communications and internet services.

"The strategic review announced in March remains in progress regarding the Group’s other businesses, which continue to show strong growth in all areas. The Group is also reviewing options for the efficient distribution to shareholders of the proceeds from the sale of the Broadband and Voice division. Further updates will be provided in due course."

Neil Armstrong of PlusNet said: "Tiscali acquiring Pipex will create massive customer churn in the consumer broadband market. Pipex is ranked fifth for customer service by Uswitch and Tiscali ranked seventh. We expect 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."

Mary Turner, the chief executive of Tiscali UK, said: "We will be able to offer our new Pipex customers the full range of Tiscali's... services including broadband, telephone and TV," said "This acquisition provides us with an even greater opportunity in rolling out our double and triple-play offers."