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Tiscali UK ISP Sale to BSkyB Deemed Almost Impossible

Posted: 07th Mar, 2009 By: MarkJ
The sale of Tiscali UK's assets to BSkyB (Sky Broadband), which Tiscali chief Mario Rosso last month claimed would be concluded by the end of March, has now been deemed "almost impossible". Instead the troubled ISP will have to renegotiate its debt payments and has already suspended shares.

The provider believes that market conditions have now deteriorated so drastically, for both sides, that it made a sale unfeasible. To put that another way, Tiscali would have been forced to drastically under value its operations.

It's believed that part of the problem involves the considerably lower value (exchange rate) of sterling (GBP), which has fallen sharply since September 2008. This has taken a major bite out of Tiscali UK's potential value.

During early 2008 some estimates put Tiscali UK's worth at between £550m and £650m. The Carphone Warehouse initially made an offer of around £450m, which was rejected. Later Vodafone tabled a cautious £1.26bn for the whole group, but pulled out. Most recently BSkyB is believed to have also tabled an offer of around £450m or less.

Meanwhile Tiscali's shares have declined by 83% over the past 12 months because of investor concern about its mounting long-term debt pile, which at £448m threaten to overwhelm it. Had the ISP not bickered so much over its value early on then it might have been better off.

So what does this mean for Tiscali UK’s customers? Well if you’re already experiencing problems with service performance then don’t expect any major new capacity investment, it simply doesn’t have the cash. We expect that a sale will still have to happen but when and to whom is anybody’s guess.
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