Acquisition

RNS Number : 9240R

Carphone Warehouse Group PLC

08 May 2009

 



Friday 8 May 2009

For immediate release        

The Carphone Warehouse Group PLC 

TalkTalk* to acquire Tiscali's UK operations for £236 million

• TalkTalk becomes UK's largest residential broadband provider - 4.25m** subscribers 

• Transaction expected to be immediately earnings enhancing for the current year to March 2010, lifting EPS by 10%

• £40 to £50m of annualised network and other synergies to be realised by March 2011, in addition to tax losses of more than £200m 

* TalkTalk is a wholly owned subsidiary of Carphone Warehouse Group PLC

**Excludes wholesale base

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 debt facilities. 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, 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 to continue 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. 

Conference call

There will be an audio webcast and conference call for investors and analysts at 11.00am this morning. The dial-in number is [phone], with an alternative Freephone number [phone] for US callers. The call will also be broadcast on our website www.cpwplc.com together with a presentation. A replay will be available for seven days, for which the dial-in number is [phone], or [phone] for US callers and the area code is 897311#.

For Further Information

For analyst and institutional enquiries        

Christian Maher                                                        07900 243308

Carla Bloom                                                              07891 094542

For media enquiries

Mark Schmid                                                              07920 484 787

Shane Conway                                                           07932 199 659  

Anthony Carlisle (Citigate Dewe Rogerson)           07973 611 888

                                                                                      020 7638 9571

Notes to Editors

1. Tiscali customers

Tiscali's customers will automatically continue to receive uninterrupted phone and broadband service. Their email addresses will remain the same, and their customer service contacts will not change. The integration of Tiscali's and TalkTalk's networks and systems platforms will take place progressively, bringing improved unbundled network reach and economics to support customer usage and service. More information can be found at www.talktalk.co.uk/tiscali.

Tiscali UK background

Tiscali UK forms part of Tiscali S.p.A., headquartered in Cagliari, Italy. The UK Company was launched in July, 2001 following the acquisitions of Liberty Surf, World Online and LineOne. Tiscali UK also acquired Tiny and Gateway ISPs and more recently Video Networks Limited in 2006 and the Pipex broadband and telephone business in September 2007. The company provides broadband, dial-up, telephone and TV services in the UK. As at December 2008 Tiscali had 1.68 million broadband customers, including wholesale customers.

2. TalkTalk 

• Voted 'Best value for money' in the uSwitch.com Home Phone customer satisfaction report 2009 based on the responses of over 12,000 home phone users (April 09).

• Named 'most improved' broadband provider in the 'uSwitch.com 2009 Broadband customer satisfaction survey' - with 8 out 10 customers satisfied with their TalkTalk broadband service, an 8% increase on last year. 

• Voted 'Best value for money for bundled services' by Broadband Choices in their customer satisfaction survey based on over 10,000 ISP customers (April 09).

• 97,000 net additions in the last quarter making TalkTalk the fastest growing home phone and broadband specialist (April 09).

TalkTalk Group background

TalkTalk Group provides home phone and broadband via TalkTalk, launched in February 2003, and AOL Broadband which was acquired in October 2006. In March 2009 it had 2.8 million broadband and 1.1 million voice and narrowband customers with 78% of TalkTalk customers now on its own network. For business customers, Opal formed in 1995, provides communications solutions to over 100,000 businesses and public sector organisations and works with 350 wholesale partners nationwide. The Group's fully unbundled Next Generation Network now extends to approximately 1,700 exchanges, covering 80% of the UK population. 

 

END

 

 

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