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Independent mobile-phone retailer and broadband provider Carphone Warehouse (News - Alert) Plc has acquired the U.K. business of Tiscali, an Italian broadband firm.

 

Under the terms of the deal, Carphone Warehouse will pay $355 million for Tiscali's U.K. operation and would be funded through existing debt facilities. The price tag (News - Alert) is less than half of the $827 million Carphone Warehouse offered informally last May, which Tiscali (News - Alert) subsequently rejected.

 

The acquisition would make Carphone Warehouse the U.K’s second largest broadband provider for residential and wholesale customers behind British Telecom Group.  The deal would also position Carphone as the No. 1 residential broadband provider with 4.25 million subscribers, the company said. The merger is expected to boost earnings by 10% by March 2010.

 

Tiscali will join other broadband brands under Carphone Warehouse’s portfolio, including - AOL (News - Alert) UK, Opal, TalkTalk. The transaction is expected to be complete by the end of June. 

 

"We are delighted to be acquiring Tiscali's U.K. business,” said Charles Dunstone, Carphone Warehouse chief executive in a statement Friday. “We know the business well and the fit with TalkTalk is perfect.”

 

Tiscali is the U.K.'s fifth-largest broadband provider with 1.45 million subscribers. The acquisition comes as good news for Tiscali. The company had been struggling to find a buyer for its operations in recent months. Thanks to the weak economy, the firm suffered financial setbacks and was forced to ask banks to postpone the interest on its loan. That move had industry officials questioning whether the broadband provider would continue to operate, or close.

 

Previously, talks had been ongoing for other companies, including BSkyB (News - Alert), to buy the Tiscali’s U.K division.  The two firms had been discussing a potential $707 million deal. If the acquisition had gone through, it would have made BSkyB the third biggest broadband provider in the U.K.