Tiscali pondering takeover move for Pipex - 18 May

Tiscali, the Italian telecommunications group, yesterday said it was considering whether to make a bid for Pipex, the UK's sixth-largest broadband provider.

The possible bid comes as Cable and Wireless, another telecoms company, secured a boost for its wholesale business by signing a deal with Virgin Media, the cable television and phone group.

Massimo Cristofori, Tiscali's chief financial officer, said the company was at a "very preliminary stage" with its interest in Pipex. "Pipex has started the procedure of an eventual sale and it has sent us their dossier," he added.

Tiscali has about1.4m broadband customers in the UK, but some analysts believe it will have to increase its sizeif it is to survive in the competitive high-speed internet access market.

In February, Tiscali secured an additional €280m (£192m) of financing with Intesa Sanpaolo, the Italian bank.

Pipex effectively put itself up for sale in March by announcing a strategic review and attracted interest from companies including BT, British Sky Broadcasting and Virgin Media.

However, several of the potential bidders BSkyB have since dropped out of the auction.

BT retains an interest in Pipex, according to people familiar with the situation. BT declined to comment.

Shares in Pipex rose 1½p to 12½p on renewed hope of bidding. Pipex's 570,000 broadband customers are its main asset, although it has operations in data hosting and a nascent Wi-max business.

Some analysts believe Pipex may struggle to attract bidders for the whole company and may instead sell just its broadband business.

A research note from Goldman Sachs analysts this week valued Pipex's telecoms business at £211m and the hosting and network services at £178m. This valued the company at 15p a share. Pipex declined to comment on its strategic review.

C&W has signed a four-year contract with Virgin Media. It will enable Virgin Media to supply services to a big part of the 50 per cent of the UK population not covered by its cable network.

C&W has been looking for wholesale deals with other telecoms companies after building a fixed-line network that covers 50 per cent of the population.

C&W said there was no overlap between its network and that of Virgin Media. It added the contract would enable Virgin to reach an additional 4m households.