Carphone Warehouse, a UK-based company that operates a chain of retail stores selling mobile and telecom services, last week snapped up rival DSL-based broadband provider Tiscali for $355 million. Tiscali was hoping to fetch $900 million, but the current economic downturn had limited its options. Carphone, which is dealing with its own issues, spent the money and, in my opinion, got a great bargain. It gets 1.45 million new subscribers and, with that, becomes the largest residential broadband provider in the UK, with about 25 percent of the total market. This purchase not only makes it easier for Carphone to spin out its telecom business into a separate company, but also gives incumbent BT something to think about.
With this deal, Carphone gets economies of scale. It has been aggressively building its own backhaul infrastructure and has been unbundling exchanges. In other words, it is becoming less and less reliant on BT’s infrastructure. Tiscali also has its own infrastructure. Carphone is going to be looking to get off BT’s network as quickly as possible. A plugged-in source of mine tells me that Tiscali also brings business and corporate customers, which is only going to bolster Opal, Carphone’s struggling business division. That means more competition for BT’s corporate division.