The war in Britain's broadband market intensified yesterday as the Italian internet firm Tiscali announced the merger of its UK operations with Homechoice, the privately owned video-on-demand company.
Under the terms of the deal, Video Networks International, which owns Homechoice, will sell the business in return for an 11.5 per cent stake in Tiscali UK. This may rise to 20 per cent if certain profit targets are met, and would value Homechoice at £100m.
As a result of the tie-up, Tiscali will become a "triple play" operator in Britain, being able to offer broadband, telephone and television to its customers.
The Milan-listed group is a major player in the UK broadband arena. It boasts 1.2 million subscribers, giving it a 10 per cent market share, behind BT, NTL and AOL. Tiscali's operations in this country made up 44 per cent of its revenues and nearly half its earnings last year.
Tommaso Pompei, its chief executive, said: "The triple play offer in the UK will be launched by the end of the year, and will be immediately followed by the launch of the service in Italy and then other markets."
The group's move will heat up competition in the UK's broadband sector, which over the past month has seen the average cost of high-speed internet packages slashed from £15 or £20 a month to next to nothing.
The price of signing up to broadband has also been dramatically reduced, with the likes of Sky, Orange and TalkTalk, owned by the Carphone Warehouse, offering connection to high-speed internet access for virtually no charge.
After the merger, Tiscali will be able to offer all its clients Homechoice's library of films, music videos and pay-TV channels.
The marriage comes 10 months after Homechoice's parent said it would run out of money unless it could secure further funding. Video Networks, which is controlled by Microsoft co-founder Chris Larson, was among the first companies to offer TV over a broadband connection, but it has struggled to reach critical mass. The group, whose other shareholders include Sony and Warner Bros, had just 45,000 customers at the last count in London and Stevenage. Mr Larson is estimated to have spent more than £100m on Video Networks since he rescued it from collapse in 2003.Reuse content