Tiscali sparks bid battle with £600m UK sale

Media giants to join fray as Italians sell British arm

Tiscali, the giant Italian internet company, has put its UK division up for sale with a price tag of up to £600m.

The company, which has 1.4 million broadband and 50,000 pay-TV customers in Britain, sent a memorandum of sale to potential buyers last week. BSkyB, Orange, Carphone Warehouse, NTL and BT are all likely to be interested in the business, as they try to consolidate their positions in a viciously competitive market.

It is believed that Tiscali UK, headed by its chief executive, Mary Turner, generates profits of around £30m per year.

It is likely to be the last big British internet player that comes up for sale as companies in the sector choose to bolster their competitive positions or bail out altogether.

A banker with links to Tiscali said: "It is a well-run, profitable business and it is easy to imagine that it will command a premium price."

In August, Tiscali acquired Video Networks, a niche internet broadcast business based in London. The company also added 137,000 customers in the last quarter of its financial year. Despite this, it is believed Tiscali has decided that it does not have the scale to compete with the likes of BT and BSkyB. Turnover in the UK for the three months to the end of October was €113.5m (£76m), a rise of 67 per cent on the corresponding period for the previous year.

Tiscali recently sold its Dutch division for €255m, and also said it planned to withdraw from Germany and the Czech Republic in order to focus on the UK and Italy. But it now looks as if the company has decided to quit Britain as well. It is understood that it hopes to complete the sale of its UK arm by March.

Tiscali could not be reached for comment yesterday.

Carphone Warehouse recently reinforced its position in the UK broadband market with the acquisition of AOL UK's access business. Meanwhile, broadcasters such as BSkyB, and telecoms companies such as BT, are keen to offer a wide range of "converged" entertainment and internet services.

Cable group NTL now offers its customers fixed-line and mobile telephony services, broadband and pay-TV.

A spokesman for BT declined to comment on whether the telecoms giant would be interested in making an offer for Tiscali. NTL, BSkyB and Carphone Warehouse also refused to say whether they would be bidding for the UK arm of the Italian group.