Almost exactly a year ago, Carphone Warehouse bid £550M for Tiscali’s UK arm, and Tiscali walked. Since then they have learned what the price is when your bluff is called and everyone on the planet knows you have a busted flush. Today they finally managed to agree to terms with Carphone, at a price of £236M or well over 50% off. Oops. For its part, Carphone Warehouse gets to be the top independent ISP in the UK, with some 4.25M subscribers.
They will use the proceeds to pay down their debt, the same debt that they begged off interest payments for until September last month. At €600M indebtedness, last year’s sale price would have left them nearly or perhaps entirely debt free, but this year it won’t even get them halfway there. The lesson? If you have to sell and the economy looks even a tad iffy, just take the money and run. The price isn’t going to get better because you are only worth what someone else will pay and you have no leverage at all.
Along with the sale of their international network in February, this transaction finally brings Tiscali full circle. From competitive Italian telecom to international powerhouse all the way back to a competitive Italian telecom – and an indebted one at that. Quite a rollercoaster, but at least they still exist – I figured it was 50/50 they would just get liquidated come fall.
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