Is Tiscali doomed to failure?
Broadband giant Tiscali is said to be on the verge of collapse this evening with auditors Ernst & Young unwilling to sign off the 2008 accounts. Shares in the company were suspended some time ago as talks regarding the sale of the UK broadband arm collapsed and the group was faced with a debt mountain of over £450 million. Unable to keep up repayments the company agreed to a suspension of the shares as talks with bankers began.
While initially the company had been asking for around £600 million for the UK broadband division, insiders believe a figure nearer £300 million is more probable in the current environment. However, the more desperate the company becomes the lower the price will fall with buyers in the UK said to be "sniffing around". Whether such buyers wait until the company collapses and pick up the Internet broadband business "on the cheap" or try to beat competitors to the punch and acquire the business as a going concern remains to be seen.
Even though Tiscali has approaching 1.8 million customers in the UK the business has never reached the "critical mass" required to be a leader in the sector. It is by no means a small operation but as competition below the top tier of the sector continues to grow we are likely to see more and more small UK broadband operations suffer. The likes of Virgin, Sky and BT are dominating the market, taking a larger chunk and leaving the smaller competitors to fight it out for the rest.
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