Vodafone has emerged as an early frontrunner to scoop the Tiscali business after being one of a shortlist of six companies to be drawn up. Virgin Media and BSkyB are also thought to be on the list, according to analysts.
Carphone Warehouse is understood to have been forced off the list because its offer was too low, but other potential buyers include Telecom Italia and Fastweb, the Italian broadband operator.
Analysts believe that bids for Tiscali’s UK division are upwards of £550m.
However, a sale is expected to encounter obstacles, due to the low value of the Tiscali brand. Strategy Analytics director of digital media Martin Olausson says: “The problem for these brands is that they are positioned as high-value brands, while Tiscali is a low-value brand. It would have made sense for Carphone, but it didn’t offer enough money.”
He adds that whoever acquires the business is unlikely to keep the brand. Olausson adds: “They would be buying the customer base, but they are the ones who need it the most. It depends how desperate they are to get into the market. I don’t think Sky or BT are desperate enough.”
BT dominates the broadband market, followed by Virgin Media. Analysts say if Vodafone wins the bid forTiscali, it could establish itas a key player in the broadband market.
Last year, it bought internet assets in Spain and Italy in an expansion into supplying fixed-line broadband to European customers.
Strategy analytics director of global wireless practice, Phil Kendall says the acquisition would “fit very well” with Vodafone’s European expansion.
He adds: “It would get it into the game and makes sense in terms of its broadband offering.”
Tiscali has a market value of £1.13bn. This week it reported first-quarter results, with sales up by 43% to £218.9m. However, it suffered a net loss of 12% to £29.7m.