Virgin is favorite to buy Pipex broadband
Monday, 26 March 2007Virgin Media is hot favourite to buy broadband company Pipex broadband for about £470m, with a deal possible this week.
Pipex is the sixth largest broadband company in the UK and recently appointed UBS, which holds 18.2% of its equity, to find a buyer. BT broadband , Carphone Warehouse, Orange broadband, Tiscali broadband and Sky broadband have all shown an interest but industry sources suggest that Virgin Media is now odds on favourite to tie up an agreed deal within the next couple of days.
Pipex focuses on the UK consumer broadband market. It is willing to heavily discount its broadband charges for those consumers willing to commit to taking bundled services on 12 or 18 month contracts. It is Pipex's domain name registration business that is lacking in Pipex broadband's rivals and therefore proving to be a key-factor in the purchase negotiations.
If the deal goes ahead, Virgin media will face a regulatory probe. If Virgin, which has 3.3m internet customers buys Pipex broadband it would add 570,000 more customers and would then walk into a regulatory storm over its market share. Virgin is already the largest internet provider in the country, but acquiring more customers through the Pipex deal --whose customers are carried on BT lines - could be investigated by the Office of Fair Trading.
In a bid to avoid a referral, Virgin would argue that its business provided over cable networks is not part of the same market. If they go down that road, there is a real 'gotcha' for the likes of Carphone and BT because of the open network issue.
Rival bidders for Pipex, including The Carphone Warehouse, BSkyB and BT, say they cannot compete fairly with Virgin because it does not have to open up its cable network to them. BT and The Carphone Warehouse are pushing Ofcom to make Virgin let rivals use its network so they could win customers from Virgin without installing new phone lines.
The Pipex sale has also raised speculation about the future of Sardinia-based Tiscali, which has two million UK broadband customers.
Labels: broadband, broadband-news, virgin-broadband
posted by Editor on 19:22,
