Tiscali has acquired German ISP surfEU for E69.6 million.
Tiscali, the Italian-based telecoms and Internet group, is on a German shopping spree. Not content with buying Planet Interkom for E77.1 million, it will now pay E69.6 million for surfEU, which has operations in Germany, Austria, Switzerland and Finland. E18.7 million will be in cash, with the rest in shares.
The new operations certainly overcome the group’s previous weakness in Germany, together making it the country’s third-largest provider with 1.8 million active users. But although it’s now snapping at AOL’s heels in Germany, Tiscali is far behind T-Online’s 6.5 million German subscribers.
surfEU takes Tiscali’s total subscriber numbers to 6.6 million active users, making it the second largest ISP in Europe: T-Online still leads the market with approximately eight million. Tiscali’s expansion is not yet complete, though. It aims to become the leading ISP in Europe.
The UK is Tiscali’s major European weak point. But BT’s LineOne ISP, put up for sale for $350 million last year, but now anticipated to raise as little as $150 million, looks like a promising target. LineOne’s 350,000 active UK users would provide the Italians with a strong foothold. At the same time, Tiscali is also talking to Trinity Mirror about buying ic24, another UK ISP.
Tiscali still doesn’t hold the leading position anywhere, which may limit its potential to gain significant revenue from advertising and eCommerce channels. Since advertisers will be increasingly drawn towards the biggest portal operators, Tiscali will need to boost this side of its business.
Still, it’s trying to address this problem – by 2002, it aims to make 17% of its revenues from portals. Its alliance with Excite should help here – it’s already dealing with Excite Italia and may well extend this to the UK, where Excite is the fifth most visited portal.
Tiscali has become one of the few key players that will dominate as consolidation continues. But it will face strong opposition – especially from AOL, which plans to expand its European operations significantly.
