Dealers cautious as Tiscali confirms BSkyB talks

After rumours surfaced that Tiscali had entered ‘exclusive’ talks with Rupert Murdoch’s British Sky Broadcasting (BSkyB) outfit, the firm confirmed late Monday that BSKyB is currently conducting due diligence on its UK assets.

“Tiscali clarifies that it is currently holding talks with the BSkyB Group plc in relation to certain UK assets,” the Italy-based firm said in a brief statement.

The potential deal has been welcomed in some quarters as evidence of much-needed convergence between content providers and infrastructure providers.

BSkyB, which has lagged in the home broadband stakes, would also gain one of the UK’s largest subscriber bases and would probably exploit the opportunity to pump Sky TV content into Tiscali’s customers.

Speaking to the Financial Times, one analyst went as far as to suggest that a deal could make BSkyB the largest provider of residential broadband in the UK, overtaking BT.

But the news will not be universally welcomed in the industry, as BSkyB is largely an unknown entity when it comes to the channel. Back in June - when it appeared as if Tiscali was on the brink of selling itself to mobile operator Vodafone - one source expressed concern over Tiscali selling itself to an operator with limited interests in that field, voicing concern as “it [Tiscali] is doing some really interesting things on the wholesale, channel side.”

Any deal that emerges will probably value Tiscali at around £450m, down substantially from around £550m originally. Tiscali has about 1.8 million home customers in the UK – not between three and four million as wrongly reported yesterday – meaning that BSkyB will fork out around £250 for each customer.

The business put itself up for sale in February and has been the subject of intense speculation around its future after scaring off both Vodafone and Carphone Warehouse.