Carphone Warehouse drops Tiscali payment by £25m
LONDON - Carphone Warehouse will reduce its payment for the UK assets of Italian broadband provider Tiscali by up to £25m after inheriting 160,000 fewer customers than expected.
Carphone revealed in May that it was buying Tiscali's UK arm for £236m on a per customer basis, based on 1.45m subscribers.
In its second quarter trading update released yesterday, Carphone said it anticipates that it will acquire 160,000 fewer customers, and therefore the payment will have to be adjusted.
Charles Dunstone, chief executive of Carphone Warehouse, said: "As part of the completion process for the Tiscali acquisition, there is a mechanism for adjusting the consideration paid for the actual number of customers acquired on completion compared to the indicative customer base reported by Tiscali.
"On the basis of the definition of customers in the acquisition agreement, we anticipate the adjustment required will be a reduction of 160,000 customers, who are predominantly broadband customers.
"The consequential true up payment due to us will be made from funds currently held in escrow."
Anaylsts said that the roughly 10% reduction in customers was likely to equate to a £20m to £25m reduction in the purchase price.
Carphone Warehouse intends to merge the Tiscali business with its TalkTalk brand, although customers will be able to keep their Tiscali email addresses.
Despite the drop in Tiscali customers, Dunstone said: "We remain confident that TalkTalk Group will end the current financial year with a total broadband base of between 4.1m and 4.2m customers and thus maintain the guidance we announced in June this year."
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