True, it's not that long ago that HC was valued at a billion.

It would be an acquisition however as it's purely with share capital it could be described as a merger, see AOL Time Warner for example.

It looks as though Tiscali may be doing this to make their UK unit more attractive to a potential buyer as well, that's also the only reason I can think of why anyone would accept Tiscali shares, in the hope that the combined entity is worth more than either seperate.

Thoughts on that appreciated.

It would also appear that Homechoice may have been burning cash and have not been achieving what was required for the 'sequential funding' from Larson. Simply it makes no sense for Homechoice to be sold if this weren't the case. If the backers were expecting them to become a viable and profitable entity on their own diluting or selling out their holding, especially with Tiscali shares, doesn't really work.

Good technology really, but with triple play now you really do need to do each product at a similar level to the competition. Homechoice TV isn't much more than a slightly beefed up Freeview, ADSL2+ has meant that 8Mbit is, by London standards, slow, and the telephone service has extensive competition from the millions of other IDA operators.
Last edited by BBRealist : 10-08-2006 at 15:47

Tiscali have 1.2m bb customers across the UK and despite the challenge of Talk Talk etc are still grabbing customers fairly quickly.

If this acqusiition goes ahead, I think they will roll out HC services asap, trying to upsell the installed base to triple play. What happens then is anyone's guess - depends how successful the upsell is I suppose. Not sure Tiscali would have enough extra clout to improve content sufficiently to really challenge Sky & cable.

As for the 'asset stripping debate'

Heres what they want to keep:
HCs IP
HCs tech equip
HCs tech bods

That's it I reckon.

They don't want

HCs HQ
UK-based comparitively expensive customer services team
All back office staff - HR, F&A, admin etc
Anything else really

I believe they already outsource installation people.

Any HC staff reading this, I'm not hoping this to be the case, and I could be wrong, just an opinion.

Well, there'll be a transition period obviously... but this is all definitely the reason behind the free 4 months thingy...

<<< Funny how Homechoice Ads seem to appear on the site, as this discussion continues...

+ Network.
+ Customers (£21Million/year)
+ The content agreements. More important than everything else put together.

Why accept Tiscali share though?
Maybe Tiscali are going to stay in the UK for a year or two..
Last edited by Peter We : 10-08-2006 at 18:09

Makes sense to me. It appears to be mutually benificial for both companies to come together in the hope of making themselves more attractive to a takeover further down the line from the likes of Vodafone.

What If Tiscali pull out of this merger however?

Then unless the comments made nearly a year ago about VNL running out of cash within a year aren't true another company will wait until that happens then asset strip or take the company at a cut down price.

As I said I can't see why any company would want anything from Tiscali apart from cash. Tiscali's shares are hardly a guaranteed money spinner.

This could be a precursor for Tiscali to spin the UK operations, which do actually make money, away from the unprofitable ones.
Last edited by BBRealist : 10-08-2006 at 18:06

Do you believe that HC/Tiscali merger would have the financial clout to provide a national triple play service, HD Service and more channel tie ups - eg. Flexitech?

IMO without these, the newly formed company won't last beyond 12-18 months as other services leave HC behind...

Maybe. Tiscali UK is propping up the rest of Tiscali's operations so if it's seperated from the rest of them it might be viable.

I don't think it'd have the muscle to provide a viable alternative to the bigger players though. We've a very mature Pay TV environment here and TV over fibre isn't that far away.

I struggle to see any business sense beyond sweetening up both companies for sale to a 3rd party which does have the resources to make the investments needed.

I got my third letter warning of work at the exchange ' for the launch of new products'. This round of upgrades seems to streatch into September, so no HD before then I expect.
TV over fiber is a complete non starter and pointless. You can get 20Mb over phone lines and cable is good from 100mbit++. New technology could increase both. What the massive investment in fiber would give, would not be worth it.

HC might be able to make a market in HD. Sky only have 90,000 customers for HD, NTL/Telewest probably less so they maybe able to make inroads into that. Depends whether Sky are forced by Ofcom to provide HD content to them.

Chris Larson, the majority shareholder in Video Networks, is set to recoup some of his near £100m investment in television company Homechoice as a merger with the internet service provider Tiscali looks increasingly likely.

Mr Larson, who also co-founded Microsoft, is thought to have ploughed millions into the video-on-demand start-up.

The Homechoice business owned by Mr Larson and other shareholders including Time Warner, Sony and Disney, is likely to be valued at about £100m.

According to reports, Mr Larson is expected to receive a stake of more than 10 per cent of the equity of the combined company, which could rise toward 20 per cent if growth targets are met. Given that Tiscali UK is valued at between £500m and £600m, Mr Larson's shareholding in the combined group could be worth between £60m and £70m initially.

A deal to combine the two companies could provide Homechoice's sub-scale business with access to Tiscali's 1.1 million UK internet users. Homechoice has struggled to gain market share in the UK as it competes against satellite television giant Sky as well as the cable company NTL.
http://news.independent.co.uk/busine...cle1218455.ece

Tiscali in talks with HomeChoice about unspecified agreement in the UK

MILAN (AFX) - Tiscali SpA said it is in talks with Video Networks, a company operating in the UK market under the HomeChoice brand, about a possible agreement through its Tiscali UK unit.

In a statement late yesterday, Tiscali did not give details about the nature of the possible deal, but said that it will shortly inform the market about the outcome of the negotiations. danilo.masoni@afxnews.com dm/tc


Under terms of the deal, the combined HomeChoice-Tiscali UK entity would be valued at about 500 to 700 million pounds, the source close to the deal said. Video Networks' controlling shareholder Chris Larson would receive an 11.5 percent equity stake in the new entity, with a chance to increase this to 20 percent over time if profit targets are met.
http://today.reuters.co.uk/news/arti...CE-TISCALI.xml
Last edited by Peter We : 11-08-2006 at 12:06

Sky's 90,000 in a few months in impressive and I can only see it rising quickly. Think about it - premiership and champions league football in HD and the sales of HD sets will only rise as prices continue to fall. Remember the PS3, Xbox 360, HD-DVD and Blu-Ray will all be available by the end of the year and sky will flog more stb as people get to see the difference. If HC don't provide a HD service by early next year, I'll have to look at other options...

Interesting quote from Independent:

http://news.independent.co.uk/busine...cle1218455.ece


That's about the same as they had end of March. Eithey they had zero net inflow of subscribers in those 3 months or both articles are a bit mistaken. Suggests an inaccuracy though, if Homechoice didn't grow subscriber base between March and June something was very very wrong.

If this actually goes through all these details will become public knowledge anyway as Tiscali is a publically traded company in Italy.

I'd still put money on you guys being up for sale as a combined Tiscali / Homechoice customer base in the not too distant future. Going by the stories of Tiscali's financial state being so precarious.

That said the Homechoice product going mass market would mean losing a few things, quality of customer service would go through the floor almost certainly, and if Tiscali place Homechoice on the same customer service arrangement as Tiscali Retail's subscribers you'll be calling India

It's either pay now or pay later to be honest. Thankfully BT are just awaiting the right regulatory environment before beginning to deploy deeper fibre.

BT seemed to think TV over fibre was worthwhile over 20 years ago, Verizon and others seem to think it worthwhile more recently. it's the pinnacle of triple play, multiple HDTV streams, telephone and multi-10mbit broadband down a single piece of glass / plastic.

The major reason, by the way, for fibre to be used instead of copper is that rather than having to use an MSAN and IGMP to stream a single channel to each customer at once you gain the ability to dedicate a wavelength on the fibre to broadcast TV CATV style using QAM encoded multiplexes. You can then supplement this with high bandwidth unicast VOD using another wavelength.

No range limitation, no limit to concurrent broadcast streams to each home, only a potential limit on VoD due to bandwidth but as you can stuff 2.4Gbps down each GPON splitter, sharing that between a maximum of 32 homes usually dependent on optical budget, that's not a major major problem.

Unless of course NTT in Japan, Verizon in the US and others really have completely thrown their money away, which seems unlikely.
Last edited by BBRealist : 11-08-2006 at 13:30

>That's about the same as they had end of March. Eithey they had zero net inflow of subscribers in those 3 months or both articles are a bit mistaken. Suggests an inaccuracy though, if Homechoice didn't grow subscriber base between March and June something was very very wrong.

Errm, they haven't releases any new figures so, obviously, the 48K figure would be what The Independant should quote.

As for Fiber to the home. I'll beleive it when I seen it. The argument 20years ago was difficult to justify, now with ADSL, Sat and cable its more so.
Maybe in another 20years there would be some demand..

I see the stock market isn't impressed

http://uk.finance.yahoo.com/q?s=TIS.MI

Register has picked up on this now as well:

http://www.theregister.co.uk/2006/08...li_homechoice/

Check out the link in the story there too for background:

http://www.officialspin.com/main.php...recent&rid=540


Ya the confusing bit was that they were specifically referring to it as customers in June, so either they have sources we don't or a researcher has gotten it wrong, I'd suspect the latter.
Last edited by BBRealist : 11-08-2006 at 16:16

Actually the term merger is used accurately most often. Company H agrees to be purchased by company T but with Stock so shareholders end up holding stock in Company T which owns all stock in Company H.

They merge but it's effectively a takeover.

Yes, its a merger, with each party getting differing shares based on the value of the combined group. Thats what a merger is.

>Ya the confusing bit was that they were specifically referring to it as customers in June, so either they have sources we don't or a researcher has gotten it wrong, I'd suspect the latter.

Also they put the value on Tiscali of 500-700million. A wild range given the easily checked market value (euro912.5m) from the shareprice.

I think Tiscali may by thinking of spinning off the UK opearations and combining the entity with HC, rather than HC becoming part of Tiscali SpA

On the 'merger' terminology, what I was getting at is that the term is used to give the effect of some sort of equality. The term acquisition is avoided because of the emabaressment felt by the party being bought. The fact that stock is used is not really important. Dress it up, call it a merger if you like but this is HCs capitulation.

As a shareholder he will get 20% of Tiscali if it hits targets - wich would also increase the share value. Its not a controlling share, but if it ends up being worth 400Million, who cares?

Where do you get 400m pounds from?

If its a success the share price will double and the shareholding will double. 2x2 x100m=400m

Well HC has gone for 60m for 11.5%, going up to 20% if it reaches certain targets which would be about 104m pounds. share price would need to quadruple for 400m.