Pipex becomes takeover target

The likelihood of further consolidation in the UK broadband market rose yesterday after Pipex Communications received several expressions of interest.

Pipex said it had appointed UBS, the investment bank, to consider its strategic options, “which could include a sale of the [telecommunications] company”.

“This process is at a very early stage and there can be no certainty that a transaction will result,” it added.

However, Pipex is understood to be in no rush to sell. In addition to its broadband and fixed-line phone service, analysts have also highlighted its domain name registration business, data hosting subsidiary and Wi-max businesses as valuable assets.

The Wi-max trial, a 50-50 joint venture with Intel, is promising to deliver citywide WiFi networks and trials have already been conducted in Milton Keynes and Warwick.

BT, Carphone Warehouse, Orange, Tiscali and British Sky Broadcasting are all expected to consider the case for making offers for Pipex. People familiar with these companies said that as established broadband suppliers they would look at the merits of bidding for Pipex. The companies declined to comment.

Pipex is the sixth-largest broadband company in Britain after Virgin Media, BT, Carphone, Tiscali and Orange, with 570,000 broadband customers at end 2006.

Some industry analysts and bankers say Tiscali will need to increase its presence in the broadband market if it is to survive the consolidation taking place because of ferocious competition.

Carphone transformed itself into the third-largest broadband company by buying AOL UK’s internet access business last year.

Shares in Pipex fell ½p to 13½p yesterday.