RealTime IT News

Tiscali, World Online in European ISP Mega-Merger

[London, ENGLAND] Shares were suspended in Tiscali S.p.A. and World Online International N.V. on Thursday, pending announcement of a merger of the two European ISPs.

Tiscali, "The European Portal," with operations in Belgium, France, Germany, Italy and Switzerland, will absorb cash-rich, equity-poor World Online to create a European Internet access company second only in size to Germany's T-Online.

A brief statement heralded the later announcement, saying: "The Boards of Tiscali S.p.A. and World Online International N.V. announce that expectation is justified that agreement can be reached on a proposed combination of the two companies."

Speculation about the forthcoming merger has been rife, ever since the press got wind of exploratory talks between the two companies in early August. At the time, World Online said it was in on-going discussions with several potential partners, but admitted that one of them was Tiscali.

The merger is a marriage of convenience, as Tiscali's shares have been relatively high, while in comparison to World Online the company is cash-poor. World Online on the other hand has around US $1.6 billion in cash from its flotation, but with its share price in collapse it could not achieve its pan-European ambitions without a partner.

Under Chairman James Kinsella, who was appointed following the resignation of Nina Brink, World Online changed its policy to concentrate on building up its infrastructure, supplying services to other ISPs. The policy may well have saved the group which at the height of Brink's resignation scandal appeared doomed.

Tiscali, founded by Renato Soru as recently as January 1998, expanded its regional telephone and Internet operations rapidly, launching Italy's first free Internet access service in March 1999. Via its subsidiary Nets S.A. it has begun to invest US $130 million into a high speed fiber-optic backbone network linking cities in two loops across northern and southern Europe.

As a combined company, Tiscali and World Online will be well positioned to compete with Deutsche Telekom's T-Online and bid for third generation mobile licenses.