Internet Solutions Provider Pipex Sells Broadband and Voice Division

HostReview.com
Monday, July 16, 2007; 02:50 AM

Pipex Communications plc, a major provider of telecommunications and internet solutions including broadband, voice, web hosting and network services, announced on Friday that it has entered into an agreement for the sale of its subsidiaries owning its consumer Broadband and Voice division to Tiscali S.p.A. (Borsa Italiana, Milan: TIS) for a total consideration of approximately £210 million, on a debt-free basis, before adjustments.  The corporate broadband customers will remain within the Pipex Group. 

The subsidiaries being sold to Tiscali are: Switch2 Telecoms Limited, Pipex Homecall Limited, Toucan Residential Limited, Pipex Internet Limited and Toucan Residential Ireland Limited.

Pipex’s Broadband and Voice division is a leading provider of telecommunications and Internet services in the UK market, reporting revenues of £231.7 million and profit before tax of £13.9 million, excluding amortisation of goodwill and inter-company interest, in the year ended 31 December 2006.  As at 31 December 2006, net tangible assets stood at £13.1 million, excluding goodwill, investments and inter-company balances.  At that time, the division had approximately 570,000 Broadband customers and 480,000 Voice customers.

The transaction, which constitutes a fundamental change of business for the purpose of the AIM rules, is conditional, inter alia, on shareholder approval and also competition clearance being received. 

A circular convening an Extraordinary General Meeting will be posted to shareholders shortly. 

The proceeds of the disposal will be placed on fiduciary deposit pending the directors’ consideration of its further application.

Pipex was advised on the transaction by UBS Limited and Oakley Capital.

The continuing group
Following the disposal of the Broadband and Voice division, the Group will consist of 3 divisions namely Web Hosting, Business Services and Pipex Wireless (WiMAX). 

Hosting
The growth in Pipex’s hosting operations has been impressive, with a year on year growth in active services exceeding 24%. In the ground breaking area of virtualised hosting solutions and virtual private servers, Pipex Hosting achieved in excess of 90% customer growth, and is now one of the two largest hosting providers by subscriptions in Europe (based upon SW-Soft statistics). Pipex’s domain name market share has also increased by 25% over the last year, to 2 million domains. More than one in every five domains in the UK is registered through Pipex hosting.

Pipex’s new data centre in Germany which utilises the latest technological advances to ensure energy efficiency is now fully operational, and was a contributing factor in Pipex winning the prestigious "Best Enterprise Internet Hosting Provider in Germany" from the eco Internet Awards 2007.

Business Services
Pipex Business Services, the SME and Corporate unit, has seen good growth in the high end hosting, leased line and IPVPN sectors.  New contracts have been secured from large organisations including T-Mobile, Servista, Cost Cutter, Red Bull Racing, Rosebys, British Museum and British Library. There has also been an increase in additional services being taken by long standing corporate customers such as Littlewoods Gaming (Sportech plc) and Alliance & Leicester. New product launches include Boundary Networks, a secure private network that enables organisations to extend the security capabilities of their internal network across the Internet to the remote user CPE device. This enhances business continuity for retailers with an innovative approach to remote branch/store and mobile office security.

Pipex Wireless (WiMAX)
Following the successful launch of WiMAX services using licensed spectrum in trials in Milton Keynes, Warwick and Leamington Spa, Pipex has generated considerable interest from other councils who are considering offering WiMAX services.

In addition to partners Intel, National Grid Wireless and Ericsson, the division has announced a strategic partnership with Nokia Siemens Networks which covers network infrastructure, services and software.  Together, Pipex Wireless and Intel will launch wireless services across the UK.

Pipex Wireless is now focusing on the commercial launch of the business which will take place in Manchester later this year.  During 2008 commercial WiMAX services will be made available in a number of additional cities as the network expands in the West Midlands and the North West.  During this period Pipex Wireless will also trial and launch a number of value-added products and expand the routes to market and channel partners in order to deepen market penetration.

The regulatory environment within Europe for the spectrum has improved significantly in recent months, and the division will continue to work with both the regulator and the industry to optimise its position.

Peter Dubens, Executive Chairman of Pipex, commented, “Over the past 3 years, Pipex has successfully transformed the scale and quality of its Broadband and Voice customer base.  In the consolidating UK market, today’s announcement crystallises value for shareholders, and ensures that Pipex’s customers will continue to receive a wide range of competitive, high quality communications and internet services.

“The strategic review announced in March remains in progress regarding the Group’s other businesses, which continue to show strong growth in all areas.  The Group is also reviewing options for the efficient distribution to shareholders of the proceeds from the sale of the Broadband and Voice division.  Further updates will be provided in due course.”