Dan Bieler
KPN acquires Tiscali's Dutch operations
KPN has announced that it intends to acquire Tiscali's Dutch operations for €255m (about 2.4x 2006 revenues). As part of the deal, KPN will inherit 276,000 broadband and 126,000 narrowband subscribers as well as Tiscali's infrastructure in the Netherlands.Comment: Over recent quarters KPN has staged a remarkable increase in DSL retail market share from 31.8% in Q1 2005 to 39.6% in Q2 2006. As of Q2 2006, KPN had 1.8m broadband subscribers. The deal should therefore boost its retail market share to about 45%. In this sense the deal must be good news for KPN.However, it is also fairly obvious that at an implied value of about €630 per subscriber (or an ARPU of €53), KPN has plans that go beyond the provision of plain vanilla Internet access - and beyond synergies from the integration of Tiscali's infrastructure. Its own TV offering had attracted 230,000 subscribers by Q2 2006 and its IPTV offering Mine is gaining momentum.KPN, like many other European incumbents, is fighting competition from rival triple-play offerings by introducing and reinforcing its own triple-play offerings. The broadband connection into the home (or business) remains the most important aspect of this strategy. Emerging applications rely on this channel. KPN can ill afford to lose market power in this space - even if the jury is still out regarding the long-term triple-play business case.The acquisition, which follows the earlier acquisition of Demon Netherlands, boosts KPN's position, in particular vis-à-vis the cable operators UPC, Essent and Casema, which have launched multi-play and VoIP offerings. Cable modems still remain an important access method, although this ratio has fallen to below 45% of broadband connections in recent years.What at first sight looks like a smallish acquisition by KPN, is really part of a larger picture, which KPN is working on very effectively.
