Tiscali has confirmed that it is to buy Pipex's ISP operations in a deal worth more than £210 million.
Pipex, which has acquired rival ISPs Bulldog and Freedom2Surf in the past, also owns web-hosting companies 123-reg and Web Fusion.
The deal will see Pipex's broadband provision services, though not its web hosting or domain registration concerns, come under the control of the Italian company.
The deal still needs the seal of approval from Pipex's shareholders and the Office of Fair Trading (OFT) but looks certain to go through.
Mary Turner, chief executive of Tiscali UK said: "We will be able to offer our new Pipex customers the full range of Tiscali's compelling and innovative services including broadband, telephone and TV. This acquisition provides us with an even greater opportunity in rolling out our double- and triple-play offers."
Tiscali has unbundled around 800 telephone exchanges, meaning that it can reach over 55 per cent of households in the UK without having to rely on BT's network. It plans to increase this figure to 1,000 exchanges in the future.
Peter Dubens, executive chairman of Pipex, said: "Tiscali's commitment to investment in unbundling, along with the new TV services it is introducing will offer our existing customers value and choice in the future."
Aamir Baloch of price-comparison service Firsthelpline.com said that it would be interesting to see whether Pipex would retain its branding and separate identity when it is taken over by Tiscali.
"Whether the brands will be kept separate we don't know, but hopefully they'll remain focused on customer service," Baloch told Web User.
The deal will increase Tiscali's UK customer base to just under two million. BT has the largest number of broadband subscribers in the UK with around 3.6 million customers.
Virgin Media has just over 3.4 million broadband customers in the UK and the Carphone Warehouse has a collective total of 2.3 million between its two brands, AOL and TalkTalk.
Steve Weller of uSwitch.com warned that the deal would not be straightforward.
"Any acquisition of Pipex is going to be difficult due to the complex nature of their network which has been built up through a number of acquisitions," he said.
However, a larger customer base would help Tiscali push its IPTV service.
"If Tiscali can integrate Pipex's customers successfully it would place them in a stronger position with the other large providers with over two million customers. If Tiscali can rollout their TV services on a national level, it would give further competition to Sky and Virgin Media's TV services," said Weller.
Earlier this week Sky announced that it had added 259,000 broadband customers in just three months. With BT's acquisition of the Brightview Group, the balance in the broadband market in the UK seems to be shifting, with smaller players being squeezed out and taken over as the industry becomes dominated by the larger companies.
Firsthelpline.com's Baloch said that though there was still competition within the market, the larger companies were starting to dominate.
"It's sad to say, but to get market share you need to have money to market your product. It's become a numbers game," Baloch said.
However, Chris Eagle, of BroadbandChoices.co.uk said that the consolidation in the broadband industry was bad news in the long run for customers.
"Companies are vying for a monopoly in people's homes; they want to supply you with broadband, home phone and digital TV, and this is leading to more convergence in the market but less choice for consumers," Eagle said.
Tiscali is an Italian-owned ISP with operations in the Netherlands, Germany and the Czech Republic.
www.tiscali.co.uk
www.pipex.com
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