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Friday, 8 December, 2000, 07:02 GMT
Tiscali bid secures World Online
Tiscali home page
The Italian internet service provider (ISP) Tiscali on Thursday said its bid to buy Dutch rival World Online for 3.4bn euros ($3.04bn) had been successful.

The takeover will create Europe's third-largest ISP behind Deutsche Telekom's T-Online and France's Wanadoo, which on Wednesday clinched a deal to buy the UK's Freeserve.

Tiscali said its all-stock bid had secured 96.1% of World Online shares.

Chief executive Jim Kinsella said, in a reference to the US ISP, that Tiscali aimed to become "the AOL of Europe" by expanding through further acquisitions.

"We need to do more acquisitions in the UK, France and Germany," he said, adding new deals were likely within a few months.

Analysts divided

Analysts were divided on Tiscali's prospects. Some said the firm would benefit from economies of scale and the injection of cash that World Online would provide.

Others said Tiscali would face tough competition and might be disadvantaged by its lack of affiliation with an incumbent telecoms operator.

In addition, although the company has about 3.5 million active subscribers, it is strong only in smaller markets such as Denmark and the Netherlands.

Maurits Heldring, media analyst at Amsterdam-based Kempen & Co, told the BBC he predicted "a minor role in the development of the European ISP market" for Tiscali.

He also said the wave of consolidation in the sector was likely to continue.

"For the smaller ISPs, it is very hard to make money on their own."

Tiscali shares dropped 4.1% to 25.56 euros on Thursday but World Online stock surged 15.1% to 12.20 euros.

The deal, announced in September, had been expected to help Tiscali break even in the second half of next year.

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Background:

Internet price wars
News and background

See also:

06 Dec 00 | Business
French rival clinches Freeserve deal
22 Sep 00 | Business
World Online drops unmetered access
07 Sep 00 | Business
Tiscali pays $5bn for World Online
15 May 00 | Business
World Online float hearing
13 Apr 00 | Business
World Online boss quits
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