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TalkTalk is set to become the UK’s largest consumer broadband provider with the acquisition of Tiscali.

In a statement released today by cheap broadband specialist TalkTalk, it was announced that the company will pay £236 million to acquire Tiscali’s UK division. The deal will boost TalkTalk’s broadband subscriber numbers to 4.25 million, equating to 25 per cent of households.

TalkTalk, the consumer broadband division of retailer Carphone Warehouse, was one of many companies which had considered buying the troubled broadband supplier over recent months. Sky and Vodafone had both entered negotiations with Tiscali, before pulling out after failing to agree a price. This was attributed in part to instability in the equity markets as well as concerns over the firm’s levels of debt.

Subject to regulatory approval, the acquisition is scheduled to go ahead in June. Carphone claims that it has already identified potential cost-savings of between £40 million and £50 million by March 2011. These are expected to result from moving four-fifths of customers to its network, as well as the combination of the company’s billing systems and "efficiencies associated with backhaul, the core network and individual exchange costs".

According to TalkTalk, the deal will also bring a host of benefits to former Tiscali customers. These are said to include “higher bandwidth, greater capacity and advanced services”, which will make it "easier and faster to use the internet”. They will also be line for “lower-cost telephone calls”, TalkTalk claims.

Charles Dunstone, chief executive officer of Carphone, said: “Six years ago, no one could have imagined that we would build the largest residential broadband provider in the UK, but our determination to offer incredible value with the latest technology has propelled us to being the most popular provider in the country.

“Combining Tiscali with TalkTalk creates a unique platform that will allow us to innovate faster and provide an even better service for our enlarged customer base.”

Tiscali is currently the UK’s fifth-largest broadband suppler, with a customer base of 1,768,000. However, in recent months the company has lost custom to rival providers, with its broadband subscriber numbers falling in the last two consecutive quarters. This is thought to be linked to Tiscali’s consistently poor performance in customer service surveys.

Meanwhile, TalkTalk’s credit crunch-friendly cheap broadband deals have helped it prosper. The firm is intending to build on its recent success with a new marketing strategy which will focus on its free services.

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