European ISP Tiscali has bought Homechoice, which offers broadband and video-on-demand to customers in London and Stevenage.
Tiscali will start offering its UK subscribers TV services by the end of the year. Services will then begin in Italy and other territories.
Video Networks, the parent of Homechoice, gets an 11.5 per cent stake in Tiscali. This could increase to 20 per cent if targets are met, valuing Homechoice at roughly £100m. The company was taken over by Chris Larson - the fourth employee at Microsoft.
Tiscali has about 10 per cent of the UK broadband market and the purchase of Homechoice might help it fight off competition in an increasingly aggressive market.
Homechoice has been looking for a new owner for some time. BSkyB and ntl, as well as mobile networks Orange and Vodafone, were all mentioned as potential suitors.
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