Is Pipex the next provider to be up for sale?
The Times has looked at the possibility that Pipex may be on the acquisition radar of larger providers during 2007, for the full article see Times Online.
The speculation appears to stem from comments by Peter Dubens the chairman of Pipex, he is quoted as saying he was "reviewing the best way forward". It looks like some talks may have already taken place with the BT Group, who themselves in 2006 announced the acquisition of Plusnet. Only time will tell which companies are really interested in Pipex.
It would appear that one of the problems that Pipex is looking to address is that its position in the consumer market is becoming increasingly costly. Advertising campaigns like the recent David Hasselhoff series will not have been cheap, and the success will be marked by how many customers the group has acquired as a result, the number of which has not been revealed. A major issue for Pipex is also meeting the expectation of its customers, with our forum showing what appears to be a fair number of unhappy customers.
The predictions of the broadband provider market shrinking to around five providers seem to becoming a reality with increasing speed. Certainly by the end of 2007 we will probably find 90% or more of broadband customers under the control of just five providers. The smaller providers are likely to continue operating in the small business and other specialist areas, but increasingly the gulf between small providers and large ones is making it a much harder market for new companies to start in and be successful.
Update 13:10 Reuters has issued a further update on the latest results from Pipex which can be read at www.reuters.co.uk.
"Broadband customer numbers of 570,000 are flat on the number disclosed in September, which is disappointing given marketing investment and a significant reduction in prices,"Dan Gardiner, Analyst - Bridgewell
The flat number of customers suggests that the number joining Pipex has been balanced by a similar number leaving. What the number doesn't reveal is the level of churn in the various different divisions, with Pipex owning Freedom2Surf, Toucan and Nildram it is possible that the extensive advertising by Pipex has been successful, but balanced out by people leaving the providers under the groups control.
To some the fact that around half of the Pipex profits come from the Internet hosting and domain name division will be a surprise, especially when this area accounts for just 10% of the groups turnover. What this does show is the very slim margins available for broadband providers to invest in providing a quality service, and how the last year has seen pressure increasing to bring connection pricing down lower and lower.