Carphone Warehouse is set to become the largest provider of residential broadband in the UK after it bought over the UK arm of communications firm Tiscali.

The company, which provides broadband under the TalkTalk brand and also owns AOL UK, secured the crumbling Sardinia-based Tiscali in a £236m deal.

Carphone Warehouse is now the second biggest overall provider behind BT, which has a massive business client base.

The addition of Tiscali's 1.7 million UK customers will increase TalkTalk's residential customer base to 4.25 million, extending to 25% of UK households. Tiscali customers will retain their existing tariffs, email addresses and the same means of contacting customer services, but the intention is to "migrate" Tiscali customers to the Carphone Warehouse billing and customer-service platform over the next 24 months.

Charles Dunstone, Carphone Warehouse founder and chief executive, said: "The most important message for Tiscali customers is that their service will continue and improve." Dunstone added that there was "no cause for concern" for the jobs of Tiscali's 700-strong London-based workforce.

According to Jason Glynn at the comparison website,, the takeover of Tiscali is likely to be a good thing for its customers, because his site's last survey found customer satisfaction with service levels at Tiscali had been deteriorating.

However, he added: "The worry is that TalkTalk might take its eye off the ball with the acquisition of Tiscali customers. Carphone also owns AOL UK and that has seen a deterioration in customer service."

TalkTalk is currently rated fourth for customer service after O2, Plusnet and Sky, while Tiscali is sixth and AOL ninth.

Mr Glynn believes service will become more important, although price will obviously remain a key factor in the recession.

"The market has been blown apart by the new entrants, 02 and Sky, who provide highly efficient customer services. It is almost as if they came in and showed the bigger players how to do it. Sky, for example, entered by acquiring Easynet, a highly technically-efficient internet service provider," he said.

The market remains extremely competitive. Anecdotal evidence suggests that getting rid of their broadband connection will be one of the last savings people make when economising.

Tiscali had previously been in talks with BSkyB, but negotiations broke down earlier this year.

TalkTalk, even before the acquisition of Tiscali, which they hope to complete by the end of June, had the biggest year on year increase in customers and the merger will see it leapfrog Virgin Media in market share.

Carphone Warehouse, which is splitting its retail operations from the TalkTalk broadband division, hopes the takeo ver will allow it to make annual savings of £40m to £50m within two years.