The merger gives Video Networks, the parent company of Homechoice, an 11.5% stake in Tiscali UK, which could increase to 20% if performance targets are met.
It increases Tiscali's broadband customer base to 1.3m, of which 350,000 are also fixed-line phone customers and 45,000 are subscribers to Homechoice's TV-over-internet service.
Tommaso Pompei, a senior manager at Tiscali, said: "The triple-play offer will be ready by the end of the year in the UK, and immediately after that in Italy, then other countries will follow."
Tiscali operates in Germany, the Netherlands and the Czech Republic.
Video Networks is believed to have been approached by other companies including BSkyB, Vodafone and Orange, after deciding in November it needed to examine its funding options. Lack of cash had been hampering its attempts to expand beyond its London heartland.
Tiscali, which is headquartered in Italy, has funded the takeover of Video Networks by giving its shareholders, the biggest of whom is former Microsoft executive Chris Larson, a share in Tiscali UK.
With Tiscali UK valued at around £500m, Video Networks shareholders have effectively received around £60m for the company, which could increase to £100m if the performance targets are met.
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