Freeserve is in takeover talks with France Telecom’s ISP Wanadoo.
Since parent company Dixons effectively put Freeserve up for sale earlier this year, the UK ISP has been in talks with a number of partners about a variety of potential transactions. This summer it looked like Deutsche Telekom’s Internet subsidiary T-Online would be a buyer, but the deal collapsed because of disagreements about the price tag and conflicts in management style. Since then, Freeserve has more than halved in value.
There are two major types of player potentially interested in Freeserve – European ISPs (such as T-Online) looking to build out services across the continent, and firms with substantial investments in network infrastructure in the UK wanting to leverage the Freeserve brand and customer base to provide broadband services. An obvious firm in the second category is Energis, whose Energis Squared subsidiary originally provided the technology for Freeserve’s launch.
While T-Online and Energis are still possible buyers – and there are many others in the frame – a sale to France Telecom’s Wanadoo ISP would definitely make sense. Wanadoo is a major portal in France and elsewhere in Europe, with over a million French customers and over half a million abroad; acquiring Freeserve would suit its interests.
But even better, the sale would also allow France Telecom to leverage its network assets. France Telecom has substantial interests in UK infrastructure, including fastest-growing mobile communications operator Orange, and a 25% stake in dominant cable operator NTL. Orange and NTL will be in the forefront of providing broadband Internet technology as 3G services are rolled out and as DSL and cable modem services become a reality for the majority of the UK population over the next year. Freeserve’s customer base of almost two million would be a major advantage for these operators – indeed, NTL itself has previously been suggested as a purchaser.
The deal could still fall apart as the companies negotiate on price and management issues; the latter has been something of a problem for France Telecom’s last major UK acquisition Orange. Nonetheless, if everything goes according to plan then France Telecom and Freeserve should both benefit substantially.
