Freeserve plays it safe with pounds 1.4bn price tag

AROUND 100,000 Freeserve subscribers - roughly 8 per cent of the 1.3 million regular users - have registered for shares in the Dixons' free Internet service provider which comes to the stock market in a fortnight's time.

The issue - which has been billed as Britain's answer to the gravity defying Internet floats in the United States like Yahoo! and AOL - is expected to be given an indicative price range of between pounds 1.35bn and pounds 1.45bn when institutional bookbuilding starts today.

The figure is some 30 per cent below the price tag of pounds 1.8-pounds 2bn that City analysts have put on the float, reflecting concern in the wake of the recent falls in Internet values on Wall Street, to ensure that what many in the City hope will be a trailblazing deal does not turn into an embarrassing flop.

The number of Freeserve subscribers who took advantage of the ability to register on-line is relatively small when looked at in the context of the big popular privatisation issues of the Eighties, but is still nearly twice as much as the 50,000 or so that Credit Suisse First Boston, and Cazenove, the City advisers to the float, had expected.

Registrations which were due to close on Friday night had to be held open for several hours longer than planned because of the backlog of Freeserve users who had complained that they had been unable for technical to reasons get their registrations in on time.

The users who clicked on the register icon on the Freeserve site were clearly undeterred by the off-the-cuff remark by John Clare, Dixons' chief executive last week, that buying shares in Freeserve was "a gamble".

The retail tranche is relatively small and the advisers deliberately avoided the kind of high-profile advertising-led promotional campaigning directed at small investors seen in other recent large-scale floats.

The minimum application has been set at pounds 250 fully paid.

Analysts say that based on the American experience investors can expect a share price rise of between 30-100 per cent in the aftermarket.

Given that Dixons price already discounts a consensus valuation of pounds 1.9- pounds 2bn, the advisers have chosen to base their pricing decision on the assumption that the initial price rise will be towards the lower end of that range.

The offer is set to raise around pounds 200m of which around half will go back to Dixons to offset the initial start-up costs with the remainder going to the Freeserve chief executive John Pluthero to use as a mini-warchest to buy up various service providers to augment its offering to customers.

Of the 20 per cent of Freeserve that Dixons is selling, around 18 per cent will be offered to the public. Energis, which supplies the telecommunications infrastructure, is taking around 2 per cent.

Some analysts have expressed doubts about Freeserve's future, despite the initial surge of interest when it launched last year. Their concern is that as other providers follow Freeserve's example and drop access charges, Freeserve will lose its attraction for Internet subscribers.

Mr Pluthero is attempting to address these concerns by adding on extra services that can be accessed through the Freeserve web site in an attempt to make Freeserve the retail outlet of choice for subscribers. Freeserve currently earns revenue from three sources: advertising, services like record or book sales, and a share of the cost of the phone call incurred when subscribers log on.

Currently, the latter is the main source. But with analysts predicting that the value of UK market for electronic commerce will beat pounds 45bn early in the next century, Mr Pluthero is aiming to be one of the three or four players that he anticipates will dominate Internet retailing in the future.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
This weekend's 'Big Hero 6' by Disney Animation Studios
arts + ents
News
i100
News
Budapest, 1989. Sleepware and panties.
newsDavid Hlynsky's images of Soviet Union shop windows shine a light on our consumerist culture
Arts and Entertainment
Eleanor Catton has hit back after being accused of 'treachery' for criticising the government.
books
News
In humans, the ability to regulate the expression of genes through thoughts alone could open up an entirely new avenue for medicine.
science
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee