Freeserve to sell float shares online

THE 1.25M subscribers to Freeserve, Dixons' Internet service provider, will be able to register online for the shares when it is floated within the next few weeks. It is thought to be the first time that subscribers have been able to register for a flotation issue on the Internet in Britain.

Dixons, the high-street retailer which pioneered free Internet access in the UK, has promised subscribers they will be prioritised if the offer is oversubscribed.

CSFB and Cazenove, which are jointly handling the offering, are expected to start pre-marketing the issue to institutional investors next week, with a view to completing the sell-off by July. Dixons is seeking to sell 20 per cent of Freeserve, which has been valued at pounds 1.3bn to pounds 2.6bn.

The advisers are confident about the level of retail support although there has been some concern about the appetite of institutions for the offering in the wake of the recent sell-off in Internet shares on Wall Street.

Freeserve also suffered a setback earlier this week when AOL, one of the leading Internet service providers, announced it was dropping charges and would offer a free service in the UK from now on.

Freeserve took off spectacularly when it was launched last September. However, its growth rate tailed off sharply once other operators responded by cutting charges or offering free access.

Dixons has also had to put back estimates of a likely break-even. Having initially talked of a break-even in the first year, Dixons now sees that as unlikely, particularly given the flotation expenses which will have to be taken into account.

Freeserve's revenue comes mainly from its share of the telephone charges incurred when customers are online, although it is seeking to develop other revenue streams such as advertising. It is also setting up joint ventures to provide a range of products and services through its Internet portal.

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