The internet service provider Freeserve yesterday admitted a key distribution deal with Dixons for its narrowband internet access product was up for renegotiation.
Dixons, which set up Freeserve in 1998 and floated it on the stock market a year later, is thought to be talking to rival firms including AOL and BT about distributing their narrowband internet service in its shops instead.
Freeserve, now owned by France's Wanadoo and run by Eric Abensur, insisted that its narrowband contract with Dixons had not been terminated and that there was still everything to play for.
"It's not over 'til it's over. They [Dixons] have served notice on the contract but it's not been terminated," said a Freeserve spokesperson.
Its rivals, however, are understood to be battling hard to win the distribution deal with Dixons by offering to increase the amount paid to the retailer for new customers signed up in its stores.
Dixons currently promotes Freeserve through its Dixons and Currys electrical goods stores and the PC World chain. In return, Freeserve pays it a flat fee and a bounty payment for each new customer that signs up to the service in one of its stores.
"What is likely to be happening is that they [BT and AOL] will be offering Dixons far more than it currently gets from Freeserve," said one source.
Freeserve's narrowband contract with Dixons ends in February next year, while its broadband contract with the retailer expires a year after that. "It's not a secret that our narrowband contract with Dixons ends in February ... it's been in our business plans for quite some time," a spokesperson said.
Dixons confirmed yesterday it was "reviewing the situation" for next year but would not be drawn further other than to say that review was "ongoing".
Freeserve tried to play the move down yesterday.