TV shopping channel may float for pounds 2.5bn

PARTNERS IN Open, the BSkyB-backed digital interactive television consortium, have been discussing a flotation for the business in the wake of the successful debut of Freeserve, the Internet service provider which listed with a pounds 2bn price tag in July.

Mathew Horsman, analyst at Investec Henderson Crosthwaite, the stockbroker, has put a tentative flotation value of pounds 1.4bn. However, sources close to the group believe that with 1.3 million Sky digital subscribers already signed up and at least 1.6 million expected by the end of the year - all of whom automatically get access to the home-shopping channel - Open could be heading for a valuation closer to pounds 2.5bn if it floated early next year.

One banker said: "[Mr Horsman's] analysis is pretty conservative. It is based on a cashflow. With 1.6 million by the end of the year, Open would be the largest Internet portal in the UK."

Freeserve has 1.3 million subscribers. Valuing Open on the same pounds 1,500- a-subscriber basis would give Open a flotation valuation of around pounds 2.4bn.

The founding shareholders HSBC, the bank, British Telecom, and BSkyB each have 20 per cent, with Matsushita, the Japanese electronics group, holding 15 per cent.

High-street retailers who have agreed to be "tenants" in Open's virtual shopping mall include WH Smith, Argos, Carphone Warehouse, Dixons, Next, Going Places, and Somerfield.

The partners have so far invested pounds 300m on development costs. A sale on the stock market of 15-20 per cent of the company could recoup that investment at a stroke.

Paul Seward, head of strategic development at HSBC and a director of Open, the former British Interactive Broadcasting, said yesterday: "Flotation is certainly a thought that has been discussed. But it not something we would rush into."

Much will depend on the reaction of viewers to the offering when it goes live this autumn, although preliminary indications are that many viewers prefer interactive TV shopping to browsing the Internet. "People are saying that if it is on the TV, I can use it," Mr Seward adds.

Sales using Open's home TV system have already reached pounds 100,000 despite the fact that it is still only a trial service, with the Woolworths and Manchester United sites being the most heavily used so far. HSBC, which is launching a basic home banking service on Open next month, is registering customers at the rate of 1,000 every two days.

Open this week launches a pounds 17m advertising campaign in an attempt to drum up interest ahead of the full launch in October. The service is being offered initially on the Sky digital platform, although the consortium is in active negotiations with the cable companies about supplying the service to cable customers when they launch their own digital television services next year.

The launch comes as ONdigital, Sky's digital rival, suffered a fresh blow as it emerged that Ashley Faull, who quit as programming boss, is canvassing City funds for a new interactive TV company, Sit-Up Entertainment. He is expected to be joined by two more ONdigital executives, John Egan and Marcus Ezekiel. BSkyB yesterday bolstered its team with the appointment as general manager of Richard Freudenstein, director of operations and business development at Foxtel, reporting to chief executive Tony Ball.