Freeserve, the U.K.’s top Internet-service provider, is poised to make its debut on Wall Street today in an attempt to raise money that could be used to thwart attempts by America Online to become the dominant online player in Great Britain.
Its parent company, Dixons Group Plc, will reportedly sell about a fifth of Freeserve on the London and Nasdaq stock exchanges Monday, in a sale that could raise up to 1.5 billion pounds (UK or $2.4 billion US$).
Dixons Group is the U.K.’s largest electronics retailer, with about 950 stores, pumping out revenue last year of 2.9 billion pounds ($4.6 billion US$). Freeserve is just one of Dixons Group’s many enterprises, which also include real estate development and appliance services.
Analysts say early indications are that there will be a great demand for the stock, despite Freeserve’s mounting red ink of 1.04 million pounds ($1.66 million US$) over the last seven months of operation. Prices for the stock are already reportedly soaring in the gray market — which is the unofficial trading that takes place before a new share comes to market.
Face-off with AOL and Microsoft
Since it was founded last year, Freeserve has been offering a plethora of free online services including Web space, entertainment and news — with the range of services expanding. Just last week, the company began placing stock market quotes on its Web pages for free. These type of freebies have enabled Freeserve to eclipse both Microsoft and AOL’s subscriber bases — snagging about 1.3 million U.K. Internet subscribers.
This reality spurred Microsoft Corp. in June to also begin giving its U. K. subscribers free Internet access. Industry experts say that Microsoft had no choice since it had lost about a fifth of its 150,000 English customers to Freeserve. Soon after, AOL — which is No. 2 with 600,000 U.K. subscribers — announced that it too would provide a free online service called Netscape Online beginning August.
Analysts say free access is simply the admission price in order to be a player in the U.K.’s burgeoning e-commerce marketplace. Buying and selling of goods on the Internet in Britain is expected to grow from 160 million pounds ($257 million US$) in 1998 to 8.1 billion pounds ($13 billion U.S.) by 2001, according to Forrester Research, Inc. In addition, the number of U. K. Internet users is estimated to more than double to 17 million next year, according to the Computer Industry Almanac.
Another reason free access is necessary to stimulate e-commerce in Britain is the fact U.K. telephone companies charge Internet surfers by the minute to use their lines. Moreover, despite consumer protests, it wasn’t until last month that British Telecommunications Plc, the U.K.’s largest phone company, agreed to offer its customers hooked to an ISP a flat fee of 11.75 pounds during weekend instead of billing per minute usage.
60-minute free telephone access
Meanwhile, last week, Freedom Telecom, which already offers Britons advertising-funded free telephone calls, announced it would launch freephone Internet access in August — giving its subscribers 60-minutes a day free online connection time. Some industry experts say this could spark yet another series of free offers to Britons over the next several months from competing telephone companies.