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Monday, June 28, 1999 Published at 17:52 GMT 18:52 UK


Business: The Company File

Freeserve to float online

Dixons hopes Freeserve users will want to buy shares

Small investors will have to go online if they want to take part in the UK's biggest Internet float.

Electrical retailer Dixons confirmed on Monday that it was selling a fifth of its Freeserve Internet service provider.

It is offering 18.25% of Freeserve shares in the float on London Stock Exchange and New York's Nasdaq market.


[ image: Freeserve faces growing competition for Internet users]
Freeserve faces growing competition for Internet users
To encourage small investors, it has set the minimum investment level at £250.

Dixons also said that all prospective shareholders must register their interest online by 9 July.

Freeserve has grown rapidly since its launch last summer, gaining 1.25m users and becoming the UK's largest player in the market of hooking computer users up to the Internet.

Million-pound loss

Its success was largely down to being the first Internet Service Provider to offer a free service to customers.

There have been widely different valuations placed on Freeserve.

Dixons did not put a valuation on the business as details of the float were unveiled on Monday.

But it did reveal that Freeserve lost £1.04m on revenues of £2.73m in its first eight months of business.

Paul Sharma, of Investec Henderson Crosthwaite, said comments from Dixons about the value per subscriber would suggest a figure of about £1.5bn.

Prospective shareholders who register by 9 July should receive a mini-prospectus and application form the following week.

Tesco and The Sun

Dixons is selling a further 1.75% to telecoms company Energis.

"The flotation of Freeserve is an important milestone in our strategy to become the UK's home on the Internet," said John Pluthero, Freeserve chief executive.

Even though Freeserve made a loss, its perceived value has helped double the share price of its parent, Dixons, from 599p on 22 September to 1203p on Monday (1200 GMT).

Its success has led to a host of imitators - in total 80 other free services have launched in the UK.

Well-known brands - from supermarket group Tesco to the Sun newspaper - have attempted to muscle in.

This increased competition has led some analysts to express worries about the flotation, as Freeserve has no real track record in a highly volatile market.

Freeserve earns half its money from a share of telephone call charges, the rest from advertising revenue and from e-commerce, which it expects to take over as the biggest income stream in the year to March 2000.

No more Freeserve shares will go on sale for at least a year after the flotation and Dixons said it would sell a maximum of 40% more in the year after that.



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