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Tuesday, 7 March, 2000, 18:10 GMT
Freeserve shares tumble

Internet access war shakes confidence in Freeserve
Shares in the UK's leading internet service provider, Freeserve, and its parent Dixons, have tumbled by almost a fifth in frenetic trading.


We have a commitment with the stock exchange to hold on to our current stake until at least the end of this July.

John Clare, Dixons chief executive
The heavy price falls are as a result of concerns that the free unlimited internet access proposed by Altavista and NTL will blow a hole in Freeserve's business model.

Freeserve has based its service on no subscription fee and making its money from taking a proportion of the phone call charges.

At the close, Freeserve was down 167.25 pence (19%) at 712.25p, while Dixons was 254p (17%) lower at 12.31.

Dixons shares were suspended during the afternoon at the request of the company "following shareholder approval of reorganisation proposals".

It said it had no immediate plans to reduce its 80% stake in Freeserve.

Ready to fight back

Freeserve, which holds almost a third of the British market, pointed out that free internet service providers already existed, but with strings attached.

For example, even with NTL's proposals the catch is that subscribers must use the company's telephone service and spend at least 10 a month on calls.

Freeserve said call revenues formed a decreasing slice of its revenue, nearly half of which came from advertising and e-commerce, but it gave no hint that an unmetered package was forthcoming.

Some analysts said Freeserve was well-positioned for the new competition, but others said it would be a costly battle.

FTSE listing

Freeserve has been tipped as one of a number of companies to be promoted into the UK shares premier league, the FTSE 100 listing.

The index setting committee will decide on which companies fall out of the top 100 and which replace them - likely to be a range of fast-growing high-tech firms - when it meets on Wednesday.

Their decisions will be based on closing share prices on Tuesday.

Analysts said the Altavista and NTL announcements had also undermined the UK telecom sector generally.

British Telecom fell 118p to 11.70 and Vodafone Airtouch dropped by 14.5p to 384.5p.

No plans to sell

Dixons chief executive, John Clare, denied suggestions that he was planning to reduce his company's holding in Freeserve.

He said: "We have a commitment with the stock exchange to hold on to our current stake until at least the end of this July.

"Then if we choose to, we can sell it down some. But we're not thinking of that now. July is a long way away in internet time."

But he added: "What might well happen, if Freeserve wants to do a deal with somebody and issue paper, then we could get diluted. That could happen at any time."

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See also:

14 Feb 00 |  Business
Freeserve links up with BT
17 Feb 00 |  Business
Freeserve plans online drama
07 Mar 00 |  Business
Internet price war heats up
28 Feb 00 |  Business
Freeserve joins lottery bid
06 Jan 00 |  Business
Freeserve gains strength
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