Dixons to 'auction' Freeserve

High street retailer Dixons is to auction its stake in leading internet service provider Freeserve, a report said.

Bidders have ten days to place their offers, with Dixons hoping that Freeserve will be valued at £6bn, the report in the Financial Times said.

Among the likely bidders are Germany's T-Online, NTL and Spain's Terra Networks. The buyer will gain a foothold in the competitive UK market, where Freeserve is one of the leading ISPs with nearly two million subscribers.

In the past months Freeserve shares have fallen, only to be boosted in recent days by speculation that T-Online was poised to buy it.

T-Online has been seen as a likely bidder because it needs to expand globally to ensure further growth, now that it has secured its German subscriber base.

T-Online has nearly five million subscribers.

Expansion plans

Deutsche Telekom has confirmed that it is interested in making further acquisitions, but has previously declined to comment on its intentions for Freeserve.

Freeserve was effectively put up for sale when Dixons appointed investment bankers Goldman Sachs to review its holding.

Freeserve has come under threat from the spread of unmetered, flat rate telephone access.

The company derives most of its revenues from a share of the telephone line charges for its services.

The internet industry has been rapidly consolidating following the merger of America Online and Time Warner in January.

In the latest moves, Spain's Terra Networks, a subsidiary of Telefonica, bought US search engine Lycos for $12.5bn (£8.4bn).

France Telecom is preparing to float its internet subsidiary Wanadoo, while Telecom Italia has just merged its internet service with its biggest rival.