Dixons Freeserve tags July for £2.5 billion IPO

The City expects Dixons Stores Group to spin out FreeServe in a July IPO , according to yesterday's Times. The company - Britain's biggest Internet Service Provider, with 1.5 million members - will command a market cap of £2.5 billion, according to analysts. Not bad for a seven-month old Internet business that is expected to turn over just £9 million in its first year of operation. Dixons has already confirmed the appointment of investment bankCredit Suisse First Boston and stock broker Cazenove to investigate a flotation. The only questions as far as The Register was concerned, were when and how much? Times journalist Chris Ayres supplies the answers. The meat of the story comes from a City presentation made by Freeserve general manager Mark Danby on Friday, but arranged several weeks ago (April 23). This was cut short to ensure Dixons complied with Stock Exchange rules, Ayres reports. "After frantic negotiations between Dixons, CSFB and Dresdner Kleinwort Benson, the investment bank that organised the presentation, Mr. Danby agreed to give his talk, but it lasted only minutes. 'Our lawyers have blacked out most of my slides', he joked. 'I'm subject to wartime censorship.'" Dixons would be crazy not to float Freeserve -- and ASAP. The company was not the first company to launch a free Internet access service in Britain, but it's by far the most successful. Now the floodgates are open, with more than 30 companies, including a string of household names, plying free Internet access in the UK. And that will eat into Freeserve's potential customer base. The moment Freeserve's growth rate dips, the moment its valuation falls. Of course, there's plenty of mileage in getting FreeServe customers to buy more things online: in recent weeks the company has inked deals to flog books, and financial services. Sister company Jakarta will use the service to sell consumer software. However, the majority of FreeServe customers are Net newbies and they will take their time to get into the ecommerce swing. And soon, FreeServe will run out of people in the UK to hook up to the Internet. It's difficult to see how FreeServe can sustain such furious growth without a substantial acquisition or two. And that requires stock from a company commanding an Internet premium-rating. ® Dixons sues AOL Tesco will not spin off its ISP AOL will not jump on freebie bandwagon Free ISPs safe from UK watchdog No such thing as a free lunch