It's been confirmed that Freeserve is to lose its favoured place in Dixons' stores trumped by rivals AOL UK.

Financial details surrounding the deal were not disclosed although some sources claim it will cost AOL around £100 million for the privilege of flogging its ISP services in Dixons' stores.

AOL will become the preferred ISP to Dixons customers through the retailer's 1,100 PC World, Dixons, Currys and The Link stores in the UK.

The agreement will also enable AOL to be preloaded on all Dixons own-brand PCs.

AOL's narrowband products will be plugged in Dixons' stores from February 2004. AOL's broadband product will replace Freeserve's ADSL offering on the shelves from February 2005.

Predictably, AOL is pitching today's announcement as a brilliant deal. Freeserve's take on it is somewhat different. Essentially, it claims that it has decided "not to renew its…distribution agreements".

In fact, had it been forced to match AOL's cash offer (estimated to be anywhere between £10 million and £100 million depending on who you speak to) it might have affected Freeserve's stated aim of "reaching profitability in 2004".

Either way, Freeserve insists that it has been "steadily reducing its reliance on Dixons for customer sign-ups" - so the loss of this potentially marketing deal is not an issue.

Said Freeserve chief exec Eric Abensur: "We have been prepared for the possibility of a non-renewal of the Dixons contract for some time. Over the past two years a major part of our efforts have focused on diversifying our distribution channels across the UK, both offline and online." ®

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