BT and United News & Media have put their jointly owned ISP LineOne up for sale.
BT and United News & Media have decided that LineOne, the UK’s fifth-largest ISP, no longer fits their plans. United is concentrating on business-focused Internet content, as demonstrated by its recent sale of the Express newspaper titles, whilst BT is trying to sell all its non-core activities to reduce its GBP30 billion debt.
The move is the latest step in the consolidation of the European ISP industry. The buyer will almost certainly be another, larger ISP. Germany’s T-Online, which nearly bought the UK’s largest ISP Freeserve over the summer, is likely to be interested, as is Terra Lycos. The problem at the moment for ISPs is that competition is so intense that simply providing Internet access is not profitable. LineOne makes an operating loss.
ISPs need to make money by leveraging their brand and customer base into eCommerce transactions. Obviously, this will work best for the ISPs that have the largest customer base and the most content available, both in terms of free content to attract customers and in terms of premium content for which customers will be prepared to pay. Building scale is key.
But the problem for LineOne is that even though it has a million unique visitors per month to its portal site, its brand is not particularly strong compared to larger players such as Freeserve. Although it would provide a useful foothold in the UK market for a European player, it would not give them a market-leading position. And it is hard to see why a rival British ISP would be particularly interested in the company. After all, its users do not pay subscription fees, and many people are signed up to several different non-subscription ISPs at once.
The most likely outcome for LineOne is a sale to a player such as T-Online, seeking to build scale in the UK market. However, with Freeserve also up for sale, LineOne will certainly be seen as second prize. BT and United are highly unlikely to make very much money out of selling the business – certainly not the GBP1 billion the company was valued at in early 2000.
