France Telecom’s Wanadoo unit has agreed to buy UK ISP Freeserve for GBP1.6 billion.
Wanadoo has been viewed as a potential buyer for Freeserve for some time. The French ISP, majority-owned by France Telecom, has now ended the speculation, making a GBP1.6 billion agreed offer. This will be a relief for Freeserve’s shareholders. The company has halved in value since the T-Online talks and prospects as a standalone company with interests in only one country looked fairly bleak in the consolidating European market.
It’s also good news for Wanadoo. There were always two possible types of partner for Freeserve: European ISPs looking to build out services across the continent, and firms with substantial investments in network infrastructure in the UK wanting to leverage the Freeserve brand and customer base to provide broadband services.
Wanadoo, happily, satisfies both these conditions. It is a major portal in France and elsewhere in Europe, with over a million French customers and over half a million abroad; acquiring Freeserve adds an extra two million to these. But even better, parent France Telecom will be able to leverage its network assets. It has substantial interests in UK infrastructure, including fastest-growing mobile communications operator Orange, and a 25% stake in dominant cable operator NTL. Orange and NTL will be in the forefront of providing broadband Internet technology as 3G services are rolled out and as DSL and cable modem services become a reality for the majority of the UK population over the next year.
Freeserve’s customer base will help these operators gain market advantage (indeed, NTL was suggested as a purchaser earlier in the year), as well as cementing Wanadoo’s dominance. The move also ensures that France Telecom’s archrival Deutsche Telekom will find it harder to build a major presence in the UK ISP market – although fifth-largest player LineOne is still up for sale. But irrespective of the Germans’ plans, France Telecom looks like it will be one of the strongest players in the UK market as Internet, TV and mobile communications converge.
