Freeserve: The Pioneer in Free ISPs in Europe
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Case Details:
Case Code : BSTR092
Case Length : 11 Pages
Period : 1998 - 2001
Organization : Freeserve, Wanadoo
Pub Date : 2004
Teaching Note : Available
Countries : Europe
Industry : Internet, Telecommunication
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"Most subscription-free ISPs, including Freeserve, offer little to differentiate themselves and provide little or no barriers to exit for subscribers. As long as users can switch accounts so easily, free-ISPs leave themselves vulnerable to churn."
- Nick Gibson, Durlacher in 1999.1
"They're (Freeserve) doing a good job in a still brutally tough competitive environment. They have a much more valuable franchise than people believe with their number one position in the UK. That shouldn't be underestimated."
- Peter Bradshaw, Analyst, Merrill Lynch in 2000.2
Freeserve's Free Fall
In December 2000, Freeserve, the pioneer among free Internet Service Providers (ISP) in Europe, was taken over by Wanadoo, France's leading media and online services company.
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From September 2000, Freeserve's share value had been falling steadily and this prompted the company to talk to several prospective buyers like Dutch Portal World Online and Germany's T-Online. The acquisition by Wanadoo put an end to industry speculation about the future of Freeserve.
The main reason for the takeover was to revive the loss-making Freeserve. The combination of Freeserve and Wanadoo was aimed at creating a leading European Internet and online services company. It planned to offer a wide range of services including ISP, portal, e-commerce, yellow pages and business directories. The takeover also meant an increase in the customer base for both companies.
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Hence, a stronger management, coupled with better technology, telecommunications, marketing skills and expertise, saw Freeserve emerge as one of the largest players in the European ISP industry by 2003. Freeserve
pioneered an era of free Internet access, which became the rage all over the UK. The Dixons Group (Dixons)3 launched Freeserve during the dotcom boom in 1998.
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Freeserve went on to become one of the largest dial-up service providers in the UK, that offered subscription-free Internet access. Dixons reaped huge benefits from Freeserve. They made more than £600 million between the launch of Freeserve and its sale. At a certain stage, Freeserve was valued at £9.5 billion - more than Dixons itself - and the parent company had made £300 million from the public issue in 1999, and a further £312 million from selling shares since then. Freeserve's value, when it was sold to Wanadoo, was approximately the same as what was placed on it during its initial public offer held in August 1999. Freeserve worked as a subsidiary of Dixons for eighteen months and during this period its share value went up by more than 500 percent before crashing. |
Freeserve: The Pioneer in Free ISPs in Europe
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