AOL's UK Plans Threaten Freeserve's Success

Strategic Insights -

AOL, the world's largest Internet provider, is set to launch a free Internet service in the UK under its Netscape division, posing a significant threat to Freeserve's success. The move is seen as a bold move by AOL to overtake Freeserve, a subsidiary of Dixons, and become Britain's largest free Internet access company. Despite this, Dixons shares held firm, slipping just 2p to close at £14.16, while the FTSE 100 fell by 1.2 per cent.

Key Takeaways:

  • AOL's UK plans involve launching a free Internet service under its Netscape division, which will bring the company a new set of Internet customers.
  • The service will appeal to the young, mainly male and less affluent section of the population, who are looking for a cool and free Internet experience.
  • City analysts have warned that AOL's entry into the market highlights the vulnerability of Freeserve's position, with WestLB Panmure advising clients to avoid Freeserve's flotation.
  • Freeserve is valued at £600 million by WestLB Panmure, while Dixons has priced its flotation between £1.31 billion and £1.51 billion.
  • AOL Europe is owned by America OnLine, quoted in the US, and Bertelsmann, the German media company.
  • Netscape is an Internet search engine that has become a fashionable Web brand in the US, with a strong appeal to young, tech-savvy individuals.

Statistics:

  • Dixons shares slipped just 2p to close at £14.16.
  • The FTSE 100 fell by 1.2 per cent.
  • Freeserve is valued at £600 million by WestLB Panmure.
  • AOL Europe is owned by America OnLine, quoted in the US, and Bertelsmann, the German media company.

Sources:

  • The Times, Commentary, 1999
  • WestLB Panmure, note advising clients to avoid Freeserve's flotation, 1999
  • AOL Europe, press release announcing launch of free Internet service under Netscape division, 1999
  • Quoted in The Times, 1999