Baker Street, London -- Amidst all the hoopla surrounding the flotation of Freeserve (LSE: FRE), investors seem to have forgotten that the Dixons' (LSE: DXNS) offshoot is not the only internet service provider, or ISP, listed on the London Stock Exchange.
Before Freeserve came along to spoil the party enjoyed by existing providers, subscription services were the norm. Internet Technology Group(LSE: ITH) was one of the largest of this breed. Concentric Networks has recently made a £150m offer for the company. Yesterday ITG said it had 300,000 "dial-up customers" in all, making it one of the largest ISPs in the country. 150,000 of these have been attracted in the past couple of months to the group's new "free" services, such as Waitrose.com and FreeNetName in the UK and The Music Factory and Macintosh's MyWeb in the Netherlands. The other 150,000 use the old subscription style service. This suggests that each ITG customer is worth £500.
Easynet (LSE: ESY) is another provider which runs a subscription based model. The company, which has just over 60,000 users throughout the UK, France and Germany, is currently valued at £148.5m. This makes each Easynet customer, all of whom pay for their premium service, worth £2,475. Increasingly though the company is admitting that its fees from subscriptions will decline. Easynet will offer a new ADSL service with a free three month trial period.
Both of these operators are dwarfed however, by the might of Freeserve. The revolutionary company announced last week in an update to its interim results that it has approximately 1.48m users. The concern is currently valued at £1.522b. On this basis each Freeserve customer is worth £1,028.
However, there is another player in the over-populated ISP field: Affinity Internet(LSE: AIH). The company listed on AIM this April at 70p. This morning the shares rose 11.5p to 471.5p. Investors would certainly have done far better to back this group rather than Freeserve in the short term, enjoying a rise of 670%. Even at these heady heights, Affinity is only worth £85m! You may be saying "I haven't heard of Affinity, no wonder it's so lowly rated". But in fact the company is the second largest ISP in the country after Freeserve, boasting of over 600,000 customers. At flotation it only had 175,000. This means each Affinity user is worth only a miserly £142.
This seems strange since Affinity probably has more loyal customers than many. As the name suggests, it markets its internet access services to affinity groups. For example it runs free ISPs for Arsenal Football Club and Prudential's (LSE: PRU) internet Egg arm. The shares have jumped yesterday and today because the group may enhance its revenues via a deal with PowerGen (LSE: PWG). The utility will offer its 750,000 shareholders and 2.2m customers a free internet package, provided by Affinity, who will take a proportion of revenue from telecom charges.
Today Affinity has said it wants to raise more money. If this means an offering of shares, you might like to consider buying some, since they are still worth just 5% of Freeserve's comparatively expensive paper!
Other Breaking News
On a sparse news day Scottish Power(LSE: SPW) released its interim results as did electrical component maker Pressac (LSE: PRSC). In Australia overnight Rupert Murdoch at News Corp's AGM said he might consider floating some of his internet companies. Could Bun.com, the Sun Newspaper's site, be joining the respectable ranks of the FTSE 100? More news at lunch time.
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