United Internet breaks off Freenet merger talks

21 Nov 2007

German ISP United Internet has pulled out of merger talks with rival ISP and wireline telco Freenet. The talks only began a week ago, but it is thought the potential price tag of EUR800 million (USD1.2 billion) and integration difficulties were enough to convince United to break off discussions with Freenet. The ISP said it would still go ahead with a 50/50 joint holding company with MVNO Drillisch, which could see the partnership increase its stake in Freenet to 30%. Drillisch could also end up buying Freenet’s wireless business, but its plans for a full takeover seem to have been scuppered.

‘I think it is good news for United Internet because there are so many risks in the merger,’an anonymous analyst told Forbes.com, adding that the ISP could suffer a higher churn rate when trying to integrate Freenet customers, which would affect the profitability of the newly expanded customer base. Freenet was formed in March from a merger of cellco mobilcom and its internet arm Freenet.de, and reports say the breakdown of talks now leaves Freenet looking vulnerable and without a buyer. It looked set to be split up following talks with United Internet and Drillisch, but even the sale of its wireless business might now be hampered by the lack of a buyer for the rest of the company.

Germany, 1&1 Drillisch, freenet, United Internet (1&1)