freenet sells DSL unit to United Internet

26 May 2009

German ISP United Internet (1&1) has announced it has agreed to buy the DSL business of multi-service operator (MSO) freenet for around EUR123 million (USD172.3 million). The ISP said it will pay EUR70 million in cash and transfer 4.58 million of its own shares to freenet; if the price of United Internet shares falls below EUR12 at the time that freenet’s DSL contracts are migrated, the company will pay compensation of up to EUR4 per share. It is estimated that at the point of technical migration, 700,000 DSL contracts will be transferred to United Internet by the end of the year. At 31 March 2009 the German ISP was the country’s third largest broadband service provider by subscribers, with a total of 2.82 million. It is expected that the acquisition of freenet’s DSL unit will significantly boost United Internet’s customer base, enabling it to surpass the market’s second placed operator, Arcor, which at the same date had 3.067 million broadband users.

According to TeleGeography’s CommsUpdate, freenet announced plans to sell its DSL business in February 2008 and soon after transferred it to a separate unit, which became a subsidiary of the company’s holding structure. The sale was expected to raise around EUR400 million by the end of the following October, but was reportedly put on hold in November after failing to find a buyer willing to pay the asking price.

Germany, freenet, United Internet (1&1)