Freeserve shares rocket on T-Online news

German company said to be pushing for rapid buyout of UK's largest ISP

Top UK Internet service provider Freeserve (quote: FRE) gained 25 percent in value in early trading Tuesday in the wake of reports that Germany's T-Online will make a £6.5bn bid for the company.

Electrical retailer Dixons (quote: DXNS) put Freeserve on the block early this month, fulfilling its promise not to sell the ISP's shares for a year after the its flotation.

T-Online is believed to have put in a bid for substantially above Freeserve's then-share price of 392p, offering about 650p, according to reports. But Tuesday's early gains erased much of that premium, boosting shares to around 500p.

T-Online, 90 percent owned by Deutsche Telekom, is believed to have made a previous offer for Freeserve early this year, which was rebuffed because of concerns the merger would dilute Freeserve's brand and business strategy. Freeserve became known for its innovative "free" pricing, in which revenues come from a share of the telephone call charges.

In other news, figures from Vodafone AirTouch (quote: VOD) were expected to be at the forefront of investors' attention Tuesday as the market re-opened after an extended bank holiday weekend. The company is reporting yearly pre-tax profits before one-off items of £2.47bn.

Vodafone -- where analyst profit expectations had been pitched around £2.2bn -- also confirmed the well-expected sale of Orange to France Telecom for £25.1bn. "At first sight the numbers look pretty strong," said one senior equity salesman. "Vodafone alone could lift the FTSE 100 quite strongly if the market decides the results are good."

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