Freeserve is looking to consolidate the UK free-ISP market through merger talks with its rivals, UK press reports claim.

A Financial Times report on Tuesday, said Freeserve - the UK-based free ISP - is talking to a number of rivals, in a bid to clean-up a crowded market. A Freeserve spokeswoman confirmed that the company expects consolidation in the free-ISP field "soon". The market has grown to 250 companies since Freeserve emerged in late-1998.

The glut of free ISPs is due to British Telecom's (BT) local-call pricing scheme, which charges users for all time spent online. Since Freeserve initiated the free ISP model last year, BT has offered a portion of its revenues from those users to ISPs - a lucrative reward for companies offering free Internet access.

Prior to the free ISPs, British Internet users paid a monthly fee for access, as well as telephone charges for the time they were connected.
In August, Freeserve's main competitor, AOL Europe, announced it too would join the throng of free ISPs, and launched Netscape Online as a free competitor.

But, with so many competitors in the market, analysts have been predicting consolidation for several months. British Telecom is under pressure to change its pricing structure to offer a flat rate for access, and as BT accommodates its critics, everyone wants to know what will happen to the free ISPs once their BT revenue is taken away.

One result will be new partnerships and mergers among the ISPs offering free access. John Clare, the chief executive of Dixons, which owns 80 per cent of Freeserve, has long said that he wants Freeserve to survive the expected consolidation.

The Financial Times report said that one of the rumoured targets is WH Smith, which also offers a number of online services.

Freeserve spokeswoman Lesley Smith said that the Financial Times report had overstated the talks with WH Smith, and that no plans for acquisitions or mergers were "in place".

"Clare was asked if he thought there would be consolidation in the market," Smith said. "This does not add up to merger talks."