Freeserve have confirmed that they are holding discussions with Wanadoo, the internet service provider controlled by France Telecom that could lead to a takeover.

Freeserve who is currently 80% owned by Dixons stated that they had entered into discussions that 'may or may not' lead to an offer being made for the company in shares.

Freeserves shares ended on Tuesday at 146p, and offer based on the 140p share price would value Freeserve at about 1.5 billion, but suggestions state than an offer of 1.8 billion could be made.

In June Freeserves shares did plunge by 20% after the collapse of merger talks with a German rival T-online that could have led to a 6 billion deal.

In September Freeserve at the last results announcement stated that they had passed the two million customer mark, however losses for the first quarter of that year had doubled to 17.8 million.