Drillisch's Choulidis Plans to Intensify Freenet Breakup Push
By Kenneth Wong
Aug. 23 (Bloomberg) -- Drillisch AG Chief Executive Officer Paschalis Choulidis, who unsuccessfully tried to achieve a merger with Freenet AG, will intensify his push to break up the German Internet and phone company after becoming its top investor.
Drillisch, the German mobile-phone package reseller, agreed yesterday to increase its stake in larger rival Freenet to 28.6 percent. Together with fund managers including Florian Homm and Stephan Howaldt, investors who have publicly said they back a split hold more than 44 percent of Buedelsdorf-based Freenet.
``We're now in a position to create a big and good company with a lot of potential,'' Choulidis said in a phone interview late yesterday. ``We see a big consolidation in the mobile service provider industry and are now finally able to move the process forward. Other Shareholders share the same view.''
A breakup of Freenet, whose businesses range from high-speed Web access to wireless services, would reverse a merger that created the company in March. That deal, engineered by former Mobilcom AG CEO Thorsten Grenz, took two years to complete. Freenet has a market value of 1.7 billion euros ($2.3 billion)
Drillisch, based in Maintal, Germany, which had its biggest jump in almost four years yesterday, rose 42 cents, or 6.1 percent, to 7.30 euros at 9:22 a.m. on the Frankfurt exchange. Freenet added 3 cents, or 0.2 percent, to 17.34 euros.
Snubbed Until Now
Choulidis has said for almost a year that he wants to split Freenet. He was snubbed most recently by Freenet CEO Eckhard Spoerr at the company's shareholder meeting on July 20. Drillisch had 2.1 million mobile-phone subscribers at the end of June, compared with 5.2 million wireless clients at Freenet. In addition, Freenet has 1.2 million digital subscriber line, or DSL, users and runs the Strato Web hosting division.
``For us, mobile is the core business,'' Choulidis said. ``DSL is not a core product. While it can be used as a distribution channel, we want to focus on one core.''
``We hope to start a good discussion with Mr. Spoerr,'' he said. ``In the past, the relationship wasn't that friendly.''
Earlier this year, Freenet put itself up for sale and hired Morgan Stanley to look for a buyer. United Internet AG, Germany's second-largest Internet access provider, and smaller rival QSC AG have said they are interested in Freenet's Internet operations.
Until this week, Spoerr had said he favored a sale of the entire company, arguing that reversing a merger that was completed only six months ago lacks logic.
``The discussions with various parties have indeed shown that there is a bigger buyer universe for parts of the business than for the business as a whole,'' Spoerr told Bloomberg News on Aug. 20. ``Therefore considering a sale of different businesses to different parties might create a chance to increase shareholder value.''
``It's the starting bell for the German Internet consolidation,'' Homm, the German fund manager who raised his stake in Freenet to 5.2 percent this week, said via phone. ``We obviously see that as a positive development. We like Drillisch.''
To contact the reporter on this story: Kenneth Wong in Berlin at kwong11@bloomberg.net .
Last Updated: August 23, 2007 03:32 EDT
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