Dixons has profited from the Freeserve link

Dixons will end the five year marketing agreement with the UK's biggest internet service provider in favour of a new tie-in with AOL, according to the Sunday Telegraph.

The arrangement had seen Dixons pre-load Freeserve software on PCs sold in Dixons, PC World and Curry's.

Dixons refused to comment on whether it had signed a deal with AOL.

Profitable partnership

A Freeserve spokesman was similarly tight lipped, but said it would continue to work with Dixons on its broadband offering, whatever the outcome of the current contract talks.

AOL also refused to comment.

The uncoupling of Dixons and Freeserve would end one of the most profitable partnerships of the dot.com era, which is thought to have netted Dixons �600m.

The Sunday Telegraph said the AOL deal would be formally announced "within weeks".

Advertising campaigns

It said the US service provider will be promoted in-store and in joint advertising campaigns with Dixons.

Dixons will also receive a commission for every customer that registers with AOL, the paper reports.

The deal is due to begin in February 2004, it says.

Freeserve had reportedly been unwilling to match the �10m offered by AOL to secure the deal.

Dot.com boom

Freeserve was the first UK firm to offer internet access without subscription charges.

It was partially floated on the stock market the following year.

At the height of the dot.com boom it briefly entered the FTSE 100 index, with a market capitalisation of �8bn, more than Dixons itself.

Wanadoo, part-owned by France Telecom, bought Freeserve for about �1.6bn in December 2000.

Earlier this year, Dixons sold a third of its stake in Wanadoo, netting it �312m.