American investment company A CMGI is seeking to boost its presence in the internet access business in a move that could accelerate consolidation among European internet service providers.
CMGI, which has $2bn (£1.3bn) in cash to spend, is targeting markets such as Britain, France and Germany, according to its European president Marcus Bicknell.
Though it would be some time before CMGI makes a move, Mr Bicknell said yesterday : "I wouldn't be surprised if we go a little deeper into the internet access business, either by associating with major telecom companies or by acquisition of internet service providers."
"It's time for a shake-up. The effect of the internet market downturn hasn't been felt yet in Europe. Consolidation among medium-sized business is necessary."
As CMGI was outlining its European ambitions, which would broaden the reach of its Altavista portal, Dutch internet service provider World Online was confirming that it has held talks with Italian telecoms and internet company, Tiscali about possible cooperation.
A combination of World Online and Tiscali would create Europe's second biggest internet service provider, after Duetsche Telekom's T-Online.
But though World Online acknowledged the talks with Tiscali, it said that it was looking at other options. "Discussions with Tiscali are exploratory. It is not just Tiscali. We are talking to a lot of companies," said a spokeswoman.
Industry analysts argue that, though a combination of World Online and Tiscali would make sense, there is a case for a more broadly based pan-European alliance. France's Liberty Surf and Britain's Freeserve are names that have been mentioned, though Freeserve has denied it has been approached.
One problem that would have to be resolved centres on valuations for Tiscali and World Online. The Dutch group has a per-subscriber valuation of €1,500 (£900) while Tiscali's valuation per subscriber is more than double that. However, some analysts believe that Tiscali would be prepared to pay a premium for World Online.
The Dutch company is also facing legal action by the Dutch shareholder group, VEB, which is claiming lack of information in a prospectus for World Online's initial public offering.
