Shares in Freeserve, Britain's leading internet service provider (ISP), are likely to regain lost ground tomorrow amid speculation that Germany's T-Online is preparing a bid for the business.

T-Online, the ISP spun off from Deutsche Telekom last month, is reported to be preparing a £6bn offer. It hopes to pre-empt any rival bids from the likes of cable companies NTL and Telewest, which have been cited as potential buyers.

Interest was ignited after Dixons, the high street electrical chain which founded Freeserve less than two years ago, appointed investment bank Goldman Sachs to review its holding in Freeserve, a move widely interpreted as signalling a sell-off.

Dixons is able to sell half its 80% stake in Freeserve from June 27 when the company presents its annual results.

Freeserve's management is said to be resistant to a sale to T-Online, fearing the company would be subsumed within the larger group. T-Online, which is believed to have first ap proached Dixons earlier this year, has 4.9m subscribers. Freeserve has just under 2m.

It is suggested that T-Online would be prepared to offer 600p to 650p a share, representing a large premium on Friday's closing price of 392p.

Freeserve shares reached a high of 920p in March but tumbled after a clutch of rivals announced the launch of unmetered internet access. It has also been affected by the sell-off of hi-tech stocks.

A deal between T-Online and Freeserve would be the latest in a rapidly consolidating internet industry. Earlier this month Spain's Terra Networks agreed to pay $12.5bn (£8.4) for US portal Lycos.

• Nina Brink, the founder and former chairwoman of the pan-European ISP World Online, said she was not warned by her advisers, ABN Amro and Goldman Sachs, that selling her World Online shares just before a stock market launch would send a negative message to investors.