Wanadoo, the unit of France Telecom and French provider behind UK ISP Freeserve, has posted a higher than expected rise in first-quarter sales.

Wanadoo added subscribers in nearly all its markets, which pleased analysts, though they said they wanted to see more evidence of growth in broadband subscribers at Freeserve.

"The UK is still the big question, it's the one segment everyone will continue to focus on, particularly if they show difficulties growing their DSL (broadband) subscribers," said Alexandra Lord, Internet analyst at BNP Paribas.

Freeserve added 188,000 subscribers compared with a year ago, bringing the total to 2.67 million, but Dresdner Kleinwort Wasserstein analyst Kai Kaufmann noted only 19,000 of those were in broadband.

First quarter sales rose 38% from a year ago to 567 million euros, thanks to a rise in broadband Internet customers and online advertising, which grew strongly after stagnating for more than two years.

Wanadoo reported 8.79 million subscribers, a quarterly rise of 251,000. Its Internet unit revenues rose 58% to 393 million euros, while directories sales rose 9% to 175 million euros.

The overall sales figure, which beat analysts' expectations, appeared to validate Wanadoo's strategy of relying on a combination of profitability at its telephone directory business and sales increases at its Internet arm to support growth in the aftermath of the Internet boom of the late 1990s.

It also suggests Wanadoo's focus on boosting the number of customers who use its high-speed, broadband Internet access is paying off. At the end of the quarter, broadband customers reached 1.6 million, accounting for 18.4% of Wanadoo's total customer base, up from 16.1% at end 2002.