Time Warner to sell AOL Internet business in UK

MUMBAI: Time Warner will sell its AOL Internet business in the UK for $688 million to mobile phone retailer Carphone Warehouse Group.

Completion is subject to EU competition authority clearance and is expected to take place by 31 December 2006.

Under the agreement, Carphone Warehouse will acquire AOL’s Internet access customer base in the UK as well as the supporting management and infrastructure (the “Access” business). For its part, AOL will provide co-branded portal, content and other audience services and will manage the online advertising sales for Carphone Warehouse’s combined broadband customer base through a revenue-sharing agreement, according to a company statement. 

The total cash consideration is £370m, of which £250m will be paid on completion and the balance paid in three instalments over the following 18 months. The consideration is being funded by an extension of existing bank facilities.

The transaction is due to complete by 31 December 2006 and is subject to EU competition authority clearance. At this stage it is anticipated that the acquisition will increase current year pre-tax profits by approximately £10m (subject to completion by 31 December 2006), and next year’s pre-tax profits by £30-40m.

Carphone operates the MViva mobile Internet portal. The deal gives the company a broadband customer base of about 2 million customers, vaulting it to third place among UK broadband service providers. AOL will continue to manage online advertising sales for the service and will share in those revenues.

Commenting on the acquisition, Carphone Warehouse CEO Charles Dunstone said: "The acquisition of AOL’s UK Internet access business is transformational for our broadband business. This deal gives us significant scale to complement the rapid organic growth of our free broadband proposition. In addition, the joint development of AOL’s already successful audience platform will bring us new advertising and content revenues in a proven and low risk manner.”

Time Warner chairman and CEO Dick Parsons said: “This agreement completes the restructuring of our AOL Europe businesses that both advances AOL’s strategic transition to an advertising-supported business model and underscores Time Warner’s commitment to shaping its portfolio of assets to drive the greatest growth possible. On both fronts – as well as across our company – we’re successfully building critical momentum to the benefit of our shareholders. As a leading provider of audience services in Europe, AOL will be better positioned than ever to continue to grow a cohesive online advertising business across a region that’s key to our future progress.”

AOL’s Carphone deal follows an announcement that Neuf Cegetel, the French telecommunications network operator, plans to sell an 18.5 per cent stake in its business in order to raise around $957 million to fund its acquisition of AOL’s French Internet access business. Time Warner will also sell AOL Germany’s Internet business to Telecom Italia for $870 million.

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