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Wednesday, October 11, 2006
Time Warner sells AOL UK in final overhaul of European ops

Time Warner has agreed to sell its AOL UK Internet access arm to British telecoms firm Carphone Warehouse in a final restructuring of its European operations.

The British division of Time Warner's stuggling Internet unit AOL will be sold for 370 million pounds (548 million euros, 687 million dollars), the two companies announced in a joint statement to the London Stock Exchange on Wednesday.

In recent months, Time Warner has sought to shore up dwindling global market share with the sale of AOL Deutschland to Italy's Telecom Italia, and AOL France to French telecoms group Neuf Cegetel.

The US giant, which has sold its European access business to create an advertising-driven Internet business, said on Wednesday that it would manage online advertising sales for Carphone Warehouse in a revenue-sharing agreement.

The deal also sees AOL provide co-branded portal and content services to Carphone. "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," Time Warner chief executive Dick Parsons said in the statement.

He added: "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."

The debt-funded deal allows Carphone Warehouse to compete more effectively in the broadband Internet market with dominant telecoms group BT, satellite broadcaster BSkyB and mobile telephone companies such as O2 and Vodafone. "The acquisition of AOL's UK internet access business is transformational for our broadband business," said Carphone chief executive Charles Dunstone, adding that the deal would give the company "significant scale".

The disposal of AOL UK was expected to complete by December 31 and would be subject to approval by EU competition authorities, the statement added. AOL UK is one of the biggest Internet service providers in Britain with 2.1 million customers nationwide.

The division chalked up revenues of 442.1 million pounds in its 2005 financial year on an operating profit of 14.1 million pounds. Carphone said Wednesday that it said the acquisition would boost pretax earnings by 10.0 million pounds in the current fiscal year, and by between 30-40 million in the subsequent year.

Time Warner's AOL, once the Internet's dominant player, had said in August that it would lay off about 5,000 employees or a quarter of its global workforce as it undertook a mammoth restructuring. AOL, formerly known as America Online, is a shadow of its former self. Just a few years ago, it was an Internet colossus and the driving force of the 2000-2001 mega-merger with Time Warner.

In the years since, however, it has weathered an accounting scandal and been relegated to one of the many divisions in Time Warner's sprawling media, film, publishing and entertainment empire.

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