Time Warner Inc. of late said it agreed to sell AOL France’s Internet access business to Neuf Cegetel, a French telecommunications network operator, for about $365 million in cash, as it overhauls its online business in Europe to boost advertising.
Time Warner, the world’s largest media company, put its Internet access business in European markets up for sale as it retools AOL into a free Web destination where popular e-mail and entertainment services are supported by advertising.
The company had entered into exclusive negotiations with Neuf Cegetel, France’s second-largest fixed-line operator. The deal requires approval from French authorities, which may be obtained by the end of October.
Under the terms of the deal, Neuf Cegetel will acquire Time Warner’s AOL unit in France for 288m euros ($365m) in cash. The acquisition of AOL’s French internet access business — that includes its 500,000 broadband customers, and its AMSE operation, which manages AOL France’s customer service operations. This means that Neuf Cegetel will now have 2 million ADSL subscribers.
The sale is part of AOL’s efforts to shed its access subscription business as it focuses on boosting advertising revenue from its free Web sites.
As part of the deal, AOL will provide audience services and manage the online advertising sales for Neuf Cegetel’s internet portal in a revenue-sharing deal beginning in 2007. In addition to the internet access business and AMSE, Neuf Cegetel has made a commitment to hire up to 140 AOL France employees, who will fill open positions within its group.
The deal is subject to approval from the French competition authorities.
AOL and Neuf Cegetel will share advertising and other revenue from the sites. The French version of AOL will continue to operate. Together, the two companies’ sites attract about 9 million unique visitors per month, according to Time Warner.
At the end of 2006, AOL customers will have access to Neuf Cegetel services such as DSL TV and Wi-Fi phone service. The French company said it will focus on converting AOL dial-up subscribers to broadband.
Neuf Cegetel already provides most of AOL’s DSL links on a wholesale basis, and the deal makes sense as it will also help it to improve both revenues and margins.
AOL LLC had 5.9 million customers in Europe, including 2.2 million in the UK, which is by far its largest European market. There is also a small operation in Spain. The mainland European operations however are moving away from an ISP model to a portal-based business, similar to the United States.
Neuf Cegetel said the agreement will help it reach its customer goals for 2 million broadband subscribers a year ahead of time. It hopes to accelerate market-share growth by convincing more of AOL France’s dial-up customers to move to faster broadband access as well. For Time Warner, the deal strengthens its position as a content and advertising provider in Europe.
Once AOL completes the sale of its European access businesses it will be “a leading provider of audience services in Europe,” Time Warner Chief Executive Dick Parsons said.
AOL is trying to become a content provider in the United States as well, agreeing last month to give away AOL.com e-mail addresses and software once reserved for paying customers to prevent defection to rivals, even though the move is likely to accelerate a years-long decline in access subscriptions.
The AOL France agreement is expected to close at the end of October, pending approval from French competition authorities.
Earlier this year, reports emerged that Time Warner Inc, the owner of AOL, had undertook a strategic review of its European business. It was thought this strategic review was similar to the review carried out last year for the US operation of AOL. That review led to the announcement in December by search engine Google Inc which said it would pay Time Warner $1bn for a 5% stake in America Online Inc.
The review was prompted by Time Warner’s then strategy to appease shareholders concerned with what they saw as an AOL drag factor on the overall Time Warner business.
Earlier this week, Time Warner said it reached an all-cash deal to sell AOL Germany’s Internet access business to Telecom Italia SpA for about $870 million. Time Warner has said it wants to shed AOL’s U.K. access business as well