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Telecom Italia (TI) agreed to buy Time Warner's (TWX) AOL Germany for $870 million in cash.

The companies said the deal will give Telecom Italia a total of 9 million broadband subscribers across Europe. Telecom Italia will have 3.2 million users, including 2 million broadband users, in Germany. AOL Germany had 1.1 million broadband and 1.3 million narrowband users as of June.

The companies also announced a partnership under which AOL will provide co-branded audience services and content on a joint Web portal for all of Telecom Italia's residential Internet access subscribers in Germany and will handle all online advertising sales. Terms weren't disclosed.

"This agreement to sell AOL Germany's Internet access business marks the latest step in Time Warner's strategy of focusing on our core assets to drive profitable growth," Time Warner chief Dick Parsons said. "Our partnership with Telecom Italia advances AOL's worldwide transition from a business built primarily on providing Internet access to an advertising-supported business model. We look forward to AOL continuing to grow its online advertising business -- both in the U.S. and overseas -- to help create enhanced value for our shareholders."

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