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Time Warner Sells AOL U.K.

The Carphone Warehouse is the buyer.

Time Warner (TWX) agreed to sell its AOL Internet access business in the U.K. to the Carphone Warehouse of London for $688 million in cash.

The deal, which comes after similar AOL divestitures in France and Germany, is expected to close by year-end.

Carphone Warehouse will acquire AOL's Internet access customer base in the U.K. as well as the supporting management and infrastructure. 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.

AOL has 1.5 million broadband customers and 600,000 dial-up customers in the U.K.

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The acquisition of the Access business will give Carphone Warehouse an enlarged broadband customer base of approximately 2m customers, making it the third largest broadband provider in the U.K. Over time, the additional scale is likely to create significant operating efficiencies in relation to network infrastructure and marketing costs.

For Time Warner and AOL, this transaction marks an important step in positioning AOL's audience business to take further advantage of the rapid growth in online advertising -- in keeping with AOL's overall worldwide strategy. In addition to exiting its Internet access businesses in Germany, France and the UK, AOL will now have a stronger platform for providing portal, content and other audience services, on a stand-alone as well as a co-branded basis, and managing online advertising sales.

"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," said Time Warner chief Dick Parsons. "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."