and Time Warner Inc. announced that Telecom Italia has agreed to acquire Time Warner's AOL Germany Internet access business for EUR 675 million ($870 million, Equity Value) in cash.
The companies expect to close the transaction in four to six months, after receiving the customary regulatory approvals.
In light of Germany's fast-growing demand for broadband Internet access (over 12 million ADSL subscribers at 30 June 2006 that could increase by 10 million in the next three years), Telecom Italia is moving to consolidate its presence in Germany, which started with its acquisition of Hansenet in 2003 and expanded with its organic growth. Once its acquisition of AOL Germany's Internet access business closes, Telecom Italia will be Germany's second-largest broadband provider - with more than 3.2 million total subscribers, including nearly 2 million broadband customers.
Telecom Italia is already a European leader in broadband Internet access. With its presence in Italy, France, Germany and Netherlands as well as its pending acquisition of AOL Germany's Internet access business, Telecom Italia will serve approximately 9 million broadband subscribers in Europe.
Under a new partnership, 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.
AOL Germany has operated as an ISP for over 10 years and competes in both narrowband and broadband Internet access. As of June 2006, AOL Germany, ranked second and third among German narrowband and broadband access providers, had 1.1 million broadband subscribers and approximately 1.3 million narrowband subscribers.
Riccardo Ruggiero, CEO of Telecom Italia said: "This acquisition marks a further step in Telecom Italia's strategy of focusing on Broadband services and content delivery at an international level. Since we acquired Hansenet in 2003, our German presence has gone from strength to strength, confirming the validity of Telecom Italia's Broadband strategy, and with the AOL co-branding agreement our content offer, as well as our customer base, grows."
Dick Parsons, Chairman and CEO of Time Warner Inc., said: "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. 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."
Under the terms of the five-year partnership, AOL will design, host and operate audience services for Telecom Italia's entire residential Internet access customer base in Germany. AOL will be responsible for all online advertising sales for the co-branded audience services. The financial terms of the audience services partnership were not disclosed.
Jon Miller, Chairman and CEO of AOL LLC, said: "AOL's partnership with Telecom Italia highlights the value of the Internet access business we have built in Germany, as well as our programming assets and advertising network. AOL's content and features will enhance Telecom Italia's Internet service, and the scale of our advertising network in Germany - Europe's second-largest online market - will increase. This continues our strong momentum in building our worldwide advertising business and serving a large and highly engaged audience."