Time Warner to sell German unit of AOL

Posted by Mark Raby

In a deal announced late Sunday night, AOL will sell the German division of its Internet service company to Milan, Italy-based Telecom Italia SpA for nearly $870 million. This move comes a couple months after AOL decided to scrap large parts of fee-based services in the United States, such as email, in favor of attracting more advertising revenue.

AOL, which was the unrivaled top Internet service provider in the country during the 1990s, has lately been struggling financially, due in large part to the development and growth of high-speed Internet, which many customers receive in conjunction with their cable or phone services. Consumers could integrate AOL with their broadband connection, but this required a monthly fee, and was mainly only of interest to customers who wanted to keep their legacy AOL e-mail account from when they had a dial-up connection.

In August, AOL said that it was planning to cut 5000 jobs in its global workforce, which constitutes about 25% of its overseas operations.

AOL Germany has 2.4 million subscribers, almost half of which are broadband customers. The sale will make Telecom Italia SpA the second largest high-speed provider in the country, just behind T-Online International, which is a subsidiary of Germany-based Deutsche Telekom.

The all-cash purchase deal is expected to be finalized by the early part of next year. Time Warner is also allegedly planning on getting rid of some of its other foreign divisions of AOL. According to a report published by the Associated Press, Time Warner may have have already entered negotiations for a similar deal in France and are in the planning stages for a sale of the UK division.