AOL Sells UK Access Business to Carphone Warehouse

IanFogg | October 11, 2006, 12:05 PM

CPW is a much more natural fit than Sky as a buyer for AOL UK's Internet access business. This is a similar combination to Neuf's purchase of AOL France.

CPW gains:
- AOL expertise in running an ISP.
- AOL's LLU network.
- AOL's c1.4m broadband customer base.
- Help in meeting the promise of CPW's wonderfully successful marketing of the original 'Free Broadband' offer (analysis here).
- Portal-related revenues through the AOL portal.

CPW are clearly finding delivery of LLU much harder than they had anticipated. The have just 20,000 broadband customers live on their LLU network. Instead, they are incurring greater costs by provisioning more customers on BT Wholesale-based DSL for longer than they had planned. CPW's operational stats are improving: call waiting times are down, waiting times for broadband provisioning are down but are still too high at five weeks (down from ten in June).

Sky already has millions of household customers, an extremely strong consumer brand, and an LLU network acquired last autumn with the Easynet purchase, before Sky made their compelling broadband product
launch.

What AOL gains is more interesting:
- Avoids the need to invest capex in further LLU network.
- Avoids access-related opex.
- UKP 370m ($688m).

AOL does not -- from this deal on its own -- move to its stated aim of being a large-scale advertising business offering content and services to the entire Internet population. There are other steps AOL must take to complete that transition.

Clients please ask us for more advice on any of these areas.
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