Carphone Warehouse buys AOLIt will be UK's third largest broadband provider

11 October 2006

Fingers typing on a keyboard

Carphone Warehouse has agreed a £370 million deal to buy the UK arm of internet provider AOL from Time Warner.

The deal will see Carphone Warehouse acquire 2.1 million internet users, including 1.5 million on broadband to add to its own Talk Talk customers. It will become the third largest provider of high-speed internet in the UK.

AOL, which was launched in the UK in 1996, is one of the longest-running internet providers in the UK.

Carphone Warehouse will take on AOL's UK customers while AOL will continue to provide content on the web and manage online advertising.

Talk Talk deal

Carphone Warehouse said that it would continue to offer both AOL internet access and its own Talk Talk deal following the takeover. Current AOL customers will be able to maintain their present contract or join the Talk Talk service.

The deal is expected to be completed on New Year's Eve, if regulators approve it.

Carphone Warehouse Chief Executive Charles Dunstone said: 'This deal gives us significant scale to complement the rapid organic growth of our free broadband proposition.’

Carphone Warehouse’s TalkTalk broadband deal - which offers customers ‘free’ broadband if they pay £20 a month for a landline phone - has been plagued by problems since it launched in April as the company struggled to keep up with demand.

Customer service nightmare

The mobile phone chain also revealed that losses from offering ‘free’ broadband to 625,000 of its Talk Talk customers will hit £70 million this year.

Charles Dunstone has admitted that the offer of free broadband created a customer service ‘nightmare’ for the firm. It was forced to hire hundreds of extra staff as it struggled to cope with demand that was far higher than expected.

It has also had to pay to use BT services while it waits for its own high-speed internet access to be fitted into homes.

Carphone Warehouse claims it has largely solved its customer service problems, with customers now waiting five weeks for a broadband connection and queries to its call centres being answered within a minute. In June, it was reported that some customers were waiting up to three months for a broadband connection.

Takeover trend

Which? broadband expert Ceri Stanaway said: ‘This deal is the latest in a recent trend of telecoms company takeovers and mergers, and although on the surface nothing should change for AOL or Carphone Warehouse's customers, neither company has a great reputation for customer service.

‘Carphone Warehouse's customer service has gone downhill as a result of it biting off more than it can chew with its free broadband offer; we hope that this takeover won't result in further detriment for either company's customers.’