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Telecom Italia to buy AOL Germany for US$855 million

Telecom Italia SpA, Italy's biggest telephone operator, agreed to buy Time Warner Inc's AOL Germany division for 675 million euros (US$855 million) in cash to gain 2.4 million Internet subscribers.

With the acquisition, Telecom Italia will become Germany's second-largest Internet service provider, with about 3.2 million subscribers, the Milan-based company said in a stock-exchange statement yesterday. It will have about 9 million broadband subscribers in total across four European nations.

The company is increasing its focus on broadband and media services under a strategic plan that was announced only on Sept. 11 and then led to the resignation of Marco Tronchetti Provera as chairman on Friday. Former European phone monopolies from Telecom Italia to France Telecom SA and Telefonica SA are offering new services such as television over the Web to increase customer spending as revenue from traditional phone calls drops.

"This acquisition marks a further step in Telecom Italia's strategy of focusing on broadband services and content delivery at an international level," chief executive officer Riccardo Ruggiero said in the statement.

Tronchetti Provera, 58, resigned as Telecom Italia's chairman after his reorganization plan -- in particular the possibility the wireless division might be sold off -- was assailed by Italian Prime Minister Romano Prodi's government and unions.

Tronchetti, who remains the largest shareholder in the holding company that controls Telecom Italia, quit to "safeguard the interests of the company and investors," Telecom Italia said late on Friday. Guido Rossi, 75, is the company's new chairman.

Shares of Telecom Italia have declined 11 percent this year, giving the company a market value of 41.3 billion euros. The 24-member Bloomberg Europe Telecommunications Services Index has fallen 3.9 percent this year.

Telecom Italia expects the number of ADSL users in Germany to increase to 22 million in three years, from 12 million at the end of June.
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