The much-anticipated and, some would say, inevitable purchase of CompuServe by its fiercest competitor America Online was confirmed last week in a complex deal worth $1.2 billion (#759,500 million).
Under the deal, one of the leading US telecom operators, WorldCom, will buy CompuServe from its majority shareholder H&R Block. WorldCom will simultaneously sell CompuServe's consumer services to AOL in return for the sale of its Internet access division, ANS Communications, for $175 million cash.
Jonathan Bulkeley, AOL's UK managing director, expects the deal to be completed in about six months. At that time, AOL will be able to add CompuServe's three million subscribers to its books, increasing its total membership figure by more than 30% to 12 million. WorldCom, meanwhile, will be running both AOL and CompuServe's networking services.
The deal has been greeted with hostility by many CompuServe and AOL users but most analysts see it as a major coup for AOL, which they say stands to benefit greatly from CompuServe's strong European business.
Petra Gartzen, senior analyst at researcher Dataquest, said: "AOL has only made a strong impression in Europe in the UK. CompuServe's presence will certainly help it penetrate what has always been a difficult area."
- Net,news, page 18
- Leader, page 24
CompuServe: the deal
How the deal is structured:
WorldCom buys CompuServe for $1.2 billion, and simultaneously sells the on-line service to America Online. In return, AOL hands WorldCom its access internet division, ANS Communications, for $175 million cash.
AOL's European partner Bertelsmann agrees to pay AOL $75 million and both companies will invest $25 million in CompuServe's European on-line operations.
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