It is a deal that fits in perfectly with the company’s future vision as a distributor of media services over broadband that has led it to plan the sale of its fixed-line network and its TIM mobile arm. AOL Germany will adds 1.1 million broadband and 1.3 million narrowband subscribers to give TI 3.2 million subscribers in Germany, including nearly 2 million broadband customers.
TI’s proposed reorganization has horrified the center-left government led by premier Romano Prodi, whose economic nationalism has led it to fear that denationalized telecoms assets could fall under foreign ownership. Though Telecom Italia chairman Marco Tronchetti Provera, who was at the center of the dispute with the government, quit on Friday, his successor Guido Rossi has made it clear he will carry in with the reorganization plan.
Telecom Italia has been steadily building its presence in Germany since it acquired Hansenet in 2003. With a base in Italy, France, and the Netherlands, the German acquisition will give it 9 million broadband subscribers in Europe to whom it can market its Telecom Italia Media content.
Under the deal, AOL will provide co-branded audience services and content on a joint web portal for all of Telecom Italia’s residential internet access subscribers in Germany and will handle all online advertising sales.
Time Warner CEO Dick Parsons said the agreement is the latest step in its strategy of focusing on core assets to drive profitable growth. He said the partnership with TI will advance AOL’s worldwide transition from a business built primarily on providing internet access to an advertising-supported business model.
The root of TI’s problems is its huge level of debt that by the end of 2007 it plans to bring down to the 33bn euros ($41.8bn) recorded at the end of 2004.
With TIM alone estimated to be worth 35bn euros ($44.3bn), its sale could solve TI’s debt problems at a stroke but the difficulty seen by the government is that no Italian corporation has the resources to buy it.
