Primus to acquire AOL|7

Primus to acquire AOL|7

Primus Telecom today announced its intentions to acquire interactive media group AOL|7.

According to a statement made by AOL|7 to the Australian Stock Exchange this morning, shareholders have agreed to sell the venture to Primus Telecommunications, subject to regulatory approval. The deal is expected to be finalised by the end of this month and is worth just over $23 million.

As part of the new agreement, AOL will grant Primus under licence the exclusive right to operate an AOL-branded ISP in Australia.

"There will be no disruption to service for AOL members," the ASX statement reads.

Primus managing director Greg Wilson said the AOL|7 service will continue to be offered separately from the telco's iPrimus Internet brand.

"We believe that the acquisition of AOL|7 will be an excellent fit with the operations of our own Internet and telephony business," he said.

AOL|7 is currently run as a joint venture between America Online, AAPT and Seven Network and provides Internet services to around 90,000 Internet users across Australia.

In contrast, Primus now has over 400,000 Internet users in Australia.

During a teleconference held by Primus today, Wilson said the AOL|7 division will continue to be managed from its existing Sydney office. Although there will be inevitable management changes, Primus is looking to retain as many of the current 140 AOL|7 staff as possible, he said.

AOL|7 launched its own broadband service into the Australian market in March 2003, promising consumers a selection of exclusive content from the Seven Network and America Online, as well as new broadband-specific services from digital music content provider Petrol Digital.

As part of the new relationship with Primus, AOL|7 customers will continue to have exclusive access to certain AOL content and applications, while iPrimus customers will benefit from the Primus Telecom/AOL partnership with its access to alternative international content and technologies, Primus stated.

Content from Channel Seven however, will not be retained under the new agreement.

Commenting on its position within the Internet services space during the teleconference, AOL|7 chairman and Seven Network new media and investments CEO Steve Wise said Seven's decision to opt out of the online AOL|7 business was largely brought about by the introduction of telephony and Internet bundling services.

"Bundling is a big issue, which has really changed the dynamics within the market," he said.

"ISP content works, but it needs to be driven from the telco business."

Seven Network would look to focus back on its core business: its television viewers. As a consequence it would not be not focusing on other exclusive content deals with other ISPs, Wise said.

AAPT to focus on single brand

AOL|7 shareholder AAPT has also made inroads into the Australian broadband market, starting both residential and small business ADSL services nationally in October last year. Both its dial-up and broadband services were jointly managed with AOL|7.

In a separate statement to the ASX, AAPT said it would now solely manage its 48,000 consumer Internet customers directly.

AAPT general manager, consumer, Brett Chenoweth said it was time to move all of AAPT's Internet, home phone and mobile service into a single, branded entity.

"The move … will help strengthen the AAPT Smartchat brand and allow us to offer greater flexibility and levels of service to these subscribers."

AAPT stated it will receive about $7.5 million in cash from the sale of its AOL|7 shares.

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