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Under the agreement, Carphone Warehouse will acquire AOL's Internet access customer base in the UK as well as the supporting management and infrastructure. AOL will continue to provide its portal - co-branded with Carphone Warehouse - and will manage the online advertising sales through a revenue-sharing agreement.

The acquisition will increase the number of Carphone Warehouse broadband users to approximately two million, making it the third largest broadband provider in the UK after ntl:Telewest and BT. The ISP says that the increase in users will create significant operating efficiencies in network infrastructure and

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marketing costs.

'The acquisition of AOL's UK Internet access business is transformational for our broadband business,' said Charles Dunstone, CEO of Carphone Warehouse. 'This deal gives us significant scale to complement the rapid organic growth of our free broadband proposition. In addition, the joint development of AOL's already successful audience platform will bring us new advertising and content revenues in a proven and low risk manner.'

AOL decided to sell its UK Internet access operation so that it could concentrate on growing its online advertising revenues. The company is also said to be looking to sell its access businesses in France and Germany.

AOL's chairman and CEO Jon Miller said that the sale is an ideal outcome for AOL, its owner Time Warner and its customers.

'For a decade, AOL has played an important part in the growth of the online medium in the UK,' Miller said. 'Under the partnership announced today, AOL will expand the size of its audience in the UK as a Web-services business.'

The UK transaction is due to complete by 31 December 2006 and is subject to EU competition authority clearance.