Deal hands
CompuServe users
to AOL
Associated PressNEW YORK -- CompuServe Corp. is being sold to telecommunications provider WorldCom Inc. for $1.2 billion in a three-way deal that hands all of CompuServe's computer online users to its biggest rival, America Online. The combination of CompuServe's 2.6 million subscribers and the nation's largest online service would create an industry behemoth -- boosting AOL's nearly 9 million membership by more than a third, erasing a big competitor and aiding its ambitions to sell more online advertising.
For its part WorldCom, the nation's fourth-largest long-distance phone company, expands its business of providing networks for online services and business customers.
The terms of the deal announced today also give AOL access to additional modems from WorldCom, helping ensure it won't be hobbled by network bottlenecks that frustrated AOL subscribers with busy signals earlier this year.
AOL stock soared nearly 9 percent in trading today, rising $6.121/2 to close at $76.06 on the New York Stock Exchange. On the Nasdaq stock market, CompuServe was down 25 cents to $13.25, and WorldCom was up $2.25 to $33.75.
The complex agreement between the three companies enables CompuServe parent H&R Block Inc., which owns 80 percent of the ailing online service, to exit a market that has frustrated it for more than a year.
WorldCom is buying CompuServe for stock worth about $1.2 billion. It then plans to trade CompuServe's content and its 2.6 million consumer subscribers along with $175 million to AOL.
In exchange, WorldCom will get AOL's ANS Communications division, which provides Internet access mainly for large business customers.
WorldCom already owns UUNet Technologies Inc., one of the largest Internet service providers. WorldCom also gets a five-year contract to service AOL's network customers.
The announcement ends months of speculation over CompuServe, which has been beset by financial losses, member defections to rival services and the cancelation of its family oriented Wow service just seven months after it was started. CompuServe pioneered the online business in the 1980s, but was overtaken by America Online in the 1990s and hammered by cheaper providers of online service and access to the World Wide Web.
A larger AOL also would be in a better position to compete with the Microsoft Network, the nation's third-largest online service behind CompuServe, which is backed by the deep pockets of software giant Microsoft Corp.
The deal would have to be approved by government antitrust regulators.
AOL has been rapidly upgrading its network of modems, computers and networking equipment after problems with network bottlenecks earlier this year.
Under an agreement with states in February, AOL gave refunds to customers with trouble logging on December and January.
