Time Warner CEO Jeff Bewkes hopes to move swiftly to find a buyer for AOL’s dial-up business after the company completes its separation from the Platform A advertising division in the next month.
According to sources inside the company, Time Warner held talks with rival dial-up provider EarthLink as recently as March about a combination.
But those talks were put on hold to both give Time Warner time to figure out the separation’s structure and the allocation of revenue and debt, and make it easier for suitors to value precisely what they are buying.
“Splitting the business has been an accounting nightmare,” said a source inside Time Warner.
Speaking at a Deutsche Bank media conference last week, Bewkes signaled a sale of AOL’s bleeding dial-up business and said that interested buyers were circling.
Now that the separation of the dial-up and advertising businesses will be completed “in the next 30 days,” as Bewkes said, sources said talks are likely to resume with EarthLink as well as other potential buyers.
Though it is a dying business, private equity firms have also been sniffing around AOL’s dial-up assets with an eye toward milking its cash flow for a few more years until the unit is put out of its misery.
AOL still had 8.7 million dial-up subscribers at the end of the first quarter that generated $539 million in revenue.
EarthLink is widely viewed as the most logical buyer for AOL’s access business, especially since rival United Online, which provides dial-up service under the NetZero and Juno brands, opted to buy flower-delivery company FTD instead.
Time Warner’s previous discussions had the company merging its dial-up business with EarthLink’s in exchange for an equity stake in the company, according to a source familiar with the talks.
Another source downplayed that, however, saying Time Warner wasn’t interested in keeping a piece of a combined company but would likely need to strike operating agreements with any buyer for e-mail and other services.
Sources said EarthLink has been eager to move forward with a deal, but Time Warner was preoccupied with the spin-off of its cable-TV operations.
Bewkes unveiled plans to spin off the rest of its Time Warner Cable division in May, clearing the way for him to focus on the struggling AOL business.