CompuServe sold to WorldCom; AOL gets subscribers

WorldCom announced today that it is buying CompuServe for $1.2 billion fromcurrent owner H&R Block. It will then sell the online service and itscustomers to America Online for $175 million. WorldCom will retainCompuServe's Network Services division, considered the "crown jewel" of thecompany. This division includes 100,000 dial-up ports in 105 countriesaround the globe and provides networking solutions to 1,200 major corporatecustomers. As part of the deal, WorldCom will provide Internet access toAmerica Online.

The deal bolsters AOL's stranglehold of the online service and Internetaccess markets, giving it almost all of CompuServe's dial-up accounts.Before its breakup, CompuServe was the number two online service with 2.6million subscribers, compared to AOL's 9 million).

Apparently, AOL is already anticipating an anti-trust investigation.

"Our intention is to run CompuServe as an individual brand, via AOL. Thedeal keeps a competitor going. It's good for competitiveness," said TedLeonsis, president and CEO of AOL Studios. "We have significant new levelsof competition and choice. By strengthening a competitor, it's good for theindustry."

AOL CEO Steve Case issued a statement in which he mentioned CompuServe'sstrong position in Europe, a weak point previously for AOL."The acquisition of CompuServe's interactive services will help fuel ourglobal expansion, especially in the critical European marketplace, which webelieve is poised for tremendous growth.

The deal is still subject to CompuServe shareholder approval and anantitrust review by the U.S. Justice Department. Additionally, AOL is goingto have problems keeping the loyal CompuServe subscribers, who are usedto a level of service and connectivity unknown at AOL