WorldCom announced today that it is buying CompuServe for $1.2 billion from current owner H&R Block. It will then sell the online service and its customers to America Online for $175 million. WorldCom will retain CompuServe's Network Services division, considered the "crown jewel" of the company. This division includes 100,000 dial-up ports in 105 countries around the globe and provides networking solutions to 1,200 major corporate customers. As part of the deal, WorldCom will provide Internet access to America Online.
The deal bolsters AOL's stranglehold of the online service and Internet access markets, giving it almost all of CompuServe's dial-up accounts. Before its breakup, CompuServe was the number two online service with 2.6 million 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. The deal keeps a competitor going. It's good for competitiveness," said Ted Leonsis, president and CEO of AOL Studios. "We have significant new levels of competition and choice. By strengthening a competitor, it's good for the industry."
AOL CEO Steve Case issued a statement in which he mentioned CompuServe's strong position in Europe, a weak point previously for AOL. "The acquisition of CompuServe's interactive services will help fuel our global expansion, especially in the critical European marketplace, which we believe is poised for tremendous growth.
The deal is still subject to CompuServe shareholder approval and an antitrust review by the U.S. Justice Department. Additionally, AOL is going to have problems keeping the loyal CompuServe subscribers, who are used to a level of service and connectivity unknown at AOL