RealTime IT News

AOL, Tel-Save.com Expand Marketing Agreement

America Online Inc. and Tel-Save.com Inc. Tuesday announced a two-year extension to an existing marketing agreement that gives AOL members discounted telecommunications services from Tel-Save.

The new agreement will net AOL $150 million, which includes the value of the original contract. It extends Tel-Save.com's right to offer long distance service to AOL customers through 2003. The two companies will also jointly market wireless service exclusively to AOL members. Tel-Save can also offer local service to AOL members.

AOL will be able to offer long distance services from additional providers beginning in July 2000 and Tel-Save.com will also be able to market its services elsewhere on the Internet at that same time.

As part of the agreement, AOL will invest an additional $55 million in Tel-Save. It will also exchange warrants for $19 million in Tel-Save stock.

AOL President and Chief Operating Officer Bob Pittman said although the deal benefits both companies, the real winners are AOL customers. He said the deal also positions AOL and Tel-Save to be key players in telecommunications convergence.

"As convergence comes to the telecommunications industry, this extension provides us with the additional flexibility to take advantage of new opportunities to directly offer wireless and local telephone services to our members," he said.