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.