The two sides have also agreed a revenue-share deal based on AOL providing co-branded content and services and managing online ad sales for all former AOL and Carphone Warehouse customers.
The deal makes Carphone Warehouse the third-largest broadband provider in the UK, after BT and NTL/Telewest, by adding AOL's 1.5m broadband and 0.6m dial-up customers to the 625,000 customers who have signed up Carphone Warehouse's Talk Talk broadband service, launched earlier this year.
The deal will require clearance from EU competition authorities and is expected to be completed by December 31.
Carphone Warehouse faced competition for AOL from Sky, which last year acquired ISP Easynet for 拢211m to fuel its expansion into broadband. In the initial stages of the auction, when a price tag of 拢1bn was mooted, Orange had also been interested.
Last year, AOL UK generated revenues of 拢442.1m and an operating profit of 拢14.1m.
The deal allows AOL to pursue its strategy of transition from an access business to a content and advertising space business.
Jon Miller, chairman and chief executive of AOL US, said: "For a decade, AOL has played an important part in the growth of the online medium in the UK. Under the partnership announced today, AOL will expand the size of its audience in the UK as a web services business."
Charles Dunstone, CEO of Carphone Warehouse, said: "This deal gives us significant scale to complement the rapid organic growth of our free broadband proposition. In addition, the joint development of AOL's already successful audience platform will bring us new advertising and content revenues in a proven and low risk manner."
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