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$70 million deal creates US' second biggest ISP

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Two of the US' leading ISPs are to merge to create North America's second largest service provider in a deal worth $70 million.

NetZero and Juno - which have seven million active customers between them - will be second to AOL but ahead of MSN, EarthLink, and AT&T Worldnet.

The new merged ISP will be renamed United Online.

Both ISPs offer predominantly subscription-free services relying heavily on advertising revenue, although the newly merged ISP will also boast one million paying punters.

United Online plans to market its subscription-free services under the NetZero brand and its billable service under Juno.

The strategy appears to rely on attracting punters to the "free" service before persuading them to dip into their pockets and upgrade to a premium service.

Mark R Goldston, the current chairman and CEO of NetZero, and the new chairman, president and CEO of United Online, said: "This merger brings together two leaders in the rapidly growing value segment of the Internet access market.

"Both companies have built widely recognised consumer brands that we plan to continue to leverage as we work to attract new users and upsell our current subscribers to higher levels of service and revenue.

"As the second-largest ISP in the United States, United Online should represent a very attractive audience for the nation's largest marketers and advertisers.

"Equally important, we expect the merger of our two companies to generate significant synergies that will result in increased financial strength, numerous operating efficiencies and an improved user experience."

The merger is expected to be completed by the end of the year. The reorganisation is expected to cost between $20 million and $25 million.

For the quarter ended 31 March 31 2001, the companies' combined quarterly revenues totalled $41.5 million.

Revenues from billable services accounted for $24.7 million (60 per cent) of total combined revenues, with the remaining $16.8 million derived from advertising and e-commerce.

The companies' combined cash balances as of 31 March 2001 stood at $209.8 million. ®

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