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AOL lost two million customers in the US over the last year. At the end of September AOL had 22.7m US users, a fall of 646,000 on the previous quarter and down two million a year ago.

In Europe, AOL has 6.3m subscribers - down 8,000 compared to Q2, but up 33,000 compared to the same period last year.

Publishing Q3 results today AOL reported that revenues rose one per cent - $26m (£14m) - to $2.1bn (£1.14bn) although gains in advertising revenue were offset by a $52m (£28m) decline in subscription revenues.

The continued fall in subscriber numbers is likely to fuel speculation which surfaced this week that Time Warner's internet division is set to axe more jobs in a new round of blood letting.

Separately, Time Warner Inc. - the monster media company behind America Online - said it has tucked away $500m (£271m) in legal reserves related to pending government investigations. The media giant also intends to restate its accounting for its interests in AOL Europe prior to 2002, the company said today.

The Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) are continuing to investigate past accounting and disclosure practices at AOL concerning advertising and the reporting of subscriber numbers.

The creation of the legal fund is viewed by some to be a signal that the matter - which has dogged Time Warner in recent years - could be resolved soon.

Said chairman and chief exec Dick Parsons: "While we're continuing to work to resolve the government investigations, we're staying focused on moving the company forward." ®

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