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AOL to Offer Subscribers Long-Distance

February 26, 1997

America Online Inc. signed a hefty marketing pact with little-known long-distance provider Tel-Save Holdings Inc., giving the online service a big chunk of cash and Tel-Save access to 8 million AOL subscribers. The two companies signed a deal to offer America Online members lower-cost long-distance phone service through Tel-Save, which America Online will promote and sell to its members. Dulles, Va.-based AOL will get an upfront payment of $100 million in cash from Tel-Save, a telecommunications provider based in New Hope, Pa. It will also get warrants to buy Tel-Save shares. The announcement fueled a rally by Tel-Save shares, which climbed $7.375 to close at $20.50 on Nasdaq. AOL shares rose to $1.125 to $36.625 on the New York Stock Exchange. Analysts said the deal was a boost for the firm because it showed it was able to put a value on its growing subscriber base and could derive revenue from new sources.

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