Carphone Warehouse has announced an agreement to purchase AOL’s UK internet access business for £370m.

The retailer is believed to have fought off competition from BSkyB for the ISP, whose sale forms part of AOL’s refocus from subscriptions onto ad revenues.

The acquisition of AOL’s 1.5m broadband subscribers will allow Carphone Warehouse to pass its target of 1.8m, which it had aimed to reach by 2009.

The retailer said in a statement that AOL would provide “co-branded audience services” and manage online ad sales as part of the agreement.

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.

The retailer announced separately that it had signed up 625,000 users for its free broadband package by the end of September, although only 421,000 had been linked up to high-speed connections.

AOL had reportedly hoped to raise £1bn from the sale.

The deal is expected to be completed by the end of the year.