Carphone Warehouse has agreed to buy AOL’s UK ISP business for £370 million in a deal that’s expected to go through by the end of the year.

AOL has around 2.1 million internet subscribers in the UK, 1.5 million of which are broadband customers. Add this to Carphone Warehouse’s 412,000 connected broadband users and the combined customer base will come third only to BT's and NTL's in the broadband stakes.

Time Warner, AOL’s parent company, has been actively seeking buyers for its European ISP businesses this year, offloading AOL France to Neuf Cegetel last month.

Carphone Warehouse was said to be in competition with BSkyB for AOL UK, but it has once again proven the UK's most aggressive ISP. Executives claim 625,000 people have applied for the company’s “free” broadband service in the past six month, although it’s struggled to meet demand.

In addition to the phenomenal growth of its broadband business, Carphone Warehouse has grown its number of voice customers to 2.7 million, claiming around 11 percent of the residential calls market in the UK.

AOL will provide co-branded portal, content and other audience services and will manage the online advertising sales as part of the deal.