AOL, Time Warner’s troubled internet business, lost 835,000 subscribers and its operating profits dived by 17 per cent in the first quarter of the year, the world’s biggest media group admitted yesterday.

Shares in Time Warner fell nearly 2 per cent on the news, even as the company announced that a strong performance by its cable division had boosted net income by 59 per cent in the first quarter.

The media group said that total group net income in the quarter was $1.46 billion (£790 million), compared with $915 million in the same period in 2005. Revenue was nearly flat at $10.46 billion, compared with $10.36 billion.

However, revenue at AOL continued to sink as new advertising revenue was more than offset by lost subscribers. AOL revenue fell by 7 per cent to $1.98 billion, as it lost 835,000 subscribers in the quarter, dropping to 18.6 million subscribers.

AOL’s operating income fell 17 per cent to $442 million from $530 million. It is understood that the company expects AOL’s subscriber fall to continue in the second quarter but improve in the second half of the year.

Dick Parsons, Time Warner’s chief executive, told analysts yesterday that the company was in talks with Liberty Media about a possible cash acquisition of the 50 per cent stake that Time Warner does not already own in the cable network Court TV. He also said Time Warner is in discussions with Liberty about a potential swap of “non-strategic” assets and cash in exchange for “a significant portion” of Liberty’s nearly 4 per cent stake in Time Warner.

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