LONDON - AOL Time Warner said on Monday it had reached an agreement with UK retailer Dixons to promote its AOL Internet access service in the consumer electronic chain's 1,100 stores beginning next year.

AOL outbid rival Freeserve, the UK ISP that Dixons funded and launched in its stores five years ago, to secure the coveted retail alliance, said people familiar with the negotiations. As part of the deal, Dixons will begin promoting AOL's dial-up service in its Dixons, Currys and PC World stores starting in February, 2004. In February, 2005, the chain will plug AOL's high-speed broadband services, the companies said.

Dixons is still under contract to promote Freeserve, a unit of France's Wanadoo, in its stores until February, 2004 for dial-up access and its broadband product until February, 2005.

Terms of the deal were not disclosed, but sources told Reuters last month it was a five-year-alliance valued in the tens of millions of pounds.

AOL and Freeserve have invested heavily in rolling out broadband in the fast-growing UK market. BT Group, which has a sizeable lead on rivals, will launch its biggest consumer broadband push yet with new partner Yahoo on Tuesday.

Sources close to the AOL-Dixons deal said Freeserve pulled out of negotiations months ago when the price tag climbed into the tens of millions of pounds range.

Freeserve had been the lone ISP promoted in Dixons shops since its inception five years ago. Dixons, which still owns roughly 80 million shares in Freeserve as a result of its sale to Wanadoo in February, 2001, has been gradually selling off its stake in the UK ISP.

At 0843, shares in Dixons were up 0.5 percent at 138 pence, while Wanadoo was up 3.2 percent at 6.18 euros.