US internet firm Yahoo will be sold to American telecoms firm Verizon Communications for nearly $5bn (£3.8bn) in cash.

Yahoo will be combined with AOL, another faded internet star, which Verizon bought last year.

The deal does not include Yahoo’s valuable stake in Chinese firm Alibaba.

The price tag for the deal is well below the $44bn Microsoft offered for Yahoo in 2008 or the $125bn it was worth during the dot.com boom.

Verizon said the deal for Yahoo’s core internet business, which has more than a billion active users a month, would make it a global mobile media company.

Marissa Mayer, chief executive of Yahoo, said: “Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL.”

In an email to staff, Ms Mayer said she was “planning to stay”, adding: “I love Yahoo, and I believe in all of you. It’s important to me to see Yahoo into its next chapter.”

AOL chief executive Tim Armstrong said the deal was about “unleashing Yahoo’s full potential”, and creating a major player in mobile media.

Together they will have more than 25 brands, including Yahoo Mail, Flickr and Tumblr as well as AOL’s Huffington Post and Techcrunch news sites.

Ms Mayer, who took the helm in 2012, has made little progress in returning the company to profit.

Last week the firm reported a $440m loss in the second quarter, but said the board had made “great progress on strategic alternatives”.

Verizon and Yahoo were reported on Friday to be in exclusive talks over a deal.

Source: BBC