Internet service provider America Online moved yesterday to reassure investors that its merger with media group Time Warner was on track yesterday amid concern that regulatory scrutiny would hamper the ground-breaking deal.

In a speech to an industry conference, Bob Pittman, the AOL president, said the group expected combined revenues of $40bn (£26.5bn) next year as well as cost savings of $1bn in AOL-Time Warner's first year of operation.

Rumours about the difficult anti-trust negotiations involving such a large cable network and the world's largest ISP, denied by the groups, have been circulating in the past week.

A note by analysts at Merrill Lynch, AOL's financial adviser, sought to reassure investors by stating that AOL executives were "comfortable the merger will close by the end of the year as expected".

The note, by Henry Blodget and Jessica Reif Cohen, remarked that many investors have called "regarding the progress" of the merger. They also reiterated a buy rating on both companies, mentioning that Mr Pittman was meeting all Time Warner divisions in an attempt to foster greater co-operation between them.

Analysts have raised questions about how the various parts of the group can work together. In an interview yesterday, Ms Reif Cohen said: "There may be a little bit more scrutiny [about the deal] but nobody really thinks that the deal won't get done."

Comments yesterday from Mr Pittman, who is to be co-chief operating officer of the combined group, lifted the share prices of both groups.

AOL rose almost $2 to more than $57, though shares are still trading almost a third below their pre-announcement level. The deal is valued at almost 25% less than in January.

Mr Pittman - who is to take over post-merger cable operations told a conference organised by the Bank of America that cashflow from the combine would increase by 30% in its first year. His forecast for revenues of $40bn in 2001 were made to show growth potential for a combined group.