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Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: Mary Baker who wrote (32221)	10/5/1999 8:54:00 AM
From: John Carragher	Respond to of 41369

News from Handelsblatt Deutsche Telekom's T-Online Enters Price War With AOL Handelsblatt Germany's two online giants, T-Online and America Online Inc., have entered into an open price war. AOL, the No. 2 service on the German Internet market, enacted a price cut on Oct. 1. This prompted market leader T-Online to hold a hastily arranged press conference on Monday to announce its new price structure. Market observers believe that the latest moves represent only the start of a wave of price cuts, which they say will lead to the introduction of flat-rate charges for online access (including telephone charges). AOL plans to take this step before the end of next year. AOL Europe chief executive Andreas Schmidt is determined to conquer the German market and shareholders have equipped him with a marketing budget of 200 million marks ($109.8 million or 102.3 million euros). Since the start of October, AOL has been charging its 900,000 customers a rate of 9.90 marks a month for the online service and 3.9 pfennigs per minute in telephone charges. With this tariff structure, the group hopes to make up ground against market leader T-Online, which has 3.6 million subscribers. However, AOL charges a further six pfennigs for each connection made. T-Online, a subsidiary of Deutsche Telekom AG, has now presented four new price models to suit frequent and average-frequency users. For a charge of 19.90 marks a month, Telekom customers will now also gain unrestricted access to the Internet, with the telephone charge reduced to three pfennigs per minute. The connection charge of six pfennigs, introduced only six months ago, has been dropped. AOL said it would first closely examine its rival's offensive, but added that the model appeared confusing. The market expects AOL to also drop its connection charge. Telekom stressed that AOL's last initiative had not made any impact on T-Online -- in terms of either new business or cancellations. T-Online chief executive Wolfgang Keuntje said that considering its earnings situation, his group would be able to cope with the price cuts. Sales generated by T-Online's e-commerce business had developed better than expected and this was creating "economic scope," Mr. Keuntje added. He stressed that T-Online was not receiving cross-subsidies from parent group Telekom. Mr. Keuntje also announced that T-Online planned to further expand its position on the European market. Its launch in Austria, in cooperation with Telekom's mobile-network subsidiary Maxmobil, would take place shortly. In Britain, the market would be explored in cooperation with Telekom's new subsidiary One-2-One. Switzerland and France were also on the group's list of future markets, he added. On plans by the parent group to float T-Online, Mr. Keuntje said that his group was ready for the market but would not force the issue. A decision on a flotation had not yet been taken. The group chief declined to provide profit details. In the first half of 1999, T-Online generated sales of around 400 million marks.