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

To: robert duke who wrote (6071)	3/3/1999 3:13:00 PM
From: William F. Wager, Jr.	Read Replies (2) \| Respond to of 41369

AOL/AT&T (Dow Jones Newswire)... NEW YORK (Dow Jones)--When America Online Inc. (AOL) told Tel-Save earlier this year that it would would lose the exclusive right to sell long-distance to its subscribers in the Year 2000, company observers figured other carriers would be hawking their services to AOL customers soon after. While a host of long-distance providers would like to gain access to AOL's 15 million subscribers, a report in Wednesday's USA Today suggests that AT&T could be the first to strike a deal. That newspaper reported that AT&T is in talks with AOL about an alliance in which AT&T would sell its phone service on AOL. Consumers would be able to sign up for AT&T service and pay their phone bills on AOL, USA Today said. AT&T officials would not comment on the report, while AOL officials did not immediately return calls seeking comment. While rumors pinning AT&T and AOL together routinely surface - the most recent, advanced by Business Week in its March 8 edition, had the two in merger talks - experts on the Internet and telecommunications industries said a long-distance service alliance would be a savvy move for both companies. If a deal is reached, AT&T would be able to tap AOL's customer base, while AOL would likely get a fee for each AOL subscriber who signs up for AT&T service, said William Blair & Co. analyst Abhishek Gami. America Online could also try to use such a deal to get access to AT&T's cable lines, he added. That analysts point to fees and possible access to cable lines as the benefits for America Online from any long-distance deal with AT&T is a testament to how much the online service provider's business has changed in the last several years. When America Online struck the deal with Tel-Save about two years ago, the company was cash hungry and industry observers were questioning whether advertising revenue would be enough to fuel its growth. Tel-Save, which at the time had no presence in the consumer long-distance market, offered an unprecedented up-front cash payment of $100 million for the right to peddle its services to AOL subscribers. Since then, Tel-Save has signed on 1 million AOL long-distance customers, and America Online now depends less on ad revenue and more on fees from sales of third-party services. The most recent reflection of this shift came last month, when America Online gave Bank One Corp.'s (ONE) First USA unit the exclusive right to market credit cards on its site. For each customer that signs up, American Online gets a payment. With cash coming from those kinds of arrangements as well as other revenue sources, America Online may be looking for AT&T to offer cable line access as part of a deal instead of a big upfront payment. Cable line are better able to handle high-speed transmissions of data than phone lines, and AOL has long made it known that it wants access to cable lines. Indeed, just last month AOL formed a lobbying coalition that will pressure Washington lawmakers to give it access to high-speed Internet and data lines controlled by cable companies. If AOL reaches a deal with AT&T on long-distance, the company might find a clearer avenue to cable lines than through the Beltway. "Competition makes strange bed partners," said Brian Adamik, an analyst with the Yankee Consulting Group.