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AOL to Announce Plan to Launch Service in Australia by Next Fall

By Rajiv Chandrasekaran
Washington Post Staff Writer
Tuesday, October 7, 1997; Page D03

Continuing its aggressive overseas expansion, America Online Inc. said it will announce today that it is launching a version of its service in Australia in partnership with German media conglomerate Bertelsmann AG.

The move into Australia – the second-largest online market in the Pacific, after Japan – is part of a continuing effort by AOL to boost its subscriber base, which it hopes will lead to increased revenue from advertising and marketing deals. AOL operates similar services in Europe, Japan and Canada, which collectively have about 850,000 customers, said Jack Davies, president of AOL International.

Although 42 percent of households in Australia have personal computers, only about 11 percent use online services, according a recent survey conducted by AGB McNair, an Australian market research firm. Davies said the number of Internet users in Australia – currently 1.6 million – is expected to triple by 2001.

"This is the next logical step in our global expansion," said Steve Case, AOL's chairman and chief executive. "The growth in Australia ... creates a very unique opportunity for AOL."

Like the other overseas services it operates, AOL Australia will feature a mix of the online service's standard offerings interspersed with local content. AOL said the new service will be in operation by next fall.

Bertelsmann will invest from $27 million to $41 million to pay for launch costs, AOL executives said. AOL will not spend cash, but it will contribute content and technology to the venture. The two companies will share the profits evenly, the executives said.

"We think we have a good team in place with AOL and Bertelsmann," said Thomas Middelhoff, a top Bertelsmann executive who sits on AOL's board. He said AOL's European venture, jointly operated by Bertelsmann, has grown faster than expected and now has about 700,000 subscribers.

AOL hopes that Bertelsmann, which owns about 5 percent of AOL, can exploit the inroads it has made in the Australian market, where it operates book and music clubs.

The venture is expected to face competition from local Internet providers; from Telstra, the country's largest telephone company; and from other online services, including the Microsoft Network.

The CompuServe online service, whose members AOL acquired last month, has 25,000 subscribers in Australia, Case said. He said AOL does not plan to convert those users to the new service.

© Copyright 1997 The Washington Post Company

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