AOL Ups Prices and Positions
February 09, 1998
by Dale Wettlauffer
In three successive press releases today, America Online (NYSE: AOL) announced management shifts, a $2 a month price increase for unlimited use accounts, and final details of the CompuServe acquisition. The unlimited price increase may have been a term of America Online's deal to sell ANS Communications to WorldCom (Nasdaq: WCOM), which was completed today, but it speaks directly to the market power of an online service with 13.5 million members split between its America Online and CompuServe brands. America Online shares gained $12 to $110 1/2 on the day, as the price increase is a direct supplement to cash flow considering that the majority of AOL users are on the unlimited plan.
America Online doesn't look like it will wait around to catch all this cash in outstretched mitts, though. The company announced that it will put development of CompuServe's 5.0 client software on a fast track, which should put at ease (somewhat irrational) fears that CompuServe customers will flee the service. In addition, America Online will look at strategic alternatives for the SPRYNET Internet service provider (ISP) business, which no doubt includes the retention of an investment banker to look at selling the service.
Finally, AOL announced another extension of the company's successful partnership with Bertelsmann AG of Germany. In partnership with French television programmer Canal+ and French telecom and ISP company Cegetel, AOL and Bertelsmann will contribute their AOL and CompuServe France assets to the partnership. AOL and Bertelsmann will be minority owners of the enterprise, but AOL's brands will be maintained. The French companies will offer alternative distribution channels to the partnership, take some operational hassles away from the AOL-Bertelsmann partnership, and will allow those partners to concentrate more on content and developing other European properties.