RealTime IT News

AOL Australia Flails at AAPT Connection

AOL Australia is reportedly considering an equity deal with telecommunications carrier AAPT to lift it out of the doldrums it has been in since its underwhelming debut two years ago.

Shares in AAPT were frozen on the Australian Stock Exchange this week after the company admitted it was in discussions with the local subsidiary of America Online.

"These discussions have not concluded. In particular, the pricing and timing of any transaction which might result from these discussions have not been finalised," the company said in a statement to the ASX on Tuesday.

The opportunity has arisen with the exit by German media giant Bertelsmann AG from a 50/50 partnership with America Online in both Australia and Europe.

While it might be expected that AAPT would be the junior partner, in fact it is AOL which is desperate for an infusion of Australian blood. After a lacklustre launch, AOL Australia has been estimated to have on at most 25,000 users.

AAPT's own ISP service, Smartchat.net, is thought to exceed that number in membership, despite being launched after the local AOL. Also, AAPT's wholly-owned subsidiary Connect.com.au was the first ISP in Australia to build an Internet backbone network, and its customers number in the hundreds of thousands.

To top it off, AAPT currently has 500,000 users of its telecommunications services, including a 15 cent flat local call service. This customer base would no doubt seem more enticing that Bertelsmann AG's book club memberships.

The deal could be a blow for American-based telco Uunet, as it currently has the contract to provide the ISP hardware and connectivity to host and run the AOL service. AAPT's resources would be able to easily cover the extra load of AOL's users.

The deal would continue a trend of deals and new ventures aligning consumer ISP operations with the four major Internet backbone networks in Australia: Cable & Wireless Optus with its buy-out of Microplex and the establishment of its own Optus Internet ISP arm; OzEmail's buy-out by Uunet; and Telstra's failed efforts to buy OzEmail's consumer division to add to its existing Big Pond service.

AAPT is 80 per cent owned by Telecom New Zealand, after a market-based takeover last year which was opposed by the AAPT board but which its shareholders accepted readily.