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AOL Entering Latin America

America Online Inc. Tuesday set it sights on Latin America, announcing a deal with entertainment conglomerate Cisneros Group.

The two will invest $100 million in an equal partnership to bring AOL to Brazil, Mexico and Argentina. The service is slated to launch in about a year, with AOL rolling out Latin American versions of AOL.com.

The AOL/Cisneros co-venture will provide traditional AOL services such as e-mail, chat, instant messaging and the Buddy List, available in both Spanish and Portuguese. AOL users in the United States and Europe will be able to access the Latin American features as well.

Additional features will include regional content and local customer service. The AOL/Cisneros entity will head up the Latin American development of AOL-owned CompuServe.

Executives from both companies said Latin America is expected to become one of the fastest growing markets for online services.

"Our interconnected Latin American services will not only help to bring Latin Americans together to share their thoughts, ideas and experiences, but will also make it easier for them to connect with family and friends in the United States," said Steve Case, AOL's chairman and chief executive officer.

Case said global expansion of AOL has skyrocketed. The service's international users represent its fastest-growing segment, with 1.8 million members. Case said Latin America's population of 460 million represents a huge growth potential for online services.

"Latin America is poised to become the next great growth center for the interactive medium," said Gustavo A. Cisneros, the chairman and chief executive officer of the Cisneros Group of Companies.

"With a population of close to 460 million people sharing common languages and cultural values, the Latin American market presents huge potential for expansion. Enhancing this opportunity is the region's recently developed communications infrastructure and a double digit annual growth rate in computer penetration."

The major Latin American online player currently is StarMedia, headquartered in New York. Case said he didn't view StarMedia as a competitor since it was what he called a portal, adding that AOL Internet's offering would be a broader offering.

"We're offering an end-to-end solution. Users can still get StarMedia through AOL. We're offering dial-up access, local content, local customer service, all aggregated. Users will also be interconnected to the AOL community worldwide," Case said.

StarMedia Co-Founder and Chief Executive Officer Fernando Espuelas also said Tuesday's announcement doesn't change the company's plans.

"We are still focused on building the No. 1 brand on the Internet. If AOL can provide good ISP service in Latin America and increase the quality, that would be great," Espuelas said.

He said that the companies are operating in different sectors of the Internet.

Espuelas also would not rule out some kind of alliance with AOL down the road. With the online audience in Latin America surging, he believes the market had room for many players. Since AOL's Latin American launch date is still a year away, a lot can happen in the interim.

"Frankly a year from now in the Internet is several lifetimes to the power of ten," Espuelas said.

He said StarMedia would continue to pursue more local partnerships and other deals.



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