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Wal-Mart, AOL to Launch ISP

Wal-Mart Stores Inc. and America Online Inc. Thursday allied to create a co-branded Internet service provider to offer Wal-Mart communities low-cost access to the Net.

Financial details were not disclosed.

The Wal-Mart/AOL ISP will be similar to the CompuServe service and will also include controls that allow parents to determine which sites their children access. Wal-Mart customers will be provided software so they can create an online account with the new Internet service offering local access.

In addition to the distribution of the co-branded Wal-Mart/AOL ISP, Wal-Mart will also distribute AOL 5.0 software with a link to Wal-Mart's Internet shopping destination, Wal-Mart.com.

In the agreement, Wal-Mart also will promote both the Wal-Mart/AOL co-branded ISP and the AOL flagship interactive service through print, radio and television advertising, as well as in-store promotions.

The companies will also market interactive devices and services, such as AOL TV, designed to appeal to Wal-Mart customers.

Wal-Mart (WMT) and America Online Inc. (AOL) said the ISP will target consumers who live in smaller Wal-Mart communities and may not have adequate access to Internet service.

Currently, approximately six out of every 10 towns in which Wal-Mart operates have local Internet access, and the companies have agreed to work together to increase the availability of local Internet access to communities where it is not available.

"We are taking this step to benefit our customers," said Lee Scott, Wal-Mart's chief operating officer and vice chairman. "Millions of our customers will be enabled by this agreement to obtain affordable, convenient Internet service, and to access our online store."

Frederick Moran, Internet analyst at Jefferies & Co., said these types of alliances aren't really new and will likely have limited upside impact for Yahoo! stock.

"These companies have been making deals with various players for years now. Yahoo! has a ton of distribution agreements already and this just adds marginally to the mass market impact of the company.

"One deal's not going to make or break a Yahoo!. Plus, the stock's had a major run up due to its inclusion in the S&P 500 and may temporarily be out of gas."

Thursday's announcement continued a busy week for AOL, which forged a marketing alliance with Circuit City. In that deal, AOL will be featured in Circuit City's 615 stores nationwide where customers will be able to sign up for AOL's Internet service.



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