America Online Inc. is set to spin-off
its Latin American division with its initial public offering at the end of
this month.
Analysts estimate America Online Latin
America Inc. stock offering could raise as much as $425 million.
Trading under the stock symbol AOLA on NASDAQ, American Online Latin America is
set to offer 25 million shares of stock in a price range of $15 to $17 per
share.
AOL Latin America intends to become the leading provider of interactive
services in the region. The project is a joint venture between America
Online and the Cisneros
Group.
AOL Latin America provides of localized, AOL-branded interactive services
in several South American countries. The company offers Internet services
to subscribers, which will be developed on a country-by-country basis in
each of AOL’s target markets through specialized Web portals.
Earlier this month, AOL Latin America launched America Online Mexico,
its first Spanish-based service.
In Mexico AOL distributed free starter kits that users can pop into their
computers to install AOL access services, as well as a wide range of
content in Spanish. AOL exported standard American features to its audience
in Mexico, including e-mail, chat, instant messaging, and a security system
to keep children out of pornography sites.
AOL Latin America is schedule to introduce its AOL Argentina service Aug. 8, with
services to Chile, Paraguay and Uruguay to follow later this year.
AOL worldwide operates in eight languages in 16 countries. The company
launched its AOL-branded interactive services in Brazil in November 1999.
In December, America
Online Brasil reported more than 65,000 members signed up for the
service just three weeks after its launch. At the time, Charles Herington,
AOL Latin America chief executive officer said both member growth and usage
were running well above its expectations, but that it services to Brazil
are just part of AOL’s Latin American marketing strategy.
“The objective is to cover 98 percent of Latin America’s online users by
the end of 2001,” Herington said. “With Mexico, Brazil and Argentina, we
will cover more than two-thirds of the current users in the region.”
AOL Latin America has its work cutout for it. The region is behind most of
the world in current rates of Internet use, less than 3 percent of the
Latin America’s population are online. But Herington said AOL Latin America
is betting that the region’s Internet growth rate is about to boom,
eventually being higher than any other region in the world.
“Three quarters of the people who are going to be online in 2003 are not
online today. That is the market we are after,” Herington said.
AOL Latin America recently entered into a major strategic alliance with Banco Itaz, one of the region’s
financial institutions with extensive online banking operations. The two
companies plan to create a co-branded, customized version of the America
Online Brazil service to be marketed to the banks more than 7 million
customers. As a part of the deal Banco Itaz also became a minority
shareholder in AOL Latin America.
Initially, AOL Latin America’s revenue is principally derived from
subscriptions, but the company plans to build its online service member
base and portal in order to generate additional revenues from advertising
and e-commerce.
As the nation’s largest online service provider with a membership base of
more than 23 million users, AOL intends to dominate Latin America in the
same way its servic
es nabbed a major share of the North American market.
AOL Latin America faces stiff competition from regional rival Terra Networks S.A., which has established
Internet services in Argentina, Brasil, Costa Rica, Chile, El Salvador,
Guatemala, Honduras, Mexico, Nicaragua, Panama, Peru, Uruguay, Venezuela,
as well as the U.S. and Spain.
Through its joint venture with Internet
Discount Telecommunications Corp. , Terra Networks
recently launched Internet access service in the U.S.,
specifically targeting the Hispanic market segment.
Unlike Latin America AOL, Terra Networks is well established in the region
and has developed an online community interested in its interactive,
localized, language-specific content. Terra Networks also bases its revenue
from subscription feeds, advertising, marketing, e-commerce and related
activities.
The battle for the Latin American market share is certain to create
enticing offers for the region’s burgeoning online community as AOL heads
south seeking its piece of the Web empanada.
