Giant May Need to Go Mobile; A Phone Operator Is Final Piece of Jigsaw

The Mail on Sunday (London, England), January 16, 2000 | Go to article overview

Giant May Need to Go Mobile; A Phone Operator Is Final Piece of Jigsaw


Byline: SIMON FLUENDY

THE world's biggest merger, the [pounds sterling]200 billion marriage of America Online and Time Warner, is changing the face of the media industry - but there is still a piece of the jigsaw missing.

Though the deal brings together an internet giant and a film, music and publishing world-beater, analysts believe that a third company - a mobile phone operator - will have to be included.

Few doubt that the future of communications will be the mobile phone. New technology will enable people to download a vast array of data through wireless facilities.

To became a truly global operator that owns the technology, the content and the means to reach customers anywhere, AOL-Time Warner will need a mobile telephone partner.

In the UK, twice as many people have mobile phones as own computers, and by 2002 phone maker Nokia forecasts that a billion people worldwide will own mobiles and twice as many will access the net via their phones as with PCs.

Many observers believe that Anglo-US company Vodafone Air-touch would provide the perfect partner.

Vodafone last week announced ambitious plans to bring internet products to its mobile phones.

Its merger with Airtouch gives it a high profile in the US and, like AOL, it is a global company. With a single deal, AOL could provide its service to mobile users in 24 countries.

Everything about Time Warner dwarfs AOL - except its share price. It is AOL that will end up with 55% of the stock in a [pounds sterling]200 billion company.

Aside from a market capitalisation of [pounds sterling]100 billion before the deal was announced, AOL has more than 21 million customers.

Time Warner was built 10 years ago from the Warner Brothers entertainment empire and Time Inc, the magazine publisher founded in 1932 by Henry Luce. It is a giant in comparison with AOL. Revenues last year were [pounds sterling]15.8 billion and it has 70,000 employees compared with AOL's 12,500.

Aside from putting real assets into a company that has reinvented itself more times than Madonna, Time brings a potent mixture of attractions. First, there is content. Time has a giant catalogue of music from 1,000 artists and a film library that would take a lifetime to watch.

Second, Time Warner has an enticing array of cable TV interests.

Time's cable business serves 13 million homes and it also owns a high-speed internet access group called Roadrunner.

For Time the attractions are equally simple. Its own Pathfinder internet service was hugely ambitious and the group ventured into the web in 1994. But Pathfinder was a disaster.

Combined, the two will find new ways to deliver an ocean of content.

'Our new slogan is AOL Anywhere, ' says Rich Dimato, head of communications at the new media giant. 'We envisage customers using AOL on a TV, a mobile phone, a personal palmtop organiser, in the car, at the office and on the beach.' That back catalogue of music and films will be compelling - so long as consumers don't have to suffer the world wide wait.

Most of their customers use computers and ordinary phone lines to connect to the net. It takes 10 minutes or more for a three-minute song to download, though AOL is already offering music clips for download from Time's catalogue.

BUT modems attached to Time's cables will allow entire movies to be moved from AOL's computers to a customer's home in minutes.

One of the first things AOL wants to do is find a mobile phone partner.

Right now, it could deliver bite-sized chunks of news and sports headlines to be read on the tiny screens of today's mobiles.

But last week the UK announced that 13 groups had applied to take part in an auction for five third-generation mobile licences.

These phones will allow the same kind of data transfer speed as cable modems.

'We wouldn't want to speculate who our partners will be,' says Dimato, but he admits that global reach and the right technology platform will be important. …

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