AOL Europe's Musical Chairs

LONDON (01/28/2000) - The latest fallout from the America Online Inc.

(AOL)-Time Warner Inc. merger has linked German mobile-phone company Mannesmann AG with AOL Europe. Reports in the German and British press say Mannesmann is interested in acquiring a stake in the joint venture, and may even buy out Bertelsmann AG, which owns 50 percent of AOL Europe.

Bertelsmann spokesman Oliver Herrgesell confirms that Bertelsmann has been in talks with Mannesmann, but declines to confirm that the talks are related to the sale of Bertelsmann's stake in AOL Europe.

"There have been talks with Mannesmann, and there have been talks with others as well," says Herrgesell. "The talks are not in the final stage. The (stake in AOL Europe) is not the first priority for Bertelsmann. The first priority is distribution of our content."

Newspapers in Germany report that Bertelsmann is preparing to sell part or all of its stake in AOL Europe. Bertelsmann's part-ownership of AOL Europe puts it in a strange position. It owns the venture jointly with AOL, which has just aligned with a significant competitor to Bertelsmann. The competition heightened earlier in the week, when Time Warner joined up with another of Bertelsmann's competitors, EMI Music.

Mannesmann itself is embroiled in takeover talks with Vodafone AirTouch, which has been attempting to acquire the company since last fall. In an effort to strengthen its case against a hostile Vodafone takeover, Mannesmann is attempting to build alliances with a number of partners, such as Vivendi, the French media company, and Cap Gemini. Mannesmann said yesterday it would enter into a joint venture to develop e-commerce and Internet services with Cap Gemini. The full details of the venture will be revealed at next month's CeBit show in Hanover, Germany.

AOL Europe and Mannesmann will not say whether the rumors are true. AOL Europe says only, "We do not comment on market rumors, and this is a market rumor."

AOL Europe released a statement expressing its unwillingness to feed the press frenzy, but saying "an important part of our AOL Anywhere strategy is to bring about convergence between the Internet and mobile devices and services. With its broad reach and resources, AOL Europe is uniquely positioned within Europe to deliver value-added content and community via a range of mobile devices."

According to the German daily Sueddeutsche Zeitung, the terms of the deal between Mannesmann and AOL Europe have been worked out, and only await the approval of the German company's Chairman Klaus Esser.