AOL Considering Net Partnership in Italy

ROME (07/19/2000) - Mondadori SpA, the Italian publishing group controlled by Italian opposition leader Silvio Berlusconi, today confirmed published reports of negotiations with America Online Inc. (AOL) for a possible Internet partnership in Italy.

"Arnoldo Mondadori Editore confirmed the existence of contacts with numerous Italian and international operators for possible joint initiatives in the Internet area," the company said in a prepared statement. "These contacts, linked to the convergence of traditional media, digital media and telecommunications, are continuing across the board without the identification of a primary partner," it said.

News of the talks, aimed at the creation of an Italian-language ISP (Internet Service Provider) for AOL, was revealed today in the London Financial Times.

"AOL is understood to see the group's magazines -- which include a string of computer and new media titles -- as an ideal distribution vehicle for compact disks containing its Internet access software," the Financial Times said.

Mondadori shares rose 4.28 percent on the Milan stock market in response to the Financial Times report, Italian news agencies said.

"We have confirmed the contacts. We have had them with AOL and with others," said Mondadori spokesman Angelo Allegri. "We are in a preliminary phase, investigating possible partners and business models. There are many business models on the Internet, and Mondadori must choose the model that seems most successful."

AOL's subscription-based business model makes it profitable, he noted.

Mondadori is Italy's leading magazine publisher, and many potential international partners are interested in its Italian-language content, Allegri said in a telephone interview. The company controls 38 percent of the Italian magazine publishing market, with a 55 percent niche in women's magazines and almost 70 percent in the entertainment sector, he said.

"An Internet service provider looking for content is bound to be interested in Mondadori," Allegri said.

The company launched a vertical portal in March of last year to promote the sale of its books and magazines. In May of this year, it launched an information technology and electronic-commerce hub called Mytech, and in June added Mondodonna, a hub dedicated to women's issues, a company spokeswoman said.

The company publishes five specialist IT magazines, and the results of its testing of professional PCs are posted on its Web site, she said. Further channels dedicated to health and cooking will be introduced soon, Allegri added.

The company already has non-exclusive agreements with Jumpy.it, a free ISP controlled by Berlusconi's broadcasting company, Mediaset SpA, and with Altavista.it, the American ISP AltaVista Co.'s Italian subsidiary.

"These alliances are intended to increase the amount of traffic on our site.

They leave our hands free because there are no exclusivity restrictions.

Non-exclusivity is one of our guiding principles," Allegri said.

"Mondadori is one of the leaders as regards content aimed at the Italian market. An alliance with AOL would be a very interesting development," said Roberto Mastropasqua, head of Internet research at International Data Corp.

(IDC) in Milan.

"It would combine a portal with localized content at a time when the most high-profile portals in Italy are those operated by publishers. Kataweb, the Espresso publishing group's portal, is now one of the most frequently mentioned and demonstrates the logic of the online publisher. Content is fundamental if people are going to find you, and Mondadori has one of the richest content portfolios in Italy," he said.

AOL's planned merger with Time Warner Inc. represents a similar move toward content delivery, but the companies were punished by the stock market because of concerns about high overheads, Mastropasqua said.

An AOL-Mondadori portal could end up competing with Jumpy, an ISP controlled by the same owner: media mogul-turned-politician Silvio Berlusconi, Mastropasqua said.

"One would need to know exactly what they are thinking of doing. Mediaset is a big group, so it's possible that different parts of it could end up in competition with one another," he said.

"Jumpy is a free Internet provider, and a subscription-based portal would be something quite different," Mondadori's Allegri said. "The risk of competition will be taken into account, but they are two quite different realities."

Mondadori can be contacted in Milan at +3902-7542-2729 or on the World Wide Web at http://www.mondadori.com.

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