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AOL Latin America Claims Fastest Growth
By MIGUEL HELFT
September 6, 2001
When AOL launched its operations in Latin America nearly two years ago, it was a distant underdog with a long shot at success. Brazil, the region's largest market, was overwhelmingly dominated by a company that had copied AOL's successful strategy in the U.S. Even the name of its homegrown rival - UOL, short for Universo Online - mirrored AOL's. Others, including Spain's Terra Lycos (news/quote), also had healthy head starts in the region.
But after 21 tumultuous months, AOL is closing in on its rivals, and reshaping the market for Internet access.
AOL Latin America, a joint venture between AOL Time Warner (news/quote) and Venezuela's Cisneros Group, said Wednesday that it had signed up 1 million subscribers in Argentina, Brazil, Mexico and Puerto Rico, calling itself the fastest growing ISP in the region. In comparison, UOL has about 1.1 million subscribers in Brazil, Terra Lycos about 750,000 throughout the region and Telefonos de Mexico's Prodigy ISP claims 750,000 in Mexico, according to William Landers, an analyst with Credit Suisse First Boston (news/quote) in New York.
"AOL Latin America has shown tremendous momentum in its short history," said Bob Pittman, co-COO of AOL Time Warner and co-chairman of AOL Latin America, in a statement. It took AOL nine years to reach the 1 million-subscriber mark in the U.S., Pittman noted.
The numbers, however, should be taken with a grain of salt, Landers warned. He said that only about half of AOL's subscribers are paying members, while the rest are still enjoying free trials.
Despite its rapid growth, the company continues to lose money in Latin America and has not specified a date for breaking even. AOL Latin America is likely to need additional financing in 2002, Landers says. Its financial results have been battered by a crippling three-year recession in Argentina, home of the region's third-largest economy. In addition, a devaluation of Brazil's currency, the real, has eaten into the company's dollar revenues.
Still, AOL's growth shows that the company is gaining firm footing in a region that currently has about 15 million Internet subscribers -- a figure that is expected to expand quickly over the next few years.
"I think they are going to be more than a survivor," Landers says. "I think they will continue to establish themselves as one of the leaders."