AT&T fails in bid to acquire AOL

Internet AOL remains committed to staying independent as it revises its shareholders' plans.

America OnLine (AOL) has slapped down a bid from telecoms giant AT&Tits shareholders' plans. to acquire it for a sum in the region of $33 billion, maintaining it will remain independent.

Analysts believed AT&T was prepared to pay a large premium to acquire AOL to bolster the disappointing progress of its own ISP, Worldnet, which has 1.1 million subscribers. The move follows a growing trend of ISPs teaming up with telecoms. Demon Internet, the UK's largest ISP, was acquired by Scottish Telecom in May and a wave of takeover attempts is expected in the coming year.

AOL was expecting a move from a prospective suitor. In May, it strengthened its takeover defences with a new shareholder rights plan, necessary when its share price doubled. AOL's market capitalisation is $20 billion.

Following rumours of the bid, AOL shares climbed six per cent.

Steve Case, AOL CEO, sent an email to employees following reports of advances from the telecoms giant. He would not comment on whether talks had been held, but told staff: 'We are committed to remaining an independent company. This is the best course for our customers, shareholders and employees.'

However, rumours suggested there was dissension in the ranks. Robert Pitman, AOL chief operating officer, was believed to be in favour of the deal, while Case was against it. Case is on the board of WorldCom - AT&T's arch rival - that is awaiting clearance for its $37 billion merger with another AT&T rival, MCI Communications.

But in future AOL will need to operate on an a larger scale in order to achieve sustained profits, which have proved elusive despite $1.7 billion annual revenues.