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AOL warns of tough times ahead

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AOL has warned that revenues for 2003 are expected to remain flat and that the Internet division of AOL Time Warner is unlikely to deliver solid growth until 2004.

Total revenues for AOL for 2002 are expected to come in somewhere between $8.8bn and $9bn with advertising and ecommerce revenues generating between $1.5bn and $1.6bn. Earnings before interest etc (EBITDA) for 2002 is expected to skip in at between $1.7bn and $1.8bn.

Looking ahead to next year, AOL reckons "solid growth in worldwide subscription revenue" will be offset by declines in advertising and commerce revenues of between 40 per cent and 50 per cent.

As a result, overall revenues for the Internet division are expected to remain flat in 2003 compared with 2002.

The decline in high-margin advertising and commerce revenues is expected to lead to a fall in EBITDA of as much as 25 per cent, the company said.

In a statement AOL Time Warner CFO, Wayne Pace, said: "Our 2002 results continue to track as we expected. Even though it's early to give a precise 2003 outlook for America Online, management has just concluded a comprehensive review of its operations and has developed an achievable business plan to build a strong foundation for the future.

"It is clear that 2003 will be a transition year, but with this plan we expect America Online once again to deliver solid EBITDA growth beginning in 2004."

This outlook for AOL was published prior to meeting designed to update analysts on the progress of AOL.
Earlier reports suggested AOL might try and increase efforts to flog its content to those who already have broadband supplied by another provider.

The "bring your own access" model - which costs punters $14.95 a month for AOL content, email etc. on top of the cost of their broadband connection - is viewed as an area of potential growth for AOL. ®

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