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"Totally unfounded," Deutsche Telekom hotshot Kai-Uwe Ricke last week said of rumors that online daughter T-Online was to buy a 70 per cent stake in the struggling online giant AOL. But there may be more truth to this story than he is willing to admit.

On Friday, The New York Times cited two anonymous AOL company executives who confirmed that Richard Parsons, the CEO of Time Warner, held preliminary discussions with T-Online about a possible merger or joint venture involving AOL. Apparently, the talks ended without a deal.

Earlier, the Suddeutsche Zeitung (for those who read German, here's the link to the original article) wrote that Parsons and Thomas Holtrop from T-Online were introduced to each other by Thomas Middelhoff, the former Bertelsmann CEO who in the past worked with AOL in AOL Europe and is now employed by Investcorp in London. Bertelsmann ended its relationship with AOL when in 2000 America Online purchased Time Warner for... (Dr. Evil pinkie finger to mouth trepidation)... $112 billion.

According to the German paper, Darmstadt-based T-Online offered $1 billion for a 70 per cent stake in AOL. Time Warner was to keep 30 per cent.

It's no secret that Time Warner would like to discard its struggling Internet arm, even though Edward Adler, a spokesman for Time Warner, told The New York Times that "America Online delivers over $1 billion in free cash flow to Time Warner each year and that AOL Europe is on a path to profitability in ’04 as promised".

T-Online, on the other hand, is still flourishing: it has 12 million customers, mostly in Germany, but also in Spain, France, Portugal and Austria. Not only does T-Online wants to expand internationally, it also has cash reserves of €4 billion. Which makes you wonder: if it can’t get AOL, who will it buy next? ®

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