Deutsche Telekom looks to buy out Europe Online for scrap

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Deutsche Telekom appears to be the only company left talking to Europe Online, this year's most spectacular online flop, but as a predator rather than a partner. The German telecoms group is not interested in equity like the others that dropped out (including CompuServe and ITT Corp), according to a source close to the discussions.

It wants to carve-up the eight month old corpse. "Deutsche Telekom is examining what EOL has, such as the brand, personnel and technology," explains the source. "Top of the list is the brand," he adds. DT has the most developed online information network in Europe, with over a million subscribers (CompuServe has roughly 700,000 throughout Europe). But it only operates in Germany with its T-Online.

"It (DT) appears to be planning a move abroad but I don't know how this fits in with its planned partnership with America Online," adds the source.

A partnership was proposed between America Online, German publishers Bertelsmann and Springer and DT last autumn. However, the mega-deal has yet to be approved by the European Commission's competition commissioner Karel Van Miert. America Online operates alone in most of Europe but its subscribers are easily outnumbered by CompuServe's.

The source says DT views the Europe Online situation as "the breakdown of a wrong concept." He adds: "Deutsche Telekom does not want to continue that concept." At the centre of its problems, he argues, is the fact that Burda, a major stakeholder in EOL, is also one of the main content providers..

"It doesn't work because rival content providers won't cooperate with you and your content suffers," he explains. The Europe Online experiment, he believes, should be a lesson to all content providers who are toying with the far more lucrative online business of providing the platform. There are currently 15 different small investors in Europe Online, including British media group Pearson and U.S. telecoms company AT&T as well as numerous banks and private stakeholders.

Copyright August 1996 Crain Communications Inc.

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