AOL and Wal-Mart team to provide low cost Internet access

America OnLine (AOL) and retail giant Wal-Mart, which owns Asda in the UK, are teaming up to create new jointly branded, low cost Internet access services.

The move follows yesterday's announcement by AOL that it had signed a marketing deal with electronics retailer Circuit City, and Yahoo! and Kmart's statement that they planned to launch a free online store called Bluelight.com.

The much anticipated deal will see AOL and Wal-Mart developing a customised version of AOL's Compuserve service, which will be distributed on CD-Rom in Wal-Mart stores.

Wal-Mart has also agreed to distribute AOL's premium service and the disks will include links to Wal-Mart's online store, which is due to be relaunched on 1 January based on AOL technology.

While Wal-Mart wants to provide as many shoppers as possible with access to its revamped website, the alliance will give AOL exposure to the 90 to 100 million people who shop at Wal-Mart stores each week.

The two companies will also jointly market the services through print, radio and television ads.

A Wal-Mart spokesman said: "You'll see a lot of cross-marketing in the stores and online."

He added that the companies have not yet decided on fees for the Internet access service, which, unlike a similar service provided by Kmart, Yahoo! and Softbank, will not be free.

The two also said they would work together on "next generation" interactive devices and services, which could include interactive television such as AOL TV, although no specifics were given.

Richard Church, an analyst at Salomon Smith Barney, said the two firms were attracted to each other because AOL wanted access to the Wal-Mart demographic base, while Wal-Mart needed to attract people to its website to establish itself as a credible ecommerce player.

"In essence, this scenario establishes a Wal-Mart front end with the AOL back end services and infrastructure as its foundation," he explained.

AOL's shares fell 1 1/2 to 85 7/16 on the New York Stock Exchange on Thursday, while Wal-Mart's rose 1 7/8 to 68 1/8.

Microsoft also signed a similar deal with computer and electronics retailer, Best Buy, on Thursday and the two will cross-promote each others' products and services. The software giant said it would invest $200 million in Best Buy.