March 12, 2002 3:30 PM PST

AOL slowly adds members

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America Online said Tuesday that it has surpassed 34 million subscribers, but the time it took to reach that figure underscores slowing growth at the world's largest Internet service provider.

The AOL Time Warner division took 74 days to add its most recent one million members, compared with just 35 days for the previous million.

Analysts attributed the decline of AOL's subscriber growth rate to several factors, including softness in the dial-up access market, sluggish subscriber growth at AOL Europe, and slower-than-expected sign-ups for AOL's high-speed Internet service.

Investment bank Lehman Brothers said it expected AOL to reach the 34 million mark more than a month ago.

"The delay in hitting this milestone highlights our concerns that domestic growth is slowing dramatically, that international subscribers may not be picking up the slack, and that churn may be increasing," Lehman Brothers analyst Holly Becker wrote in a report released Tuesday. Churn is the rate at which subscribers leave the service.

Becker said Lehman Brothers is cutting its estimates for net additions, or the number of new subscribers minus the number of people who leave the service. The firm now expects 975,000 net additions for the quarter and 4.5 million net additions for the year.

Despite its sluggish subscriber growth, AOL touted the strength of its business, focusing on the amount of time members spend on the service.

"As we continue to build our subscriber base worldwide, AOL members are integrating more and more online activities into their lives," AOL CEO Barry Schuler said in a statement. "This is underscored by the fact that our members are spending on average more than 70 minutes a day with the service, or now more than a billion hours a month."

The majority of AOL's 34 million members pay $23.90 a month for unlimited Net access.


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