Internet subscriber, ad downturn knocks AOL Time Warner profit

In a double whammy, an internal review of AOL's accounting practices from late 2000 to early 2002 has also forced the parent company to restate earnings, slashing revenues by $190 million and cash flow by $97 million.

The review was prompted by a continuing Securities and Exchange Commission probe into falsely inflated revenues.

Despite AOL's negative contribution, the group reported income of $US57 million ($103 million), or US1c per share, compared with a loss of $US997 million, or US22c per share, in the same period a year ago.

Revenues totalled $US9.98 billion, compared with $US9.07 billion last year.

At the core of the damaging AOL result was an 84 per cent fall in subscriptions from 1.3 million in the same quarter a year ago to 206,000. AOL also posted a 48 per cent slump in advertising revenues.

The result can only add to the pressure on AOL chief Steve Case to resign.

In Australia, AOL7, which is undergoing a major restructuring of its business, was keen to distance itself from the result.

``We're a three-way joint venture, in which AOL owns one third and AOL is itself a subsidiary of AOL Time Warner. It is a completely different company," a spokeswoman said.

AOL7, a privately held joint venture between AOL, Seven Network and AAPT, does not release financial results to the market but does have to file an annual report to the Australian Securities and Investments Commission. Last year, before the AOL7 merger, AOL Australia lost $47.6 million on revenue of $29.2 million. A spokeswoman said the 2002 results would be filed with ASIC at the end of the month.

The joint venture has also never revealed the number of Australian subscribers but they are believed to be fewer than 200,000.

AOL7 chief executive Amanda Lacaze said she expected most growth to come through a yet-to-be-launched broadband service. Trials are expected to start next month.

``The AOL experience makes better sense on broadband than it ever did on narrowband," she said.

In early October, AOL7 offered voluntary redundancies to about half of its 200 employees. Ms Lacaze said the move to broadband meant a lot of positions were no longer needed.