AOL, AT&T; to Develop Cell Phone

Accelerating its drive into the fast-growing world of hand-held devices and gadgets, America Online said Wednesday it plans to develop a co-branded cell phone with AT&T; Wireless that will include a customized version of its popular online service.

The deal expands the two companies’ existing partnership, which began last July when AT&T; started offering AOL services--including e-mail, news, weather and stock quotes--on its Digital PocketNet phones.

The new AOL-AT&T; phones, expected to be in stores the first half of 2002, will include additional AOL services, including instant-messaging.

Relying on cutting-edge wireless technology, AOL services will begin operating as soon as the cell phone is turned on, eliminating the need to scroll through menus or use sign-on screens. If the user receives an instant message or e-mail, for example, the phone will ring or vibrate.

The two-year AOL-AT&T; agreement is exclusive for the first year. After that, either AOL or AT&T; may make similar deals with other wireless or Internet partners, according to AT&T; spokesman David Caouette.

AOL allows members to access its services through a variety of AT&T; rivals, including Sprint PCS Group and VoiceStream.

Financial terms of the AT&T; agreement were not disclosed.

AT&T; charges customers an extra fee to use many of the AOL services it offers. With the new phones, the price--which has not yet been set--will be bundled with the monthly connection charges.

The announcements were part of the company’s “AOL Anywhere” strategy, which is designed to wean the Dulles, Va.-based Internet giant off its reliance on personal computers. AOL offers its service on hand-held computers, two-way pagers, interactive television and traditional telephones.

AOL Time Warner fell 17 cents to $52.68 Wednesday, and AT&T; rose 6 cents to $20.77, both on the New York Stock Exchange.