The deal, rumoured for nearly a week, includes several cross-marketing initiatives including offering AOL software at Wal-Mart stores and an agreement to promote the joint service in print, radio and television advertising and in-store promotions. AOL shares were up 4-1/16 at 91, while Wal-Mart shares rose 1-3/4 to 68 on Instinet.

The Wal-Mart and AOL deal represents the second major alliance to be announced by AOL this week, coming on the heels of a marketing pact announced on Wednesday with Circuit City Stores Inc, the No 2 US seller of consumer electronics. Also on Wednesday, Kmart Corp, the No 3 US retailer,said it would form its own Internet company, teaming up with Web media network Yahoo! Inc. and retail partner Martha Stewart Living Omnimedia Inc. to provide consumers with free Web access, personalized content and shopping services.

About 90 million people a year visit Wal-Mart stores. AOL has nearly 20 million subscribers, more than the combined subscriber base of its four nearest competitors.

The Wal-Mart/AOL Internet access service will be acustomised version of AOL's CompuServe budget service, aimed at areas of the country that do not have easy local access to Internet services. The retailer said that six out of 10 towns in which it operates have local Internet access. "We are bringing a new form of shopping to people in smallto medium-sized communities across the country," Lee Scott, Wal-Mart's Chief operating officer and vice chairman, said in a statement.