SBC Communications and Prodigy Communications closed their
mini-merger today, capping a deal that will shift most of the telephone
company's Net customers to the Internet access provider's subscriber
ranks.
In return, SBC will take a 43 percent stake in Prodigy. The deal is similar to that struck
several years ago between Sprint and EarthLink, which has since managed the
long-distance phone company's Net customers.
Prodigy will get a total of 703,000 Net customers--about 80 percent of SBC's
total--including 137,000 consumer and small business high-speed access
subscribers. The Internet service provider (ISP) will also take over new SBC
customers both inside its 13-state home territory and in the 30 new markets
the phone company has agreed to enter as a result of its merger with
Ameritech.
That's welcome news for Prodigy, which has boosted its subscriber base in
recent months with low-priced service offerings, but has yet to regain the
high-profile industry position it held in the early days of commercial Net
access.
The deal does mark some concession by SBC that it has proven less than
successful in managing its own Net business. Nor is it alone there. Once
viewed as potential AOL-killers, none of the phone companies' ISP
services, with the possible exception of AT&T's WorldNet, ever climbed to
the top of the dial-up Net access market.
Most of the local phone companies, at least, are doing their best to avoid
repeating history with their high-speed Net services. All have launched
high-profile marketing campaigns touting the advantages of their services
over competing technologies like cable modems.
Prodigy, too, highlighted the deal as a way to win its customers access to
SBC's high-speed lines.
"This alliance moves Prodigy into the lead position in the broadband playing
field, with DSL clearly defining the strategic focus for our future growth,"
said Prodigy chief executive Samer Salameh.
Existing Prodigy members won't have to change their email or service as a result of the deal, although they could win access to lower DSL prices if they live in SBC territory, Prodigy executives said. Pricing arrangements have not yet been solidified.
