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Yahoo, MCI deal goes bust

The two firms will discontinue their cobranded online service, a casualty of the impending merger between MCI and WorldCom.

    Yahoo and MCI Communications plan to discontinue the cobranded online service they launched six months ago.

    The online service is a casualty of MCI's impending merger with WorldCom. To satisfy regulators, MCI in July announced it would sell its public Internet business to Cable & Wireless for $1.75 billion.

    "We had agreed to sell assets to C&W," said Kelly Seacrist, a spokeswoman for MCI. "As part of that, Internet customers go as well. Yahoo and MCI mutually agreed we would end our relationship."

    The service will be shut down as soon as the merger is completed, according to an MCI spokeswoman.

    Yahoo was one of the first portals to offer cobranded access with an Internet service provider when it announced the MCI service in January. AT&T also offers cobranded services with portal leaders Lycos, Excite, and Infoseek.

    Sprint, on the other hand, has tried to secure its Net future by taking a 30 percent stake in ISP EarthLink. All major portals have launched cobranded services to give their customers yet another way to get to their front doors.

    Analysts agreed that the move probably will not have a great impact on Yahoo. However, it might be an indication of where MCI is headed and could be seen as another sign of a floundering Internet strategy among the telephone company giants, analysts noted.

    "It's possibly good news for the EarthLinks and Prodigys and MindSprings," said Andrea Williams, an analyst with Volpe Brown Whelan. "As far as Yahoo goes, they'll find another partner."

    While she noted that the cobranding deals have done little for the portals, they could be important in the future as more consumers look for a simple solution for Net access via portal brands they know and trust.

    MCI "is left without a real strategy for attracting customers," said Peter Krasilovsky, an analyst with Arlen Communications.

    Existing customers of the cobranded service will be carried by Cable & Wireless once the MCI-WorldCom merger is completed, said Jeff Mallett, chief operating officer for Yahoo. He declined to specify how many customers the service has.

    At that time, Yahoo will shop around for a new Internet access provider for a cobranded service, Mallett said, noting that customers should not see a change in service.

    The primary targets for the Yahoo-MCI service have been people who already use Yahoo at work and school and are looking for another way to log on at home, Mallett said.

    "The whole campaign is to take Yahoo home," he said, adding that just about any ISP with reliable service can help Yahoo achieve its goal.