Prodigy Improves Cash Position, Financial Stability Under New Strategic & Marketing Agreements With SBC
AUSTIN, Texas--(BUSINESS WIRE)--Jan. 19, 2001--Prodigy Communications Corporation (Nasdaq:PRGY), one of the nation's leading Internet service providers, announced today new strategic and marketing agreements with SBC Communications Inc. (NYSE:SBC), the nation's leading provider of broadband DSL service, that will strengthen and extend their relationship.
For Prodigy, the revised agreements allow it to continue to enhance its Internet portal and bolster its ISP infrastructure for e-mail, news and chat. Further, the new agreement will significantly improve Prodigy's cash position and financial standing. For SBC, the new agreements allow it to better package and deliver Internet service and emerging broadband-powered applications on a retail basis to its customers.
The agreements call for SBC to offer Prodigy's portal to SBC customers through SBC's extensive marketing channels -- in effect, making Prodigy the preferred wholesale ISP and portal for SBC -- and to deliver the Prodigy Internet service to a minimum of approximately 3.75 million DSL and 375,000 dial-up subscribers over the next nine years.
Under the new agreements, both companies will provide the services they do best. SBC will deliver an integrated DSL and ISP product, provide customer care and billing, and manage related network services for SBC's DSL and business dial-up customers. Prodigy will provide a robust, co-branded portal and ISP infrastructure for these SBC customers. Additionally, Prodigy will continue to offer a nationwide retail ISP service for residential dial-up subscribers acquired by SBC and for existing and future Prodigy customers. With the increased volume of subscribers receiving the Prodigy Internet service, Prodigy will be better positioned to increase its non-subscriber revenue.
The revised agreements, approved January 18 by the Prodigy board of directors, include the following provisions:
Prodigy and SBC will extend the term of their relationship from three to nine years (through December 2009);
Prodigy retains the retail relationship with its consumer dial-up subscribers while SBC retains the retail relationship with its DSL and business dial-up subscribers;
Prodigy will receive monthly per subscriber fees to provide SBC a wholesale ISP service for e-mail, news and portal content for delivery to SBC DSL and business dial-up subscribers;
SBC increases its minimum subscriber commitment to Prodigy to approximately 3.75 million DSL and 375,000 dial-up subscribers over the next nine years;
As the retail provider, SBC will assume responsibility for acquiring the DSL and business dial-up subscribers, providing customer care and billing, and assuming responsibility for networking costs, enabling Prodigy to realize significantly lower operating expenses and increase its gross margin per subscriber;
SBC DSL and dial-up customers will use Prodigy's extensive roaming network to be able to access their accounts while traveling;
In conjunction with the signing of these agreements and as was made public January 4, SBC will provide a $110 million line of credit to Prodigy; and
SBC will continue to co-brand its offerings with Prodigy and both companies will work together on affinity, OEM (original equipment manufacturers) and new product marketing.
``These new agreements put Prodigy in a stronger financial and marketing position, by greatly reducing operating expenses, accelerating Prodigy's path to profitability, and giving Prodigy the resources to become one of the best portals and retail Internet service providers in the country,'' said Charles Foster, Prodigy chairman, CEO and president. |
