SBC Strengthens Ties With Prodigy

With staggering losses for last year behind it, Prodigy continues to suck big bucks of its majority owner guaranteeing SBC that it will only lose 41 percent of $340 million this year.

by Jim Wagner [January 20, 2001]

Hoping to bolster flagging revenues, SBC Communications strengthened its marketing ties and floated a $110 million line of credit with Prodigy Communications Corp. this week.

SBC is holds a 41 percent stake in Prodigy so it a vested interest in keeping the ISP afloat while the incumbent carrier seeks to further enmesh its digital subscriber line and business class connectivity services with Prodigy's existing residential dial-up base.

Under the original deal cemented between the two companies last year, SBC took over the operations and customer care functions for both firms' DSL and business class services. Prodigy was tasked with focusing on residential dial-up accounts and building out value-added services like email, news, chat, while it grew the Prodigy portal.

This week's revised agreement established commitments, with SBC promising to provide Prodigy with 3.75 million DSL and 375,000 dial-up customers during the term of the deal set to expire in 2009.

For its part, Prodigy will act as a reseller, offering SBC DSL and business dial-up, in addition to operating Prodigy Internet services.

Charles Foster, longtime SBC executive and newly minted Prodigy chairman, chief executive officer and president, said the agreement provides the ISP money to grow its services.

"Prodigy, with a clearer financial future, will continue to enhance its portal to include high-speed offerings such as video e-mail and instant messaging," Foster said. "Together, Prodigy and SBC will be the two brands that consumers can count on when they want to enjoy the full benefits of the Internet."

The contract extension comes as a relief to Prodigy officials who were concerned about flagging revenues last quarter. As it stands, Prodigy still expects to lose nearly $340 million this year.

SBC expects to have all its DSL and business and residential dial-up customers migrated to Prodigy by the end of the year.

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