SBC and Prodigy Announce Alliance
Prodigy to assume management of 650,000 SBC customers,
become exclusive consumer, small business ISP for SBC
companies, gain minimum 1.2 million new subscribers in three
years from SBC marketing channels
SBC to take 43%
equity stake, play substantial role in strategic leadership of
top-tier, independent ISP
Prodigy's Internet expertise,
SBC's broadband leadership, position Prodigy for even faster
growth
San Antonio, Texas and White Plains, New
York, November 22, 1999
SBC Communications Inc.
(NYSE: SBC) and Prodigy Communications Corporation (NASDAQ:
PRGY) agreed today to join their consumer and small business
Internet operations, positioning SBC and
Prodigy to become a leading provider of DSL broadband
Internet access and further fueling both companies'
growth.
The alliance allows Prodigy to leverage SBC's
$6 billion Project Pronto plan to make high-speed DSL (Digital
Subscriber Line) near ubiquitous in its service area, utilize
both companies' respective marketing and distribution
resources and powerful brand names to revolutionize customers'
online experience, capitalize on the Internet's growth and
pursue related market opportunities. The deal will enable
Prodigy to be well positioned to meet and grow demand for
super-fast, always-on DSL and dial-up Internet access, and
achieve the scope and scale to more quickly offer
next-generation, broadband-powered content and emerging
services such as home networking and video on
demand.
Under terms of the
agreement, which is expected to close in three to six months,
SBC will make Prodigy its exclusive retail consumer and small
business Internet access service to the approximately 100
million Americans in its service area. Prodigy will assume
management of SBC's current 650,000 dial-up, ISDN and basic
DSL Internet customer base, increasing Prodigy's total managed
subscriber base to more than 2 million and sealing its
position as a top-tier ISP. SBC will exclusively market
Prodigy service through its extensive marketing channels with
the commitment of delivering a minimum of 1.2 million new
customers over the next three years to the Prodigy member
base. The deal provides SBC with a 43 percent ownership stake
in Prodigy.
Recognizing the fast-growing demand for
high-speed access to the Internet, Prodigy will take advantage
of SBC's Project Pronto, which will make DSL service available
at even faster speeds to nearly 77 million Americans
throughout its operating region over the next three years.
Project Pronto will make SBC the single largest broadband
provider in the country; SBC currently leads the nation in DSL
subscribers, with more than 100,000 customers. Through SBC's
DSL-ISP Partnership Program, Prodigy will market SBC's DSL
service where available, giving Prodigy customers guaranteed
downstream Internet connection speeds of 1.5 Mbps, 50 times
faster than typical modems.** Super-fast, always-on DSL
service significantly enhances customers' online experience
with near instantaneous downloads of complex files and the
elimination of time-consuming dial-ups to an ISP or corporate
network. It also makes possible a whole host of
next-generation products and services that promise to unlock
the full potential of the Internet, including personal video
conferencing and online interactive games.
"This
initiative is further proof of our commitment to broadband
leadership. Our alliance with Prodigy builds on our aggressive
$6 billion broadband deployment and their already-strong
industry ranking to position us as a leader in the emerging
high-speed consumer Internet access market," said Edward E.
Whitacre Jr., chairman and chief executive officer of SBC.
"This alliance will better enable us to dramatically improve
our customers' online experience and give us the vehicle we
need to capitalize on the growth opportunities in the Internet
marketplace."
"Broadband access will
redefine the ISP playing field, and DSL is clearly emerging as
the technology of choice," said Samer Salameh, Prodigy
chairman and chief executive officer. "We now are better
positioned than virtually any other ISP to become a leading
player in the high-speed Internet access arena-giving our
customers the Internet experience they've been asking for,
which we believe will increase shareholder value."
For
current customers and as SBC signs up new customers, the
Prodigy service will be co-branded with SBC's regional brands
- Ameritech, Pacific Bell, Nevada Bell, SNET and Southwestern
Bell - in SBC's existing service areas, and with its new SBC
Telecom brand in the 30 markets SBC will enter in the next 30
months.
Additional Terms of the Deal
SBC and
Prodigy will coordinate product marketing and technology
efforts to better serve customers while playing to each
company's key strengths. Some additional highlights of the
alliance include:
- All subscribers
acquired after close by either company will become Prodigy
members. Prodigy will assume management of SBC's 650,000
dial-up, ISDN and basic DSL customers.
- SBC will exclusively
market a co-branded retail Prodigy access service through
its extensive marketing and distribution channels on a
stand-alone basis, and as part of integrated packages of
telecommunications services, with the commitment of
delivering a minimum 1.2 million new subscribers over three
years.
- Prodigy will use SBC
as its preferred provider of telecommunications services,
with the ability to offer integrated packages of services
including Electronic Yellow Page directories and other
telephone services and to reach potentially millions of new
customers.
- SBC will be able to
tap Prodigy's extensive national distribution channels of
original equipment manufacturers, retailers and affinity
partners.
- Prodigy will name SBC
as its preferred provider for network infrastructure from
access to Internet backbone.
- SBC will assume three
seats on Prodigy's nine-person board of directors; Prodigy's
board will be expanded to nine members, initially consisting
of three persons designated by SBC, three persons designated
by Prodigy's principal stockholders (Carso Global Telecom
and Telmex), two independent directors and Prodigy's
CEO.
- Prodigy will make DSL
its preferred broadband offering, even in regions where SBC
does not operate.
Prodigy will be able to
offer current SBC Internet customers the same content-rich,
easy-to-understand and customizable Internet experience
Prodigy members currently receive, including Prodigy Instant
Messaging, Prodigy Chat and Prodigy Online Communities, online
meeting places for Internet users with special interests.
Current SBC Internet customers also will be able to access
their Prodigy e-mail from any computer, anywhere in the
country thanks to Prodigy's free nationwide e-mail access
feature, Prodigy MailLink.
SBC's local presence in nine
of the country's top ten U.S. Latino population centers,
covering more than 60 percent of all U.S. Latinos, will
provide a significant opportunity for SBC's Latino consumers
to take advantage of Prodigy En Español, the country's first
fully bilingual Internet service featuring a real-time English
and Spanish homepage.
While SBC's current dial-up, ISDN
and basic DSL Internet customers will reap many benefits from
this alliance, they will continue to access the service and be
billed for services as they are today. Network and premium DSL
customers will continue to be served by SBC's existing
Internet operation.
A Look Ahead
"In effect,
we're creating a broadband-focused ISP that is going to
dramatically change what it means to be online - giving us the
ability to attract and retain customers in the 'new'
high-speed Internet market," said James D. Gallemore,
executive vice president for strategic marketing and planning
for SBC. "This deal will make SBC/Prodigy 'the' place to go
for DSL Internet access and give both SBC and Prodigy the
Internet currency to grow well into the next
millennium."
"Our partnership with SBC will play a key
role in fueling Prodigy's continued growth," said Salameh, who
will remain as chairman of Prodigy. "Altogether, the economics
of our new relationship, the consolidation of our powerful
brand names and SBC's vast geographic reach and aggressive
broadband plans, create an outstanding formula for growth to
meet our mutual strategic goals."
Also, the companies will
focus on a strategy built around how customers use the
Internet today - and how they'll use it in the future. SBC
already is developing sophisticated and proprietary customer
applications for its retail Internet access service, as is
Prodigy's advanced technology team.
To implement the
agreement, Prodigy will contribute its assets and liabilities
to a new limited partnership, to be operated under the brand
name Prodigy, which will be formed to operate Prodigy's
business. SBC will contract with and contribute certain assets
to this operating partnership in order to make the commitments
described above. This operating partnership will initially be
owned 57 percent by Prodigy and 43 percent by SBC. SBC will
have the right to convert its interest in the operating
partnership into a direct equity interest in Prodigy. Current
stockholders of Prodigy will remain stockholders of Prodigy,
and Prodigy's common stock will remain listed on the Nasdaq
National Market. The boards of both SBC and Prodigy have
approved the transactions described above. The transactions
are subject to customary regulatory approval and closing
conditions and approval of the Prodigy stockholders. Prodigy
plans to seek stockholder approval at a special meeting of
stockholders in early 2000. Prodigy's principal stockholders,
Teléfonos de México (Telmex) and Carso Global Telecom, have
agreed to vote in favor of the
transaction.
*Prodigy's total managed customer base
of over 2 million includes SBC's current consumer dial-up,
ISDN and basic DSL Internet access customers, as well as
80,000 customers of BizOnTheNet and 244,000 customers of a
pending acquisition of Texas-based ISP FlashNet.
**As a
result of Project Pronto, SBC's DSL customers will be able to
receive minimum downstream connection speeds of 1.5 Mbps, with
more than 60 percent eligible to receive guaranteed speeds of
6.0 Mbps. This compares to today's basic DSL service which
guarantees minimum downstream connections of 384 Kbps or 1.5
Mbps, depending on the package purchased.
SBC
Communications Inc. (www.sbc.com) is a global communications
leader. Through its trusted brands - Southwestern Bell,
Ameritech, Pacific Bell, SBC Telecom, Nevada Bell, SNET and
Cellular One - and world-class network, SBC provides local and
long-distance phone service, wireless and data communications,
paging, high-speed Internet access and messaging, cable and
satellite television, security services and telecommunications
equipment, as well as directory advertising and publishing. In
the United States, the company currently has 87.3 million
voice grade equivalent lines, 10.3 million wireless customers
and is undertaking a national expansion program that will
bring SBC service to an additional 30 markets.
Internationally, SBC has telecommunications investments in 22
countries. With more than 200,000 employees, SBC is the 14th
largest employer in the U.S., with annual revenues that rank
it among the largest Fortune 500 companies.
Information
set forth in this news release contains financial estimates
and other forward-looking statements that are subject to risks
and uncertainties. A discussion of factors that may affect
future results is contained in SBC and Prodigy filings with
the Securities and Exchange Commission. SBC and Prodigy
disclaim any obligation to update or revise statements
contained in this news release based on new information or
otherwise
Prodigy Communications
Corporation is a leading nationwide Internet service that
provides fast and reliable Internet access and related
value-added services. Prodigy utilizes a nationwide network
covering more than 750 cities in all 50 states allowing
approximately 83% of the United States population to access
Prodigy's services with a local telephone call.
Safe
harbor statement under the Private Securities Litigation
Reform Act of 1995: Statements contained in this news release
which are not historical fact, such as forward-looking
statements concerning future financial performance and growth,
involve a number of risks and uncertainties. Although Prodigy
believes the expectations reflected in any forward-looking
statements are based on reasonable assumptions, it can give no
assurance that its expectations will be attained. Among the
important factors that could cause actual results to differ
materially from those indicated by such forward-looking
statements are: the intense competition in Prodigy's industry;
subscriber turnover; the possibility that the transactions
announced today will not be completed; the challenges of
integrating the Internet businesses of Prodigy and SBC as
contemplated by the agreements announced today; possible
disruption in network services or in other services provided
to Prodigy by third parties; the possible unavailability of
sufficient financing to Prodigy as needed; and the possible
loss of Prodigy's distribution relationships; as well as the
risk factors detailed from time to time in Prodigy's periodic
reports and registration statements filed with the Securities
and Exchange Commission. Prodigy disclaims any intent or
obligation to update any forward-looking
statements.