SBC takes 43 percent stake in Prodigy By John Rendleman, PC Week Online November 22, 1999 1:24 PM ET SBC Communications Inc. today took a 43 percent stake in veteran Internet service provider Prodigy Communications Corp., and the two companies agreed to jointly provide high-speed DSL access services to small-businesses and residential customers. Beyond creating a Digital Subscriber Line-based, broadband-oriented Internet service for Prodigy's primarily residential customer base, the deal is expected to augment Prodigy and SBC's traditional dial-up, Web hosting and e-commerce services for business customers, officials said. New business services expected from the deal include multiple voice line capabilities on DSL circuits, integrated messaging services, integrated voice telephony and IP data services, and Internet content, said Steven Hubbard, SBC's vice president for Internet strategic markets. SBC and Prodigy expect to finalize the transaction within three to six months, subject to regulatory and Prodigy shareholder approval, officials said. Neither company disclosed specific financial terms of SBC's stake, which SBC will pay for by issuing approximately 49 million new shares of stock. Big numbers The boards of both companies have approved the deal, and Prodigy's two main stakeholders -- Carsco Global Telecom and Telmex -- have endorsed the arrangement. A full shareholder vote on the deal will take place at a special shareholders' meeting early next year. The deal calls for the creation of a new limited partnership company, which will use the Prodigy brand and run Prodigy's business operations. The partnership will assume management of SBC's 650,000 current dial-up, ISDN and DSL Internet customers, said SBC officials in San Antonio, Texas. Of those 650,000, more than 100,000 use SBC's DSL service, which offers guaranteed downstream speeds of 1.5M bps. The service will be expanded under the company's three-year, $6 billion Project Pronto network upgrade initiative to be available to 77 million potential SBC customers. The deal brings Prodigy's customer base to more than 2 million, said Prodigy officials in White Plains, N.Y., and Prodigy will become SBC's exclusive provider of Internet services for small businesses and consumers. The deal also includes a commitment for SBC to bring 1.2 million new Internet customers to Prodigy within a three-year period. Organizationally, SBC will get three seats on Prodigy's newly expanded nine-member board of directors, which will consist of three directors named by SBC, three named by Prodigy, two independent directors and Prodigy CEO Samer Salameh. http://www.zdnet.com/pcweek/stories/news/0,4153,1018265,00.html
