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SBC, Prodigy to Join Internet Operations

SBC Communications Inc. and Prodigy Communications Corp. Thursday completed the transaction to combine their consumer and small business Internet operations.

The deal makes Prodigy one of the largest retail digital subscriber line providers in the U.S., offering broadband Internet access to consumers and small businesses alike.

The SBC agreement puts Prodigy in a great position to lead the ISP market in broadband-enabled content and applications delivery.

Samer Salameh, Prodigy chairman and chief executive officer, said the SBC alliance moves Prodigy into the lead position in the broadband playing field, with DSL clearly defining the strategic focus for our future growth.

"The combination of SBC's geographic coverage with Prodigy's powerful national presence will make Prodigy the 'place to go' for high-speed Internet access, giving Prodigy members an unparalleled Internet experience," Salameh said.

Charles Roesslein, SBC-Prodigy Transition president, said the deal marks another significant milestone in SBC's strategy to become the premier provider of data communications and Internet services, and the nation's leading provider of DSL access.

"This alliance allows us to reach potentially millions of new customers through Prodigy's national marketing channels, leverages our $6 billion Project Pronto investment to make DSL near-ubiquitous in our service area, and importantly, gives us a vehicle for future growth in the ISP market," Roesslein said.

The deal close follows approval by the boards of both companies, regulatory authorities and Prodigy shareholders, including Prodigy's principal stockholders, Telefonos de Mexico and Carso Global Telecom.

Beginning in July, Prodigy will assume management of SBC Internet Services' dial-up, ISDN and Basic DSL Internet Service customers, increasing its total managed customer base to more than 2.4 million. At the end of March, SBCIS served 703,000 dial-up, ISDN and Basic DSL Internet Service customers. More than 137,000 Basic DSL Internet service subscribers are included in SBC's customer count.

Prodigy is to become SBC's exclusive retail consumer and small business ISP marketed by SBC in its 13-state service area. In early July, SBC will begin marketing a co-branded Internet service dubbed "Prodigy Internet with SBC," through its existing marketing channels. SBC has committed to delivering a minimum 1.2 million additional new subscribers to Prodigy over the next three years.

SBC has a 43 percent indirect ownership stake in Prodigy and has appointed three seats on Prodigy's board of directors, giving it a strategic role in the leadership of the independent ISP. SBC is also scheduled to become Prodigy's preferred provider for telecommunications services, which include electronic Yellow Page directories and other telephone services.

The alliance leverages SBC's $6 billion Project Pronto investment to make DSL services available to 80 percent of the population in its 13-state service area. The deal enables Prodigy to position its services as top tier national ISP.

While the deal calls for SBC to transfer customer management to Prodigy, SBC's Internet customers will not experience any changes right now. However, in July and continuing through the end of the year, SBC customers will transition to Prodigy on a region-by-region basis.

When they transition, SBC customers will receive new features from Prodigy including Prodigy instant messaging, chat, online communities and Prodigy's "en espanol " bilingual Internet service.

SBC's Roesslein said its goal is to ensure a seamless transition for SBC customers.

"Once