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Sprint, EarthLink Enter Net Access Alliance

Sprint Corporation and EarthLink Network entered into an Internet access alliance that sees Sprint making a minority investment in EarthLink, and EarthLink obtaining Sprint's Internet Passport customer base.

Under the agreement, EarthLink will obtain approximately $24 million in cash and $100 million in convertible debt financing. The Pasadena-based ISP will also have access to Sprint's branded marketing and distribution channels, preferred access to Sprint's data network, and a five-year agreement that requires Sprint to deliver a minimum of 150,000 new customers annually.

The acquisition of the Internet Passport customer base, which accounts for approximately 130,000 subscribers, will enable EarthLink to expand its member base by 25% to around 600,000 members, the company said.

In return, Sprint gets 4.1 million shares of convertible preferred stock in EarthLink and will initiate a tender offer to purchase 1.25 million shares of EarthLink common stock at $45 per share.

Sprint reported in a statement today that the sum of common and preferred shares it receives at the time of closing will comprise a 10% voting interest and a 30% economic stake in EarthLink.

The unified Net service gives EarthLink members access to Sprint's high-speed, dial-up access network that will support x2 technology nationwide. EarthLink said the alliance enables it to become the only ISP to support both x2 and K56flex nationwide through more than 500 56k POPs.

EarthLink added that Internet Passport customers will benefit from the partnership by getting expanded services including a Personal Start Page, a 6 MB free home page, vanity domains and low-cost Web sites, and access from over 1,200 total POPs.

EarthLink said it will remain an independent company under the strategic alliance, and manage the operations, customer service, technical support, and product development for the combined Internet service. The ISP will collaborate with Sprint on marketing, sales, and product development.