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
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 begin receiving ‘Prodigy Internet with SBC,’ they’ll have
significant new features such as instant messaging, chat and nationwide
roaming,” Roesslein said. “In the near future, they’ll benefit from an
enhanced online experience as the new Prodigy is better positioned to
accelerate the delivery of emerging broadband-powered services.”

SBC also plans to begin selling Prodigy service throughout its marketing
channels beginning in July on a region-by-region basis. All new subscribers
acquired by SBC will become Prodigy Internet customers immediately and be
billed directly by Prodigy.

To implement the agreement, Prodigy contributed its assets and liabilities
to a new limited partnership, to be operated under the brand name Prodigy,
which has been formed to operate Prodigy’s business. SBC has contracted
with and contributed certain assets to this operating partnership to meet
the commitments of the deal.

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