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.