January 29, 2008 / 9:39 PM / 12 years ago

Yahoo reaches 70 million AT&T mobile users in new deal

SAN FRANCISCO (Reuters) - Yahoo Inc YHOO.O has renewed its marquee subscription revenue deal with the largest U.S. phone company, AT&T Inc (T.N), one of three major broadband providers with which Yahoo has joint ventures.

In a joint statement on Tuesday, AT&T and Yahoo said they had replaced a 2001 broadband access deal in which Yahoo takes a share of AT&T Internet subscriber fees with new efforts to deliver ads to AT&T users on both their computers and phones.

However, terms of the deal, which involves revenue sharing, were not disclosed. The new multiyear partnership agreement covers both display ads preferred by corporate brand advertisers and pay-per-click Web-search ads.

A Yahoo executive said in a phone interview the new deal brings its services to up to 70 million AT&T mobile customers. Yahoo will provide Web search on the customer portal for AT&T Mobility customers and deliver ads to AT&T customers who use the Internet on their mobile phones, he said.

“We are actually gaining more subscribers; we are going to gain more search traffic,” said Marco Boerries, executive vice president of Yahoo’s Connected Life division, who oversees the Internet media company’s broadband and mobile phone business.

The new AT&T mobile phone advertising relationship is more similar in its terms to more recent deals Yahoo has arranged with Vodafone (VOD.L) and T-Mobile (DTEGn.DE) in Britain than it is with the preexisting AT&T deal, Boerries said.

“We are now the search engine and the advertising engine behind all of (AT&T Mobility) customers,” Boerries said.

Key priorities include making Yahoo a “must buy” for advertisers and a primary “starting point” for more users. The company attracts more than 500 million users to its site each month, executives said.

Wall Street analysts have speculated for the past year that a new deal would see AT&T slash the chunk of subscription fees it shares with Yahoo. The expanded deal would bring in cyclical ad revenue, not regular subscription fees, whereas the prior AT&T deal represented highly profitable sales for Yahoo.

AT&T has signed up 14.2 million broadband customers.

Jeffries & Co analyst Youssef Squali estimated last week that Yahoo would effectively be giving up somewhere around $200 million to $250 million in highly profitable annual access fees from AT&T, in favor of sharing ad revenues from AT&T traffic.

The AT&T deal, along with recently renewed broadband deals with Britain’s BT Group Plc (BT.L) and Canada’s Rogers Communications Inc (RCIb.TO), grew out of Yahoo’s strategy earlier this decade to reduce reliance on cyclical ad sales.

In the statement, Randall Stephenson, AT&T’s chairman and chief executive, said the new partnership “reflects the benefits of establishing strong alliances.”

“The agreement creates significant new advertising-based revenue opportunities for both companies,” the statement said.

The companies said newly signed-up customers of the broadband venture would see a new att.net portal, “powered by Yahoo!,” beginning in the second quarter of 2008.

The upgraded software will incorporate Yahoo Mail, the world’s most popular consumer e-mail service, and My Yahoo, which lets individual users personalize the various Web services they see when on the AT&T Internet service.

The deal covers not only historic AT&T customers concentrated in the Southwest and Western United States but also former BellSouth customers located in the Southeastern U.S. region. AT&T acquired BellSouth in 2006.

The new att.net gateway will be open to any AT&T customer, even those who do not rely on AT&T for Internet access. For example, an AT&T mobile phone customer could set up an att.net e-mail address to receive on phones or PCs.

Editing by Braden Reddall

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