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Prodigy Communications Corp. (ticker: PRGY, exchange: NASDAQ) News Relase -
19-Jan-2001
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PRODIGY IMPROVES CASH POSITION, FINANCIAL STABILITY UNDER NEW STRATEGIC &
MARKETING AGREEMENTS WITH SBC
AUSTIN, TEXAS (January 19, 2001) - Prodigy Communications Corporation (NASDAQ:
PRGY), one of the nation's leading Internet service providers, announced today
new strategic and marketing agreements with SBC Communications Inc. (NYSE: SBC),
the nation's leading provider of broadband DSL service, that will strengthen and
extend their relationship.
For Prodigy, the revised agreements allow it to continue to enhance its Internet
portal and bolster its ISP infrastructure for e-mail, news and chat. Further,
the new agreement will significantly improve Prodigy's cash position and
financial standing. For SBC, the new agreements allow it to better package and
deliver Internet service and emerging broadband-powered applications on a retail
basis to its customers.
The agreements call for SBC to offer Prodigy's portal to SBC customers through
SBC's extensive marketing channels - in effect, making Prodigy the preferred
wholesale ISP and portal for SBC - and to deliver the Prodigy Internet service
to a minimum of approximately
. 3.75 million DSL and 375,000 dial-up subscribers over the next nine
years.
Under the new agreements, both companies will provide the services they do best.
SBC will deliver an integrated DSL and ISP product, provide customer care and
billing, and manage related network services for SBC's DSL and business dial-up
customers. Prodigy will provide a robust, co-branded portal and ISP
infrastructure for these SBC customers. Additionally, Prodigy will continue to
offer a nationwide retail ISP service for residential dial-up subscribers
acquired by SBC and for existing and future Prodigy customers. With the
increased volume of subscribers receiving the Prodigy Internet service, Prodigy
will be better positioned to increase its non-subscriber revenue.
The revised agreements, approved January 18 by the Prodigy board of directors,
include the following provisions:
. Prodigy and SBC will extend the term of their relationship from
three to nine years (through December 2009);
. Prodigy retains the retail relationship with its consumer dial-up
subscribers while SBC retains the retail relationship with its DSL
and business dial-up subscribers;
. Prodigy will receive monthly per subscriber fees to provide SBC a
wholesale ISP service for e-mail, news and portal content for
delivery to SBC DSL and business dial-up subscribers;
. SBC increases its minimum subscriber commitment to Prodigy to
approximately 3.75 million DSL and 375,000 dial-up subscribers over
the next nine years;
. As the retail provider, SBC will assume responsibility for acquiring
the DSL and business dial-up subscribers, providing customer care
and billing, and assuming responsibility for networking costs,
enabling Prodigy to realize significantly lower operating expenses
and increase its gross margin per subscriber;
. SBC DSL and dial-up customers will use Prodigy's extensive roaming
network to be able to access their accounts while traveling;
. In conjunction with the signing of these agreements and as was made
public January 4, SBC will provide a $110 million line of credit to
Prodigy; and
. SBC will continue to co-brand its offerings with Prodigy and both
companies will work together on affinity, OEM (original equipment
manufacturers) and new product marketing.
"These new agreements put Prodigy in a stronger financial and marketing
position, by greatly reducing operating expenses, accelerating Prodigy's path to
profitability, and giving Prodigy the resources to become
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one of the best portals and retail Internet service providers in the country,"
said Charles Foster, Prodigy chairman, CEO and president.
SBC, PRODIGY AND CUSTOMERS ALL BENEFIT
Under the new agreements, Prodigy provides the portal and ISP infrastructure for
SBC DSL and business dial-up customers, and the site will be co-branded with
both Prodigy and/or one of SBC's regional brands - Ameritech, Pacific Bell,
Nevada Bell, SNET, Southwestern Bell and SBC Telecom. Prodigy will continue to
market its own retail ISP services - both DSL and dial - to consumers and small
businesses nationwide.
"Prodigy, with a clearer financial future, will continue to enhance its portal
to include high-speed offerings such as video e-mail and instant messaging,"
said Foster. "Together, Prodigy and SBC will be the two brands that consumers
can count on when they want to enjoy the full benefits and functionality of the
Internet."
2001 PRO FORMA
Going forward, Prodigy will have revenue from the following sources: dial- up,
DSL, and other non-subscriber related sources. The revenue mix in 2001 is
expected to be approximately 80 percent from dial-up, 14 percent from DSL and 6
percent from other sources. As a result of these revised agreements, Prodigy
expects to see significantly improved gross margins and positive EBITDA
(earnings before interest, taxes, depreciation and amortization) in 2001.
Prodigy expects that total revenue for 2001 will be in the range of $350 million
to $365 million, with gross margins of at least 49 percent. EBITDA for the year
is expected by Prodigy to be in the range of $31 million to $34 million, or $.44
to $.49 per share. Prodigy anticipates a net loss before adjusting for minority
interest to be approximately $334 million to $340 million, or $4.77 to $4.86 per
share. This is largely due to amortization associated with the goodwill Prodigy
booked as a result of the initial SBC investment
At the end of 2001, Prodigy expects the Prodigy Internet service will be
delivered to between 3.1 million and 3.7 million subscribers.
SBC AND BROADBAND
SBC is the acknowledged leader in bringing the benefits of high-speed DSL to
consumers and businesses, with more than 500,000 DSL customers at the end of
last September. Through its $6 billion Project Pronto, SBC has stated it plans
to make DSL available to nearly 77 million Americans throughout its operating
region.
The new agreements between SBC and Prodigy are effective January 1, 2001. All
SBC consumer and small business dial-up and DSL customers are expected to be
migrated to Prodigy's authentication profiles and systems in 2001.
Prodigy management will conduct a conference call (877.679.9049 or 952.556.2803,
passcode Prodigy) to discuss this agreement today at 10 a.m. EST. The call will
be simultaneously broadcast on Prodigy's Web site at www.prodigy.com. In
addition, Prodigy's chief financial officer will host a second call today (same
telephone numbers) at 12 p.m. EST to further discuss the financial impact of
this agreement. That live call may also be accessed at www.prodigy.com.
A taped replay of both teleconference calls will be available for one week after
the call starting at 1 p.m. EST and 3 p.m. EST today. The telephone number to
call is 800.615.3210 or 703.326.3020. The passcodes are 4921803 and 4922062
respectively.
ABOUT PRODIGY COMMUNICATIONS CORPORATION (www.prodigy.com):
Prodigy Communications Corporation (NASDAQ: PRGY) is one of the nation's largest
retail Internet service providers. It has an alliance with SBC Communications to
provide wholesale portal services to SBC's dial and DSL subscribers. Prodigy
Internet delivers fast and reliable Internet access and user-friendly Internet-
based products, services and information via a nationwide network covering more
than 850 cities in all 50 states, allowing more than 90 percent of the U.S.
population to access the Prodigy Internet service with a local telephone call.
Prodigy tailors its services and technology to three fast-growing Internet
markets: consumers, small business owners and the U.S. Hispanic population.
Prodigy Internet features best-of-breed content, Prodigy Instant Messaging,
Prodigy Chat, and Prodigy Online Communities, combined with the accessibility
and freedom of direct access to the World Wide Web for all users. Prodigy Biz
Corporation, a subsidiary of Prodigy, offers a powerful suite of specially
designed Internet products and services for small business owners. Prodigy(R) en
espanol, is the nation's first-ever, fully bilingual Spanish/English-language
Internet service created especially for the U.S. Spanish-speaking population.
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This press release contains forward-looking statements that involve a number of
risks and uncertainties. Among the important factors that could cause actual
results to differ materially from those indicated by such forward-looking
statements are the intense competition in Prodigy's industry, subscriber
turnover, disruption in Prodigy's network services or in other services provided
by third parties, the challenges of integrating the Internet businesses of
Prodigy and SBC Communications Inc., the possible failure to achieve the
anticipated benefits of the agreements between Prodigy and SBC, the possible
unavailability of sufficient financing to Prodigy as needed, as well as the risk
factors detailed from time to time in Prodigy's periodic reports and
registration statements filed with the Securities and Exchange Commission.
Prodigy's business and operations are operated by a limited partnership, called
Prodigy Communications Limited Partnership, of which Prodigy is the general
partner and owns an approximate 57 percent interest and SBC Communications owns
an approximate 43 percent interest.
CONTACT: Prodigy
Media
Denise Clarke Fraser, 512/527-1120
or
Morgen-Walke
Investor Relations:
Katherine Mittelbusher, 617/747-3606
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