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Today's report from Web Editor
Susan Rush
• Sprint Bags ION Biz, Cuts Staff
• SBCy Inks Deal To Acquire Prodigy
• AT&T Makes Pact With Excite@Home
• Microsoft, Intertainer Partner For Broadband VOD
• BellSouth Posts 2.6 Percent Profit Gain
• Canal+ Technologies Launches iTV Service In CA
• WOW Gains Voice With Gemini
• Broadband Briefs
Sprint Bags ION Biz, Cuts Staff
In an expected move, Sprint
Corp. has squashed its ION service, after the high-speed integrated,
on-demand network project failed to generate enough cash. The company also
announced plans to send 6,000 full-time employees packing.
In June, Sprint announced it was reevaluating the direction of ION in the
residential and small-business markets. The company spent the summer
assessing voice stability and profitability, and ultimately determined that
its return on investment was falling short of expectations. "We believe
our vision that customers will desire integrated communications services
still holds true," says William Esrey, Sprint's chairman and CEO.
"Today, we find ourselves operating in a more difficult economic
climate and a highly competitive telecommunications marketplace," he
says.
In addition to closing the ION shop, Sprint is putting the brakes on MMDS --
ending new customer acquisition and freezing the number of markets served.
Sprint is not abandoning MMDS altogether, however; it remains committed to
providing fixed wireless service to its existing customers. Along with
WorldCom, Sprint has been one of the champions of the fixed wireless
service, but the company says it is cooling its jets until "substantial
progress" is made on second-generation MMDS technology.
Sprint spent more than $3 billion in developing ION. The discontinuation of
ION will cost Sprint a $2 billion one-time pre-tax charge in the fourth
quarter.
Despite the wind down and the related charges, Sprint stands behind its
decision to launch ION. "The knowledge that we have gained throughout
the development of ION is already being put to use in delivering multiple
services over our backbone network and will be of additional value as
technology continues to evolve," says Esrey. Sprint will migrate its
ION customers to other services.
As part of an initiative to the wind down of ION, efforts to streamline
operations and cut costs, 7,500 workers will be scrapped from Sprint's
balance sheet -- 6,000 full-timers and 1,500 contractors.
Separately, Sprint reported third quarter consolidated revenue of $6.72
billion, up from $6.04 billion a year ago. The company's wireless unit PCS
Group, which trades as a tracking stock of Sprint, beat analysts' mean loss
estimates by 7 cents a share. Net operating revenue was $2.65 billion, up
from $1.71 billion during the year earlier period.
The FON Group, which consists of Sprint's long-distance and broadband units,
did not fare as well. Third quarter revenue for the group declined from
$4.44 billion a year ago to $4.24 billion. Including a loss of 11 cents a
share from ION, the group posted Q3 diluted earnings per share from
recurring operations of 28 cents compared with 43 cents in Q3 2000.
Sprint FON Group shares were down 8 percent to $20.19 as of 1:20 a.m.
EDT. During the same time period, shares of Sprint PCS Group were down
3 percent to $25.57.
Related Stories:
Sprint
May Retool ION Project, 6/1301
Sprint
Pursuing Bundled Broadband Strategy, 6/4/01
SBC Inks Deal To Acquire
Prodigy
After some wheeling and dealing resulting in a
revised tender offer, SBC Communications
Inc. has signed a definitive agreement to acquire Prodigy
Communications Corp.
To win over Prodigy shareholders, SBC upped its original bid 21 percent,
from $5.45 a share to $6.40 a share to acquire the 70.5 million Prodigy
shares it does not already own. SBC went back to the drawing board last week
after several stockholders balked that the tender offer of $5.45 a share,
saying it was too low. The revised offer is valued at about $465.3 million.
A special committee of three independent Prodigy board members was formed to
negotiate with SBC. The committee has reviewed the new offer and determined
the revised merger agreement is fair to Prodigy stockholders, SBC said in a
statement. Just two days ago, Prodigy said it had hired its own set of
lawyers and advisors to review the offer, but after receiving the green
light from the special committee, Prodigy is now prepared to support and
accept SBC's offer of $6.40 a share.
"We are very gratified that we were able to arrive at a point that
agreed with Prodigy's board, and we looking forward to closing (the deal)
quickly," says Selim Bingol, an SBC spokesman.
When SBC first unveiled the offer, it said with competition heating up, it
was time to take over Prodigy in order to strengthen its overall Internet
strategy, including DSL services. "We are very excited about the
agreement," says Denise Fraser, a Prodigy spokeswoman. "It is a
new beginning for Prodigy given SBC's strengths in DSL deployment,
networking and customer care." The deal enables Prodigy to have the
financial resources necessary to continue its leadership position in the DSL
marketplace, she says.
SBC and Prodigy also have agreed "in principle" with plaintiffs to
settle all pending litigation, subject to court approval.
Prodigy shares jumped nearly 5 percent in early trading to $6.56. The deal
is expected to close in the fourth quarter.
Related Stories:
SBC
In Talks With Prodigy Committee, 10/15/01
Prodigy
Shareholder To SBC: "Offer Is Too Low", 10/12/01
SBC
Makes Tender Offer For Prodigy, 9/24/01
AT&T Makes Pact With
Excite@Home
AT&T
Broadband inks a deal of its own with Excite@Home
to continue provisioning new broadband customers while Excite@Home continues
bankruptcy protection proceedings.
Although details of the deal were not released, AT&T Broadband says its
ability to reach an agreement quickly will cause little or no impact on new
or existing customers.
The deal with AT&T is similar to agreements sealed with three other MSOs
earlier this week -- Comcast, Cox and Rogers Cable.
Excite@Home remains tight-lipped about the financial details of any of the
deals it has struck with the MSOs.
The short-term solution of Excite@Home provisioning new customers will
enable the MSOs to more smoothly move over to their own provisioning systems
-- Cox and Comcast have been the most vocal about wanting to break away from
Excite@Home, even before the broadband ISP filed for Chapter 11 bankruptcy
protection earlier this month. Not only that, both cablers are scheduled to
end their exclusive service agreement with Excite@Home Dec. 4 and will exit
the service completely as of June 4, 2002.
Related Stories:
MSOs
Deal With Excite To Fire Up New Customers, 10/17/01
No
New Broadband Orders, Excite@Home Says, 10/11/01
Microsoft, Intertainer
Partner For Broadband VOD
Despite the uncertainty in some people's mind
about video-on-demand, Intertainer
Inc. is moving full speed ahead. The broadband-content provider is teaming
with Microsoft Corp. to launch VOD in
35 broadband markets.
Intertainer is hoping to attract broadband users by offering more than
70,000 hours of content, including films, television and music. The
subscription service, dubbed FirstPass gives users unlimited access
to content for $7.99 a month. Users will pay additional fees for
pay-per-view offerings of full-length feature films, both new releases and
cataloged titles.
The content will be delivered to users via Microsoft's Windows Media Player.
Beginning on Oct. 25, Microsoft also will "prominently" feature
the service on MSN Entertainment and WindowsMedia.com, an online audio and
video entertainment guide.
The broadband VOD service is available in 35 U.S. markets, including New
York, Los Angeles, Chicago, Boston, San Francisco, Seattle and Washington,
D.C.
Separately, XO Communications Inc. inked a
deal with Microsoft as the outsourced Web hosting provider for Microsoft's
bCentral portal, which has 1.6 million registered users.
Related Stories:
Getting
The Picture?, 6/4/01
Intertainer
Wants The Ball, 2/5/01
BellSouth Posts 2.6 Percent
Profit Gain
As the economic downturn continues, BellSouth
Corp. is taking steps to reduce costs after posting a small profit gain of
2.6 percent in the third quarter.
BellSouth posted adjusted earnings $1.06 billion, or 56 cents a share during
the third quarter, up slightly from $1.03 billion, or 55 cents, a year
earlier. Revenue, which includes BellSouth's 40 percent stake in Cingular,
rose 7.7 percent from $6.9 billion in the comparable year earlier period to
$7.4 billion.
More than 15 percent of the company's revenue came from its broadband, data
and Internet division, which posted revenue of $1.1 billion. The company
ended the quarter with 463,000 DSL subscribers, and continues to set its
sights on 600,000 by the end of 2001.
In the fourth quarter, BellSouth plans to take a charge of between $170
million to $200 million associated with the newly announced 3,000 layoffs
and other asset write-downs.
As of 1:33 p.m. EDT, BellSouth shares had dipped 99 cents to $38.05.
Related Stories:
Middleware
Maker Moves Management, 9/5/01/01
ITV
Market Ripens for Consolidation, 7/23/01
Canal+ Technologies Launches
iTV Service In CA
After four months in development, a partnership
between Canal+ Technologies
and WINfirst brings interactive
television to Sacramento, Calif. residents.
The iTV system enables fiber-to-the-home provider WINfirst to offer iTV
services and a channel line-up of digital video, audio and video programming
options. The system provides Canal+ Technologies' video-on-demand software
and Mosaic Navigator, which enables up to 12 different channels to be viewed
on a single screen.
In addition to middleware and conditional access system from Canal+,
WINfirst is using content from Interntainer Inc., pay-per-view capabilities
from TVN and streaming media software from nCUBE. Philips is supplying the
set-top boxes.
Related Stories:
Middleware
Maker Moves Management, 9/5/01/01
ITV
Market Ripens for Consolidation, 7/23/01
WOW Gains Voice With Gemini
Upstart competitive cabler WideOpenWest
has announced plans to begin full market rollout of voice-over-IP telephony using
Gemini Broadband Voice service in the Denver metro area.
Having completed a market trial this spring in the Denver suburb of Lakewood, the Castle Rock, CO-based cable operator is planning a full launch of broadband long-distance telephone service bundled with broadband Internet and digital cable. Dubbed WideOpenTelephone, the flat-rate services charges $35
a month for 1,000 minutes of intrastate and state-to-state calling. Customers will still use the local RBOC for local service.
By the end of the year, WideOpenWest hopes to add an international calling plan as well, a
company spokesman tells senior editor of Broadband Week Karen Brown.
For now, WideOpenWest is focusing on Denver, but is planning for future telephony trials in Detroit, Chicago, Columbus and Cleveland, using the americast cable systems it is in the process of buying from SBC Communications Inc. The franchise transfers have been completed in those communities, and the sale is expected to close in the fourth quarter.
Meanwhile, the network buildout in the Denver metro area is continuing. WideOpenWest has franchise agreements in 13 suburban cities there.
Related Story:
WideOpenWest
Acquires Ameritech Customers, 5/24/01
Broadband Briefs:
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Acterna and Tollgrade
Communications Inc. partner to develop and market DSL remote access
solutions for provisioning and maintenance of service provider networks
worldwide.
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Access Spectrum
LLC tabs Motorola Inc. to design,
manufacture and market infrastructure and portable and mobile radio
products for use by carriers in the 700 Megahertz Guard Band spectrum.
The FCC intends to auction 12 licenses in this spectrum in June.
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Santera Systems'
next-generation switching equipment will be used by LecStar
Corp. for its Class 5 and Voice over ATM traffic.
-
EarthLink Inc. and
America Online launch their
respective high-speed Internet access services over Time Warner Cable
systems in Western Ohio. EarthLink also rolled out service in Albany,
N.Y.
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