BT and Yahoo! in broadband alliance

BT yesterday unveiled a partnership with the internet company Yahoo! that will see the telecom company's BT Openworld broadband product rebranded as BT Yahoo! Broadband.

The move is part of the telecoms giant's efforts to boost the number of its broadband customers to 5 million over the next three years from the current total of just over 1 million users.

"The alliance is the next step to realising a Broadband Britain, building on the 1 million ADSL customer mark and delivering services and content which will appeal to a mass market," Pierre Danon, the head of BT's consumer division BT Retail, said. "With such a compelling product, I believe this will provide a significant boost to our broadband sales."

The deal will see Yahoo! looking after a jointly branded internet portal in a move that will help BT save money while providing content and services. BT, meanwhile, will provide the product, customer service and billing.

Customers will be offered a host of new services and content ranging from anti-virus protection at no extra cost to the creation of online digital photo libraries and interactive gaming.

"For customers to get the most out of the internet, several factors are crucial," Mr Danon said. "Access must be safe and fast, use must be personalised and flexible, and content must be exciting, engaging and imaginative. By joining with Yahoo! we can satisfy all of these criteria, as well as providing customers with support from two world class organisations."

Shares in BT closed up 7.5p, or 3.9 per cent, at 200p ­ the biggest riser in the FTSE 100 index yesterday after BT also reiterated its key financial targets. Yahoo! shares in New York ended up 6.75 per cent.

BT and Yahoo! refused to detailthe financial sideof their partnership other than to say that BT would pay Yahoo! a one-off fee for every lead that resulted in a new broadband customer being signed up. Jerry Yang, a co-founder of Yahoo!, said the deal was a "true sharing of economics" and would be similiar to its partnership with the US telecoms group SBC. BT, meanwhile, will get a share of the advertising revenue that is generated from the tie-up.

BT reckons the deal will boost the number of customers it signs up a month to about 20,000 in the first six months to next March.

The tie-up with Yahoo! only affects the consumer side of the BT Openworld internet service provider business. Retail customers of both BT Openworld's broadband and narrowband service will be migrated to the new service from September.

BT Yahoo! Broadband will also be available to new customers from September. Meanwhile, BT Openworld's business customers will see no change in their service and the deal does not affect customers of BT's BT Broadband product.

The partnership is an extension of a previous arrangement under which the pair had co-promoted BT Broadband and Yahoo! premium services.

Yahoo! has similar partnerships on broadband in Japan and the US. Terry Semel, Yahoo's chairman and chief executive, said: "We believe that the powerful combination of Yahoo!'s world-renowned brand and BT's leading market position can help drive increased DSL adoption in the UK.

"Our alliance with SBC in the United States has already proved this to be a highly successful business model."

In a separate development, the telecoms company Energis said that it was mounting a new complaint against BT under the Competition Act over what it calls "BT's monopoly of the broadband market".

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