Yahoo! ( YHOO) and BellSouth agreed to jointly sell high-speed Internet service starting next year.

Yahoo! and BellSouth will market the offering on the Yahoo! site and in BellSouth's advertising, the companies said in a statement. BellSouth currently has 2.4 million high-speed Net customers in nine states. The Yahoo! features will be available to customers for free.

The alliance is the latest that Sunnyvale, Calif.-based Yahoo! has formed with telecom providers. It already has deals with Verizon ( VZ - Get Report) and SBC Communications . Last week, it extended its partnership with BT Group's ( BT) British Telecommunications unit.

Demand for high-speed Internet services is increasing at a faster rate than traditional phone services, which is spurring Atlanta-based BellSouth and other telecommunications outfits to compete for these customers.

"Yahoo! is a weapon that helps them in that battle," said Martin Pyykkonen, an analyst with Hoefer & Arnett who rates Yahoo! shares strong buy and doesn't own them. He doesn't rate BellSouth. "From Yahoo!'s standpoint, there really is minimal costs."

Yahoo!, which is slated to report third-quarter earnings tomorrow, declined to release financial details. The company continues to pursue similar agreements, said Jim Schinella, a vice president for business development at Yahoo!, in an interview.

Shares of Yahoo! rose 61 cents to $34.13 while BellSouth rose 3 cents to $25.06.