Yahoo! Reaping Rewards of SBC Linkup

Price cuts in the telco's co-branded DSL service have spurred customer growth, Yahoo! says.
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SBC Communications'

(SBC)

price cuts for high-speed Internet service have created "a real spike" in new customer additions, the company's marketing partner said Wednesday.

SBC's discounts on DSL-based Internet connections have caused a surge in signups for the service co-marketed with

Yahoo!

(YHOO)

, Yahoo! chief Terry Semel said. "The strategy is definitely paying off," Semel said on Yahoo!'s conference call with analysts to discuss

results for the second quarter ended June 30.

The CEO's comments offer an early indication of the success of the price-cutting move for SBC, which isn't due to report second-quarter results until later this month.

SBC and other regional Bell operating companies, notably

Verizon

(VZ) - Get Report

, started cutting prices on DSL at the end of the first quarter in order to win share from cable operators, who claim two-thirds of the broadband Internet market.

Over the past few months, cable operators have said that increased promotional activity by telcos hasn't affected the popularity of their own cable modem service.

Though Yahoo! wouldn't say how many new subscribers it and SBC had signed up for DSL service, the number would presumably be higher than the 270,000 SBC added in the first quarter, which was already at a record-setting pace for the telco. Yahoo! executives pointed out that the Internet company added 600,000 paying customers in the quarter, with 15% of that number coming from people who already were getting Internet service via SBC. Of the remaining 510,000 new paying customers in the second quarter, most came via the SBC relationship, says Yahoo!.

SBC's shares fell 35 cents Wednesday to close at $25.76.