Yahoo Dials Rogers For Mobile Alliance

Yahoo and Rogers Communications, Canada's biggest mobile-phone company, entered into a new multi-year agreement that expands their broadband alliance into the mobile sphere.

The new pact will continue to provide Rogers' high-speed Internet access customers with a customized Yahoo portal and browser. But it also extends Yahoo's mobile offerings--including its Go 2.0 set of applications and search service--to Rogers' wireless subscribers.

Starting this month, Rogers Wireless customers can download Go 2 applications including email, local listings, Flickr, and maps, to a variety of smartphone devices. Yahoo's oneSearch will also become the exclusive Internet search provider on the Rogers Wireless mobile portal. OneSearch is tailored to the mobile format by delivering relevant results on the first screen.

Yahoo declined to discuss details of the agreement. But during Rogers' third-quarter conference call last week, Rogers disclosed that under the new deal it will stop paying Yahoo on a per-subscriber basis and switch to an ad revenue-sharing model instead. Yahoo is giving up the per-subscriber fees in return for a one-time payment of C$52 million, reduced high-speed data costs and an extension through the end of 2011.

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Edward Rogers, senior vice president of the company's communications group, said the new terms of the agreement would help Rogers improve its margins in 2008.

In a research note on the deal, UBS analyst Benjamin Schachter said the renegotiation of the Rogers deal raises questions about the quality of its revenues from other access partners including Verizon, British Telecom and AT&T. He estimated that Yahoo will get about $575 million from its access business in 2007--the implication being that ad-sharing may not prove as lucrative as straight fees.

"Yahoo would likely make the case that while they are no longer getting subscription revenue, they've locked in a key advertising partner through 2011," wrote Schachter.

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