AOL signs wholesale agreement with Covad

Covad Communications today announced a partnership with AOL Time Warner, in which the carrier will provide DSL service for AOL customers across its nationwide network, and AOL, in turn, has agreed to make a multimillion-dollar investment in the competitive carrier.

Covad Director of Wholesale Marketing Kimberly Odom said the deal is very significant for the carrier because AOL is the country’s largest ISP and has the potential to dramatically increase Covad’s wholesale customer base. Covad currently has 350,000 lines in service, 92% of which Covad wholesales to its partners. While Covad has been trying to ramp up its retail business since emerging from bankruptcy last year, Odom said a wholesale deal such as that with AOL is still an attractive opportunity because of its sheer size and the brand recognition the ISP brings to the table.

The deal will last for five years, during which time, AOL will have access to Covad’s entire network covering 40 million homes in 94 of the top metropolitan regions of the U.S. AOL has agreed to buy 3.5 million shares of Covad common stock, or 1.5% of the outstanding shares in the company. Covad issued warrants for the stock allowing AOL to purchase the stock at a price ranging from $1.06 to $5.00 a share, which values the deal between $3.7 million and $17.5 million. Covad, however, did not reveal any details of how the wholesale agreement will work.