The agreement, which the firms said was a "landmark strategic alliance", could help it market more premium services, potentially including multimedia features such as music and movies.

For Yahoo, the agreement provides monthly subscriber payments from SBC, promotion through SBC's sales channels, and the ability to offer premium services via SBC's communications and billing infrastructure - in the first instance, broadband internet access through SBC phone lines.

In return, Yahoo will offer SBC a share of its non-subscriber revenue on advertising, e-commerce and other premium portal services.

But analysts remained unsatisfied that the SBC tie-up would represent a genuine source of revenue, or just one more vague alliance for the firm.

Signs of hope

Yahoo's shares rallied on the news, rising $1.24 to close at $15.21.

Investors were cheered that the alliance with SBC would move Yahoo towards a distribution strategy for the wealth of online content it owns.

Another potential benefit is that by teaming up with a company that already bills customers for a service, it could help Yahoo collect money for more of its premium services.

It will also allow the development of new premium services, including Unified Messaging, a tool that enables users to check, store, manage and reply to voicemail, faxes and e-mail received from multiple sources.

The addition of premium services is crucial to the company's strategy of moving away from a business model based on selling ads to support its free content.

Questions remain

The deal comes a day before Yahoo holds its annual analyst meeting, at which it is likely to announce a corporate realignment, including possible job losses.

The firm revealed a net loss of $24.1m for the July-to-September quarter, compared with a $47.7m profit a year earlier.