Earthlink 2004 Annual Report Download - page 93

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EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In connection with the Company’s wholesale and customer referral arrangements with Sprint, the Company received approximately $26.4
million, $27.3 million and $27.6 million during the years ended December 31, 2002, 2003 and 2004, respectively. The prices for services
provided by the Company to Sprint were negotiated at arms-length. As of December 31, 2003 and 2004, the Company had accounts receivable
related to these arrangements with Sprint of $5.2 million and $6.0 million, respectively.
EarthLink paid Sprint approximately $75.4 million, $74.0 million and $57.6 million during the years ended December 31, 2002, 2003 and
2004, respectively, associated with network and voice services agreements. The prices paid for services purchased from Sprint were negotiated
at arms-length. The aggregate amount due to Sprint pursuant to these service agreements was $15.8 million and $6.0 million at December 31,
2003 and 2004, respectively.
Officers and Directors
As of December 31, 2003, the Company had a note receivable from one officer of $0.7 million which is included in other current assets in
the accompanying Consolidated Balance Sheets. The note receivable was repaid during the year ended December 31, 2004.
The Company had commercial arrangements with Overture Services, Inc. (formerly known as GoTo.com ) (“Overture”), which was
acquired by Yahoo! Inc. in October 2003. A member of the Company’s Board of Directors was the Chairman of the Board of Directors of
Overture. Overture was (but no longer is) EarthLink’s default search engine provider, and during the year ended December 31, 2002, Overture
paid the Company approximately $0.3 million in connection with the commercial arrangements.
As of December 31, 2001, the Company had made equity capital investments totaling $10.0 million in EVG, an affiliate of eCompanies,
LLC (“eCompanies”). The carrying value of the investment in EVG as of December 31, 2003 and 2004 was $0.6 million. Sky Dayton, a
member of EarthLink’s Board of Directors, is a founding partner in EVG, a limited partnership formed to invest in domestic emerging Internet-
related companies, and a founder and director of eCompanies. The Company recorded adjustments of $0.6 million and $0.2 million during the
years ended December 31, 2002 and 2003, respectively, to write its investment in EVG down to its estimated realizable value.
During the year ended December 31, 2002, the Company entered into a commercial arrangement with Boingo Wireless, Inc. (“Boingo”).
Sky Dayton, a member of EarthLink’s Board of Directors, is the founder and the former Chief Executive Officer of Boingo. The amounts paid
to and received from Boingo during the years ended December 31, 2002 and 2003 were less than $0.1 million. During the year ended
December 31, 2004, the Company paid Boingo $0.8 million pursuant to various arrangements, including a software license, maintenance and
network access agreement and a revenue sharing arrangement.
19. Subsequent Event
In January 2005, EarthLink entered into a definitive agreement with SK Telecom Co., Ltd. (“SKT”) to form a joint venture to market
wireless voice and data services in the U.S. The new entity, to be called SK-EarthLink, will be a non-facilities-based mobile virtual network
operator (“MVNO”) offering mobile communications services and handsets to U.S. consumers. EarthLink and SKT expect for the closing and
initial financing of SK-EarthLink to occur in March 2005 and for SK-EarthLink’s operations to commence immediately thereafter.
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