By Deborah M. Todd
San Francisco (Reuters) - Yahoo Inc's venerable email system could have a better shot at challenging category crusher Gmail if a telecommunications company wins a Yahoo asset auction and presents it to a wider audience.
Both Verizon Communications Inc and AT&T Inc are set to make third and final round bids for Yahoo's 'core' business of mail, Web and advertising products, according to people familiar with the matter.
A consortium led by Quicken Loans Inc Founder Dan Gilbert and backed by Berkshire Hathaway Inc Chairman Warren Buffett will also make it to the final round, the people added.
A telecommunication company could give Yahoo Mail distribution on mobile devices that gives it a fighting chance to compete with Gmail and Apple Mail, which come pre installed on many Android and Apple devices, analysts said. Yahoo's media unit could get a similar boost.
Broader distribution would be a 'game changer' for mail and the other older services, raising their value to bidders with mobile reach, said Karsten Weide, an analyst for research firm International Data Corporation.
"It's not because they have bad content or bad products. They just don't have the distribution," Weide said.
He said in recent years telcos have been telling manufacturers which apps they want to see pre installed on smartphones as a condition of carrying the products.
Telcos in particular can benefit from Yahoo's technology for placing ads. Verizon could become the number three ad tech player after Google and Facebook with the purchase, said Dave McIninch, chief revenue officer of search and performance marketing firm Acquisio.
It is not clear whether telcos see extraordinary value in mail. Verizon is focused on Yahoo's ad technology, Reuters has reported, and Needham and Company analyst Laura Martin noted that Verizon acquired AOL for its ad tech and never put AOL mail on phones.
In the last year, Yahoo has rolled out new features such as an inbox capable of accessing other email services and a password-free sign-in that verifies users via text message.
Yahoo says that consumers are gravitating to its mobile email while Google and Microsoft focus on corporate products. Google and Microsoft said they can satisfy both audiences.
Yahoo Mail's new mobile App gets strong reviews on the Apple and Google Play app stores, and Yahoo says daily emails sent and received since 2013 are up 15 percent, while iOS app usage has doubled over the last 18 months. Yahoo declined to discuss profit or revenue at the ad-supported service.
Web industry researcher ComScore shows that Yahoo Mail U.S. mobile use doubled to 36.5 million users per month over the three years to March, even as Yahoo mail desktop use nearly halved. That's slightly faster mobile growth in percentage terms than Gmail, but Gmail is adding more users: Gmail had 89.6 million mobile users, more than Yahoo's combined 67.8 million desktop and mobile.
(Reporting by Deborah M. Todd. Additional reporting by Greg Roumeliotis and Malathi Nayak in New York and Liana Baker in San Francisco. Editing by Peter Henderson and Andrew Hay)