(Adds details of joint company statement; context)

By Ritsuko Ando and Eric Auchard

NEW YORK/SAN FRANCISCO, March 9 (Reuters) - AT&T Inc. (T.N: Quote, Profile, Research)and Yahoo Inc. (YHOO.O: Quote, Profile, Research) are negotiating how they could expand a broadband promotion deal to cover mobile Internet services and advertising, a source familiar with the talks said on Friday.

The source, who was responding to a report in the Wall Street Journal that said Yahoo was at risk of losing revenue of up to $250 million a year when the AT&T contract comes up for renewal next year, said new ties could offset any such threat.

Fearing the partnership could be in danger, investors drove down Yahoo shares 5.2 percent in Nasdaq trading.

Current discussions focus on a potential mobile phone deal with AT&T's mobile unit, Cingular, the largest U.S. cellphone company, where Yahoo would provide advertising, Web search and other services along the lines of the contract Yahoo struck late last year to act as exclusive provider of advertising for Vodafone mobile phone customers in Britain, the source said.

"It is pretty obvious that the next new thing is mobile services and advertising," the source said.

In a joint statement issued on Friday afternoon, AT&T and Yahoo said Yahoo also would be providing services on AT&T's Internet television service later this year.

"AT&T and Yahoo have already made adjustments over the years to reflect competitive conditions and the relative benefits each party brings to the relationship," Yahoo Chairman and Chief Executive Terry Semel said.