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Will Skype Follow In Jajah's Footsteps?

Posted by: Olga Kharif on December 22, 2009

Traditional telcos are showing healthy appetite for Web calling start-ups. On Dec. 23, European carrier Telefonica acquired Jajah for $207 million. The acquisition comes on the heels of Google’s November acquisition of Gizmo5 and British Telecom’s 2008 purchase of Ribbit for $105 million. So, what does this mean for Skype?

The recent slew of deals may offer insight into where the largest Web-calling outfit in the world, Skype, is heading. Earlier this fall, Skype regained its independence from eBay, and is now the largest stand-alone Web-calling provider. While its private equity investors have told me in the past that they are in no hurry to offload Skype, they’ll need to exit their investment at some point, either through an Initial Public Offering, or a sale. The Jajah deal indicates that the world’s traditional telecom players want in on the Web-calling game. One of these telcos may want to acquire Skype in the future.

By purchasing Skype, a telco would gain the service’s 521 million registered users as well as global presence: Anyone, anywhere with an Internet connection can make Skype calls. A U.S. telco may be able to compete with carriers in Europe and Asia. It may also be able to expand its portfolio of services, and to provide them for less. Telefonica, for instance, plans to market Jajah’s services under its O2 brand in the countries where Telefonica’s carrier O2 sells its services, Jajah CEO Trevor Healy told me this morning. The charges will be added to O2 subscribers’ wireless bills.

The new owner may help Jajah expand quicker. The start-up will be able to market its services, under O2 and Jajah brands, to more than 268 million Telefonica customer access lines worldwide. With Jajah in its holster, Telefonica may, in fact, be hoping to build up a major competitor to Skype.

Jajah expects to remain based in Silicon Valley and Israel, and to expand its 100-person staff under the new ownership, says Healy, who will continue to head Jajah as it becomes a wholly-owned subsidiary of Telefonica.

That said, Skype’s value is in the billions, so not many telcos will be able to afford to take it on. BT and Telefonica are less likely to be in the running now that they have acquired their own Web-calling businesses. Still, there are lots of other service providers out there with deep pockets.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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