The promising market for internet telephony heated up on Monday as online auction giant eBay announced it was taking over the rapidly growing European firm Skype Technologies for more than $2,6-billion.
The deal will make Skype’s youthful founders, Niklas Zennstroem (39) of Sweden and 29-year-old Danish citizen Janus Friis, exceedingly rich men. Both are set to stay in charge of Skype after the takeover.
”Communications is at the heart of e-commerce and community,” said eBay chief executive Meg Whitman.
”By combining the two leading e-commerce franchises, eBay and PayPal, with the leader in internet voice communications, we will create an extraordinarily powerful environment for business on the net,” she said.
The Luxembourg-based Skype has rapidly emerged as a leader in the market for internet telephone calls under Zennstroem and Friis, who also founded the controversial online music swapping service KaZaA.
The three-year-old company claims to have 54-million subscribers in 225 countries and territories, mostly in Europe and Asia, and to be adding 150 000 users daily.
Skype signed a deal earlier this year with Hong Kong-based Tom Online, a provider of wireless Internet access in China.
”EBay lost Japan to Yahoo. They don’t want to lose China,” said Robbert Van Batenburg, head of research at Louis Capital markets.
”Skype gives eBay a very valuable community of users worldwide.” EBay hopes to use Skype to facilitate communications between its online buyers and sellers, and to settle transactions through its PayPal service.
For example, a PayPal ”wallet” associated with each Skype account would enable users to pay more easily for Skype’s fee-based services. That would add to PayPal’s accounts and increase payment volume, according to eBay.
After downloading a program, Skype users anywhere in the world can talk for free to each other, using headsets plugged into a computer over a broadband connection.
They can also call regular phone lines in most countries of the world, typically for 1,7 euro cents a minute, far less than is charged by traditional landline operators.
”Our vision for Skype has always been to build the world’s largest communications business and revolutionise the ease with which people can communicate through the internet,” Zennstroem said.
”We can’t think of any better platform to fulfill this vision to become the voice of the internet than with eBay and PayPal.”
EBay said Skype will add more functions including video and toolbars for Microsoft Outlook and Internet Explorer, on top of premium services already on offer such as voicemail, call forwarding and conference calling.
The takeover will boost Skype’s relatively low profile in the United States. With eBay, it will be going up against internet telephony services launched recently by Microsoft, Google and Yahoo.
The best-known internet telephony operator in the United States is Vonage, but unlike Skype’s basic free service, Vonage charges its users a monthly rate starting at $14,99.
Analysts said the deal appeared expensive for eBay, but the company’s shares still rose 32 cents on the Nasdaq exchange to close at $38,94.
”There are a lot of people in this market,” said Maribel Lopez, telecom analyst for Forrester Research. ”I don’t see that Skype has a sustainable competitive advantage.”
The deal calls for eBay to pay $1,3-billion in cash and $1,3-billion in stock for Skype, plus as much as $1,5-billion in incentives based on the unit’s performance.
Skype is expected to add $60-million of revenues this year and more than $200-million in 2006, from about $7-million in 2004, eBay estimated. – Sapa-AFP