Will the Internet Kill the Phone Business?
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Case Code : MISA001
Case Length : 8 Pages
Period : 2005
Pub Date : 2005
Teaching Note :Not Available
Organization : -
Industry : Telecom and Broadband
Countries : Global
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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In 2005, "Voice over internet protocol" (VOIP), was threatening the business models of incumbent telephone service providers. VOIP enabled people to make free calls to other Skype users over the internet, and very cheap calls to traditional telephones. The threat of VOIP looked more real than ever, when on September 12th 2005, eBay, the leading online auction-house, announced that it was buying VOIP's leading proponent, Skype for $2.6 billion.
eBay, mentioned it had plans to use Skype's technology to make it easier for
buyers and sellers to communicate, and to offer new "click to call"
$2.6 billion seemed a vast sum to pay
for a company that had only $60m in revenues and had yet
to turn a profit. Yet eBay had not been the only company
interested in buying Skype. Microsoft, Yahoo!, News
Corporation and Google had all considered the idea.
Whatever the merits of the deal, the acquisition of
Skype had highlighted the significance of VOIP, and the
enormous threat it posed to incumbent telecom operators.
Skype, which had over 54m users, had received the most
attention, but other firms routing calls partially or
entirely over the internet had also signed up millions