Uncommon Wisdom

Apr 15 2009   6:08PM GMT

Skype IPO could be worst-case for telcos

Tom Nolle Tom Nolle Profile: Tom Nolle

eBay will be spinning Skype off in an IPO in 2010 instead of selling it to its founders. As we had suggested, the founders could not meet the price eBay hoped for, due we’re told to the reluctance of private equity firms to back the transaction.

An IPO for Skype could create a kind of worst-case scenario for telcos and for IMS supporters by almost guaranteeing a flurry of OTT voice services that would force down pricing and margins, at a minimum. We’re of the view that the current central-administration PSTN-like model (including IMS) will be more difficult to sustain with OTT competition unless IMS can be expanded to provide better support for so-called Web 2.0 applications and unless it is opened to more developer innovation.

A number of vendors have committed to this, notably Alcatel-Lucent, but so far no one has completely delivered. Alcatel-Lucent’s Web Services Gateway is a step in the right direction but not a complete solution. Voice competition by Skype and others could also impact ROI of the telcos further, particularly in the mobile space where call costs are still relatively high, especially for roaming and international calls.

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