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Internet Telephony: December 21, 2009 eNewsLetter
December 21, 2009

Why Would O2 Buy Jajah?

By Gary Kim, Contributing Editor

Jajah, the Internet-mediated calling service that Google Voice resembles, reportedly has been sold to O2, Telefonica’s (News - Alert) mobile company. According to Reuters, Jajah was bought for $200 million. The immediate question is why. O2 is a mobile provider. Jajah is a provider of Web-activated telephony that sells directly to end users and through business partners which can be application providers or other carriers.



 
Among the issues is how a particular service provider can manage all the business issues it faces when operating a business with strong wholesale offers. It can be done, but there are complications. Will other carriers continue to “trust” and use a provider that might be aligned with a key competitor?
 
Of course, one possible approach is simply to wind down the wholesale business and make Jajah a “captive” O2 application. That seems unlikely, though, as it would destroy much of the value the partnership businesses represent, the value of the brand and relationships.
 
It seems more likely O2 will continue to support Jajah’s current businesses, while using Jajah’s termination rights and network to add value to O2’s calling services within Europe, for example.
 
Telefonica also has a strong presence in Latin America, and Jajah’s network can be used to increase Telefonica’s share of international voice minutes, in a variety of ways. Jajah can be used by anybody with access to a Web browser and at least one VoIP or PSTN phone number and device.
 
The application setting can be a Web application, an enterprise application, a PC-initiated or a smartphone-initiated call. Given O2’s mobile operations, the ability to initiate sessions from a browser or smartphone might be helpful when O2 launches its Long Term Evolution networks, which will use IP-based voice.
 
There likely is no single overriding reason the acquisition made sense for Telefonica, or apparently was seen as valuable by other companies as well. Jajah provides a “today” business built around international calling and a “tomorrow” business that could be built around integration of communications with other applications, either consumer, carrier or enterprise. Observers say Cisco Systems and Microsoft (News - Alert) also were interested in acquiring Jajah, for example.
 
Jajah provides a recognized brand name, user base and revenue streams, plus a global private IP network with termination agreements allowing calls to reach the public network. That also is valuable.
 
Like all other providers in the fixed and mobile business, Telefonica and O2 do face a future when voice calling will be an essential and required core feature, but is not the revenue driver for the business. Under those conditions, both fixed and wireless providers will need to provide calling features at low cost, and with a bigger focus on application integration. Jajah would seem to help in all those scenarios.
 
T-Online Venture Fund, the investment arm of Deutsche Telekom (News - Alert), is an investor in Jajah. Other investors include Intel Capital, Sequoia Capital, and Globespan Capital Partners.
 
Jajah, which provides low-cost international calling to more than 25 million users, has the ability to terminate calls or transfer calls from the Internet to the local telephone network in more than 122 countries around the world.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Erin Harrison

(source: http://mobile-voip.tmcnet.com/topics/mobile-voip/articles/71433-why-would-o2-buy-jajah.htm)








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