Will the Internet Kill the Phone Business?|Management|Business|MBA|Marketing|Strategy|Case Study|Case Studies

Will the Internet Kill the Phone Business?

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Case Details:

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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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" advertisements.

Marketing Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

$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 of customers...

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