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Story URL: http://www.silicon.com/research/specialreports/voip/0,3800004463,39153424,00.htm

Skype's Zennström: 'Our biggest threat is Microsoft et al'
"In a few years' time the idea of paying for phone calls will seem very strange"

By Reuters

Published: Tuesday 18 October 2005

Internet phone-calling phenomenon Skype, which was bought by online auction company eBay for almost $4bn last week, said it sees computer giant Microsoft as one of its biggest potential rivals.

Skype chief executive and co-founder Niklas Zennström, one of silicon.com's Agenda Setters, told a conference on Sunday: "I think the biggest threat to us is companies like Microsoft, Yahoo! and Time Warner's AOL, because their customer base is so big."

Microsoft bought Teleo in August, and Yahoo! bought Dialpad earlier in the year, in efforts to catch up with Skype's lead in the booming voice over IP (VoIP) market.

Luxembourg-based Skype offers free computer-to-computer calls between Skype users. It charges for calls made from or to numbers outside the network.

The company has quadrupled in size over the last year and is adding 150,000 users per day. It now has 54 million users.

eBay is paying $2.5bn for Skype - plus another possible $1.4bn if certain targets are met - which will allow it to add free web telephone calls to its online auctions, smoothing the way for more deals to go through.

Zennström said he had thought long and hard about the sale to eBay and had talked to other potential buyers as well as considering an IPO before plumping for eBay, which promised Skype the most autonomy.

Referring to the online payment company eBay bought in 2002, Zennström said: "eBay had a good record, especially with PayPal. They don't want to disintegrate the company. They'll nourish it and allow it to grow."

Zennström confirmed he had talks with Rupert Murdoch's News Corp before deciding to go with eBay. "We had meetings with a lot of companies. We met with News Corp, yes," he said.

Zennström said he saw growth possibilities in facilitating such services as live online translation.

He said: "I'm convinced that over time pretty much all voice communication will be over the internet.

"Our objective is to change the way people communicate. In a few years' time the idea of paying for phone calls will seem very strange."