Telefónica Agrees to Buy VoIP Platform Jajah for 145 mil. Euro

Telefónica has announced that it has agreed to buy VoIP telephony provider Jajah for 145 million euro in cash, pending regulatory approvals. Jajah, which will be managed under Telefónica's European business division (Telefónica O2), has been founded in 2005 and has around 15 million clients worldwide. The company is headquartered in Mountain View, California, United States, and has another research and development (R&D) centre in Israel.

Outlook and Implications

• Modern-Day Calling Card: As a business model, Jajah basically functions as a platform for VoIP calls that can be terminated onto fixed and mobile networks. Using their own phones, rather than the combination of PC and headset, as terminals, the subscribers enter both the calling and receiving telephone numbers to the programme on the company's website, which then connects the calls, rather similarly to a traditional long-distance calling card. Jajah's service has been integrated with a number of Web-based applications such as Yahoo! Messenger, Twitter, and dating site Match.com, allowing users to communicate in voice without revealing their phone numbers. According to earlier media reports, also Cisco and Microsoft had been interested in acquiring the business (see World – United States – Spain: 23 December 2009: Telefónica in Advanced Talks to Acquire VoIP Firm Jajah—Reports).
• If You Can't Beat Them…: Although the company has given little indication on how it intends to utilise the acquired asset, the most obvious way forward is nevertheless to use Jajah for provision of inexpensive international calls. Telefónica is the leading operator across Latin America, which over the past two decades has emerged as one of world's largest pools for work-based migration, with the United States and Telefónica's home market Spain having been the most favoured destinations for such émigrés. As a service segment, international calling has grown namely on the back of increasing immigration, with VoIP platforms such as Jajah having acted as brokers enabling callers to surpass the incumbent carriers and their high tariffs. Similarly, VoIP has acted as something of a disruptive technology in commoditising voice services across the board, including domestic mobile telephony, and the leading operators have been accordingly reluctant to allow the related applications on their networks. The acquisition of Jajah seems to imply that Telefónica has now concluded that the most rational approach to VoIP, rather than rejecting it, is to embrace it and start innovating new services based on it.