Skype's free internet calls to be offered on 3 network

· Deal threatens traditional operators' revenues
· Mobile business entering new world, say Vodafone

Richard Wray in Barcelona
Wednesday February 15, 2006
The Guardian


Skype, the provider of free phone calls over the internet, yesterday clinched an important deal with mobile phone operator 3 which will see its service offered across the company's five networks, including in Britain, later this year.
The deal, the first of its kind, represents a significant threat to operators such as Vodafone who are trying to protect revenues from traditional networks while moving customers onto new 3G networks.

In contrast, 3 does not have any legacy revenues to protect, owning only 3G networks, so can offer free calls to Skype users as it attempts to increase its customer base from its current 11 million.

Skype chief executive and co-founder Niklas Zennstrom said other operators had become willing to talk to him over the past few months but talks with 3 started a year ago. "Yes the calls are free," he said. "But you're paying for the mobile access and that drives usage and something that drives usage is good for the operators."

Skype has attracted 75 million users who use their PCs, a broadband connection and Skype's software to talk to other users free. The company, bought last year by eBay for $4.1bn, (£2.4bn) makes money by also offering users the ability to call people on fixed line or mobile networks.

3 intends to run trials of the service over the next few months with a launch later in the year when handsets with Skype pre-installed should become available. After paying an as yet unspecified monthly fee for mobile internet access, Skype mobile users will be able to talk to each other and "Skypers" on PCs for no extra charge.

"I think 'for free' is not exactly the way we would describe this; we will be bundling the service," said Hutchison's managing director of European telecoms Christian Salbaing at the 3GSM World Congress in Barcelona. "For us this is about giving the customer the choice."

The rest of the mobile industry accepts that VoIP (voice over internet protocol) will transform its business model, making calling in effect free, but had hoped it was a few years down the line while it readjusted its business model.

Vodafone chief executive Arun Sarin yesterday admitted the industry in western Europe was "morphing" from being based on charging for minutes to offering the sort of "all you can eat" mobile internet access tariffs needed for VoIP to take off. But his timescale was longer than 3's. "That's clearly the world we're going into. Is that world around the corner? No. Is it two or three years away? Yes."

Vodafone yesterday announced a deal with Google for its mobile content search engine to be offered through Vodafone's Live portal.

Meanwhile T-Mobile, whose web 'n' walk mobile internet service has a deal with Google, announced plans to launch Britain's first very high speed data network with HSDPA technology which could see wireless internet access speeds exceed those of fixed line broadband this year.





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