eBay has agreed to sell a 65% stake in internet telephony firm Skype to a group of private investors for USD1.9 billion in cash and a UD125 million debt instrument. The sale, which eBay says values Skype at UD2.75 billion, represents a better financial outcome for the company’s shareholders than at one time had seemed likely. eBay paid USD3.1 billion for the business but later wrote down its value by USD1.43 billion. After receiving offers of only about USD2 billion earlier this year, eBay instead said it would pursue an initial public offering for the business, though it continued to entertain offers from several potential buyers. The investor group is led by Silver Lake, a technology-focused private equity firm, and includes two venture capital firms. A group of banks led by JPMorgan Chase is believed to be putting up about USD500 million to back the deal, people familiar with the deal indicated.
While the buzz around Skype has abated somewhat since its acquisition by eBay, Skype is profitable, and the company’s traffic growth has been remarkable. Skype generated 43.4 billion minutes of free, Skype-to-Skype (computer-to-computer) traffic in 2007 and 65.5 billion minutes in 2008. Skype also reported 5.6 billion minutes of paid, computer-to-telephone traffic in 2007, and 8.4 billion minutes in 2008.
Skype’s impact on the international long-distance market is particularly strong. TeleGeography estimates that approximately 33 billion minutes of Skype’s computer-to-computer traffic was international, up from 22 billion minutes in 2007. Skype accounted for 8% of all international voice minutes in 2008, up from 6% in 2006 (see graphic). Only five years after the launch of its service, Skype has emerged as the largest provider of cross-border voice communications in the world.
In addition to its free calling service, Skype’s paid service allows users to place calls to standard fixed and mobile telephones. Skype relies on wholesale international carriers, such as iBasis and Level 3, to connect these calls to the PSTN. If paid calling patterns mirror Skype-to-Skype calling patterns, Skype users generated approximately 4.2 billion minutes of paid international traffic in 2008.