Wednesday, May 11, 2011

Microsoft’s acquisition of Skype

According to news first reported on GigaOm and confirmed in multiple media outlets, Microsoft will acquire Skype for a reported USD8.5 billion. The following note provides a bit of perspective on the international long-distance market, a key market for Skype, and the industry which has been most directly affected by Skype's rapid growth.

International telephone traffic has grown at a compounded rate of approximately 13% annually over the past 20 years, reaching an estimated 413 billion minutes in 2010, and generating USD83 billion in revenue. However, traffic growth began to slow sharply in 2008, and volume increased by a modest 4% (18 billion minutes) in 2010. While the economic downturn has affected growth rates, Skype may be the key contributor to the recent slowdown.

In 2010, Skype reported 190 billion minutes of 'on-net' Skype-to-Skype voice and video traffic, up 68% from 113 billion minutes in 2009, and nearly three times their 2008 volume of 65.5 billion minutes. TeleGeography estimates that approximately 96 billion minutes of Skype's on-net traffic was international, up from 57 billion minutes in 2009. 'While Skype is not a phone company, they are by far the largest provider of cross-border voice communications,' says TeleGeography analyst Stephan Beckert.



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