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Mobile Europe newsletter: Thursday 12 May

So Microsoft buys Skype. Does anyone know what’s going on? One commentary we received said, “This is a bold move by Microsoft and may be a good idea if there is a strategic plan behind it”. Well, quite.

Twitter allows us to watch thinking develop in real time around an event. So first the news breaks, and the first posts say “Whoah” or “Interesting”, which is Twitter-speak for, “No idea what this means, but it surely means something.” Then you get the reflection, a trickle of connections being made.

What happened, as always with an acquisition, was that there was a rush to think of the properties that Microsoft has and then mash those together with Skype, and see what that looks like. So we have Outlook + Skype, WP7 + Skype, Kinect+ Skype, and so on. And so the market asked:”Which of these properties is best served by adding an IP comms capability, if it hasn’t already got one?”

Then we asked what it meant for the other players in the market –and there seemed to be a prevailing view that this deal was a big challenge to telcos. I’m not so sure.

Telcos already have to deal with Skype, whether that is by partnering, competing, ignoring or blocking. So what is changed by having Skype owned by Microsoft? Well, obviously it opens Skype up to a host of MS properties, but it probably makes it harder for Skype to work with other assets, such as with Google or Apple. And for telcos? As I said, many see this deal making things harder for telcos, but that only holds true if you see Skype as necessarily a competitor for telcos and I’m not convinced that it is. Certainly there are plenty of telcos that would work with Skype in lots of ways – as an “in-house” OTT competitor working into rivals’ networks whilst users are roaming, or even in home markets. Imagine Orange Business Services, for example, providing Skype + QoS as a service to an enterprise customer that has a range of SIMs from different operators in its user base.

What I haven’t seen so much of is the acknowledgement that Microsoft is more used to acting (actually acting, not just talking) in partnership with operators than Apple, Google or Facebook. Skype would not doubt say that it was always willing to partner with  It will also need operator partnerships to make WP7 on Nokia fly. So I don’t necessarily buy the view that this deal is necessarily a nightmare for operators.

Another reason to think this could be a positive move for operators is that Microsoft has bought a platform, but it hasn’t bought customers. Comment on acquisitions tend to focus on user bases as if they are discreet from all the user bases. Yet I for example, am an occasional Skype user, but also a Vodafone, Microsoft and Apple user. More than likely you work in each of these environments too, in one way or another.

So Microsoft hasn’t bought me any more than it has bought you. In fact, the argument that your contacts are discreet, and therefore you are tied to Skype in that way, doesn’t hold much water now either. Plenty of mobile phone clients already aggregate and synch your contacts from various accounts, as do web platforms of your choice. There’s clearly a telco opportunity here too – the comms as a service cloud-based model that lets you manage your contacts, call history, messaging, data limits, roaming add-ons etc all from the same web front end.

If Skype and Microsoft are part of the fulfilment of that, then why not? You are then the happiest of pipes.

Anyway, never mind what I think, here’s what the rest reckon on the question of what the deal might mean for operators:

Analysis Mason:
The deal creates a more carrier-friendly alternative to Apple and Google in the mobile space. The big story is here is the emergence of a third bloc in the smartphone market: Nokia/Windows Phone/Skype vs. Apple/iOS/Facetime vs Android/GoogleVoice. They’re all vertically integrated and operators won’t welcome the addition of OTT VoIP but the new alliance looks to be more carrier-friendly. There’s a big question about whether Microsoft can harness the creativity/innovation to revitalise its (and Nokia’s) fortunes in the world of smartphones and web x.0.

IDC: Operators a stumbling block
Mobile operators, with a few notable exceptions, have traditionally been very wary of Skype and mobile VoIP in general. And mobile operators remain essential partners in the sale and distribution of mobile handsets, especially in markets like Western Europe where device subsidies remain high. Pushing Skype to the fore of a new device’s features as an attractive selling point may actively put off mobile operators.

However, the outright hostility shown by many mobile operators towards Skype and its ilk is not a tenable long term position. Actively blocking or even failing to aid the use of VoIP on mobile devices risks damaging consumer perceptions of mobile operators in the long run. The immediate threat to call revenues is also not very high. VoIP usage is heavily concentrated in outbound international calls, and the majority of VoIP calls terminate on PCs, not on mobile phones – which is a different use case from conventional mobile calls. Added to this is the fact that in order to freely use VoIP over the mobile network, users need to have a reliably generous data plan, meaning they are most likely to be contract customers who do not pay incrementally for voice calls anyway. Of course what mobile operator are scared of is a potential future scenario in which the majority of mobile users have VoIP on their phones and habitually bypass voice services making free calls to each other as they now do over their computers. This is not outside the realms of possibility but many things are likely to change within the mobile industry before such a scenario becomes likely, and in any case continued hostility to Skype in the short term is unlikely to prevent it.

The other reason that mobile operators are worried by VoIP is the effect it can have on their networks. Skype is trying to combat this concern. In February this year it launched a new mobile partner program that provides, among other things, Skype mobile voice calling with optimised bandwidth efficiency. If VoIP over mobile is coming anyway, it surely make sense for operators to actively partner with providers, Skype being the most attractive, to have more chance of controlling its impact, and take advantage of the potential marketing and brand image benefits.

So far, most mobile operators are not doing this. Rightly or wrongly, the majority of mobile operator would prefer to continue hiding from Skype. So, while deep Skype integration and exclusive Skype features could be a great selling point for the forthcoming range of Nokia WP7 phones, the potential hostility of mobile operators could prevent Nokia and Microsoft taking full advantage, thus diminishing the value of this gutsy acquisition by Microsoft.

ABI Research: Operators need not be too unhappy
Telcos won’t be happy to see another over-the-top front opening, but they have surely seen it coming. Just witness Telefonica’s (Jajah) and Deutsche Telekom’s (Bobsled) moves in this space – they’re trying hard to make VoIP working for them rather than only against them. But having said that, if they wished that the Nokisoft tie-up would result in a leading yet still operator-friendlier ecosystem they will be disappointed.

InformaTM: Microsoft gets a voice audience
Microsoft undoubtedly has over-paid for Skype in the short-term, but potentially not in the long term. Buying Skype gives Microsoft the ability to do whatever it wants with voice to an audience of 700 million users. This kind of scale does not come cheap.