Skype teamed up with Hutchison's 3 unit on Monday to launch an Internet voice mobile phone, the first of a number of expected agreements the eBay-owned company has struck with mobile network operators to boost its revenues.
The agreement is exclusive with 3 in the eight markets where it operates, but Skype, banking on a mobile future, is seeking partners elsewhere.
The phone was made for 3 by Chinese manufacturer Amoi. Development was jointly done by 3, Skype, and Amoi, but it also included Qualcomm to enable Skype to work with core handset features such as address books and messaging.
The phone will be available free to 3’s 18-month contract holders and for £49.99 ($102.88) to its prepay users. A centrally located button marked Skype changes the phone’s mode from regular cell phone to Skype phone. Skype IM is also supported.
All calls and messages done on Skype will be free, but Skype Out, the low-cost calling feature to regular phones, is not enabled. Skype Out will be made available sometime next year, however, the two companies said.
3 operates mobile phone networks in Austria, Australia, Denmark, Hong Kong, Ireland, Italy, Switzerland, and the U.K. The phones will be available in Ireland and the U.K. on Friday with the other markets following in the coming weeks
Getting mobile operators on board hasn't been easy.
“We have had a number of discussions with operators over the years and some have told us to go away,” said Michael van Swaaij, acting CEO for Skype in the wake of founder Niklas Zennstrom’s departure. “There’s an obvious tension.”
3 U.K.’s CEO, Kevin Russell, said that free Skype calls would detract from its revenue but that he expected to more than make up for this with “incremental customers”, not just by attracting Skype users who do not currently use 3 but by reducing churn and benefiting from increased customer loyalty. 3 has since its launch had one of the highest churn rates in the U.K. because of an early decision to compte on price. It has since changed course to a services-based strategy.
Neither Skype nor 3 would disclose details, but Skype will receive a share of the revenue on the new phone’s usage. Skype also receives a royalty paid by 3 for the provision of its software. There is also the potential that 3 will receive a share of Skype’s Skype Out revenue when that service is made available.
Hutchison-owned 3 has some 4.5 million customers in the U.K., its biggest market, over 3.5 million of whom are thought to be active users. Skype has some 246 million registered users.
Skype parent eBay was recently forced to take a $1.43 billion write-down because revenue had not met the targets expected at the time of its £2.6 billion acquisition in 2005. Co-founder and then CEO Zennstrom stepped down coinciding with the announcement of the write-down.