O2 To Test Skype-Style VoIP Service


O2 is preparing to launch a new Skype competitor, using technology from a company it bought in 2009, Jajah

Mobile operator O2 has announced plans to test a new voice-over-IP (VoIP) service called O2 Connect, which, like Skype, allows smartphone users to make calls over Wi-Fi networks.

O2 Connect will be the first launch from Telefónica Digital, a global business unit set up in September to lead the company’s digital growth strategy and build new technologies. O2 Connect has been developed using technology from Jajah, an Internet phone company that Telefónica acquired for $207 million (£129m) in 2009.

O2 Connect will initially be available on iOS and Android smartphones and will subsequently roll out to other devices. Around 1,000 O2 consumer and business customers will be invited to take part in the trial, which begins this month.

A viable Skype competitor?

“This trial will allow us to explore the potential of delivering VoIP services to customers,” said Richard Porter, head of consumer mobile products for O2 in the UK. “We hope to launch O2 Connect as a commercial service in 2012.”

An O2 spokesperson said that O2 Connect would operate as a ‘freemium’ service. In other words, some parts of the service will be included within existing price packages, whereas others will be sold as extra.

The launch of O2 Connect by Telefónica is a response to the threat of mobile operators becoming “dumb pipes”. According to the Financial Times, the company believes that the potential for take-up is significant given the widespread usage of services such as Skype – particularly in emerging markets.

However, O2’s new VoIP service will face stiff competition from Skype, which was recently bought by Microsoft for $8.5 billion (£5bn). Analysts at Fitch told Reuters that “overcoming the commoditisation of voice calls” is one of the key challenges for mobile operators.

“A key barrier to free voice at present is mobile termination rates, which remain high compared to landline rates,” said Damien Chew, senior director in Fitch’s TMT team. “However, regulatory pressure has and will continue to drive these rates down.”

Joined up Business

Earlier this week, O2 announced its new strategy to target the enterprise market. As part of its ‘Joined up Business’ offering, O2 has a portfolio of services including managed WAN, cloud data services, flexible working solutions and converged solutions, as well as pure mobile and fixed services.

“O2 is evolving into a fully integrated operator, with a unique mix of mobile and fixed telecoms, tightly integrated with IT expertise which allows us to deliver Joined Up Business across an Enterprise,” said David Plumb, O2’s General Manager for Enterprise.

O2 is hoping its new strategy will enable it to tap into the UK enterprise IT market, worth an estimated £62 billion.

‘Joined up Business’ builds on the launch of ‘O2 Unify’ by O2 and 2e2 in January. The joint-venture enables businesses to outsource all their IT and communications needs to a UK single provider.

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