Liberty Media, Net2Phone to take VoIP abroad

Liberty Media announced yesterday related agreements with IDT and Net2Phone that would provide telephony services over broadband cable to Liberty’s international cable company affiliates.

Under the five-year, $20-million licensing deal with Net2Phone, Liberty said it would deliver Net2Phone’s core voice over IP (VoIP) technology via broadband to its more than 25 million international households. Customers would have access to IP dial tone, voice-activated dialing, voice portal services and multiple messaging features, Liberty said.

For Net2Phone, the deal represents its first ride into the international cable space, and it does so on Liberty’s broad shoulders. The company said the deal would open a significant revenue channel, and that it expects to establish VoIP licensing deals with other telecommunications and broadband providers.

“We are very excited about Liberty’s decision to license our technology, as this validates our business,” said Howie Balter, CEO of Net2Phone in a statement. “Our core business of routing voice and enhanced services over IP networks has and will continue to grow steadily… and we believe that licensing fees can provide high margin revenue that can support both top and bottom line growth.”

A Net2Phone spokeswoman said the company was in licensing discussions with “at least a half-dozen” other companies, including AT&T, which owns a 32% stake in Net2Phone. Details of the deal with Liberty will be finalized within six weeks, she said.

Liberty’s five-year joint venture with IDT would provide equity stakes to both companies. IDT would control daily operations, appoint a majority of its board of directors, provide the infrastructure and bear all funding responsibilities. The Liberty-IDT deal is subject to regulatory approval.

In related news, IDT said Wednesday it would slash 900 employees—or 18 %—of its work force to save $11 million. The semiconductor company, which warned earlier this month that revenues would fall sharply this quarter, said the staff reductions would result in a $2.5 million restructuring charge.

Net2Phone yesterday reported a third-quarter net loss of $118.9 million, or $2.06 per share. Even though the company said it expects to reach EBITDA-positive staus by July 2002, the revenue potential from the Liberty deal is not built into the company’s business model, the spokeswoman said.

“The $20 million that we’re getting from them, that’s the baseline because that’s the licensing fee,” she said. “Any services that we start providing to them on top of that would generate additional revenue for us.”