Oaktree, here you go.
April 16, 2000
A Voice Finds Itself in Demand
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Issue in Depth
The New York Times: Your Money
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By SETH SCHIESEL
he first thing one notices about Howard S. Jonas is his voice. It is somewhat deep, but what really sticks out is the combination of laconic pacing and an accent that could not spring from anywhere but the east bank of the Harlem River. Call it a Bronx drawl.
The distinctiveness of that voice may fade after a few moments. But after a minute or so, it probably occurs to the listener that the voice is still going. And going, spinning off onto tangents, chasing allusions, moving on to new ground totally unbidden.
Susan B. Markisz for The New York Times
Howard S. Jonas, the unconventional founder of IDT, at home with some of his children and the family bird, Tuki. IDT's Net2Phone unit is the No.1 carrier of calls using Internet technology.
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Jonas's company, the IDT Corp., is a lot like its founder: unconventional, at times seemingly unfocused and exhaustively restless in a search for new ideas and new concepts. Over the last decade, IDT has created more new niches in the voice communications market than companies that are hundreds of times its size.
Having tried and failed to beat it, the titans of telecommunications are now joining forces with IDT, whose first network operations center was in a funeral-home bathroom in the Bronx.
Last month, John C. Malone's Liberty Media Group agreed to invest roughly $130 million for about 10 percent of IDT. Within a week, a consortium led by AT&T agreed to invest $1.4 billion for a 32 percent stake in IDT's Net2Phone subsidiary, the No. 1 carrier of phone calls using Internet technology.
"Net2Phone has established itself as the Internet's very own phone company," C. Michael Armstrong, the chairman of AT&T, said at the time.
That is heady stuff for IDT and for Jonas, 43, who just a few years ago tried to promote his Internet calling service by using a toll-free number that spelled out a profane reference to AT&T.
"It's totally amazing," Jonas said in an interview recently at his company's new headquarters in downtown Newark. "Like, we were these nobodies who started in a basement and all of these giants were trying to kill us. It was like nobody knew who we were. And now it's like we're the center of everything. Everyone's trying to do deals with us. I mean AT&T, they're like the phone company. God willing, this will just continue."
Jonas, whose IDT shares are worth $300 million, almost blushed when a visitor noticed that the back of his twisted-around tie had a Brooks Brothers label. "Well, you know me," he said abashedly, but with a big smile. "I wear jeans and a work shirt. But now we're meeting with all these big guys and I need to make them feel comfortable."
Jonas, who still lives in the Bronx, N.Y., with his eight children and his wife, Debbie, first entered the communications field in the late 1980s, while he was running a small publishing operation.
His partner at the time decided to move to Israel, where rates for international calls were far higher than those in the United States. The outsized Israeli phone bills were an aggravation, if not a financial threat.
So Jonas devised a way to let his partner tap into a United States phone line, with its lower rates, using the "call back" system. An overseas customer phones a service in the United States from overseas, hangs up before the call is answered and is then automatically called back by the service.
Call back worked, and soon Jonas was in the phone business. In the early 1990s, AT&T tried to convince the Federal Communications Commission to put a stop to the practice, but failed.
The call-back business began to falter anyway after a few years, as foreign countries opened their communications markets to competition and international direct-dial rates fell. By then, however, IDT and Jonas had moved on to the next frontier: Internet telephony.
The company developed many of its own systems to transmit calls using Internet technology, which can be more efficient and cheaper than traditional telephone lines. So far, however, Internet telephone service is still directed mostly at budget-conscious consumers, especially for international calls.
By the time the major phone companies realized the potential of Internet calling, IDT was already in the lead.
Not everything, however, has gone smoothly for Jonas. In his typically unrestrained style, he recounted recently how in late 1998 and early 1999 he suffered a severe bout of depression, precipitated at least in part by the departure of one of his senior executives.
"There were lots of times when I thought I would just kill myself," he said. "I couldn't get out of bed. I couldn't eat. My kids had to read to me, take me for walks. It was like they were the parent and I was the kid."
But Jonas is back to being the endearing, slightly eccentric, sometimes frustrating executive he has been known as. On a conference call on March 31 to announce AT&T's investment in Net2Phone, Jonas was in prime form. After typically corporate and typically brief opening remarks from Armstrong and Howard S. Balter, Net2Phone's chief executive, Jonas let loose.
"I'm delirious," he said. "I feel like Roberto Benigni or something at the Oscars. I wish I was a dog so I could jump on everybody's lap and lick their face. This is unbelievable. This is I think the biggest day in telecommunications since Bell called Watson 120 years ago."
That was just the beginning. Before he was essentially cut off by Richard J. Martin, AT&T's executive vice president for public relations, Jonas managed to thank at least 16 people by name, to volunteer to broker a deal to relocate the golden "Spirit of Communication" statue in front of AT&T's headquarters in Basking Ridge, N.J., and to mention that his 11-year-old daughter beat Armstrong at the card game spit.
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