Calling Card Deals for Internet Telephony Providers
Monday, December 06, 1999 6:20 PM
by A. Sahoo
It seems that calling cards are everywhere these days - gas stations, supermarkets, the corner 7-11. It's a great business to be in - especially if you're an Internet telephony provider, that can offer lower rates while taking wider margins, to the card companies. This past week, IT leader Net2Phone (NTOP) announced two major calling card deals. They're not selling cards in onesies and twosies at the five-and-dime, though; they've hooked up with AOL (AOL) and Compuserve to pump out zillions over the web.
For those who haven't followed NTOP, this company is currently reigning king of Internet telephony. IPO-ed just 5 months ago, NTOP boasts a 59% share of all long distance phone fax minutes transmitted via Internet Protocol. Since summer, NTOP has been announcing a deal a week, both key US players (including Priceline.com, AT&T) and large global telcos in Spain, Latin America, the Philippines, etc.
With AOL's 7% stake in NTOP, the two companies have an ongoing relationship. In early November, they announced an agreement to allow AOL's instant messaging users to make PC-to-phone and phone-to-PC calls and access PC-to-fax, fax-to-PC and conference calling services, using NTOP's IT technology. Shortly after, a similar agreement with ICQ, a subsidiary of AOL, to provide Internettelephony services to users of ICQ's instant messaging service, was announced. Now, the focus is calling cards. Early last week, NTOP announced calling card deals with AOL and its CompuServe subsidiary.
For the next two years, Net2Phone will be the exclusive provider of telephony services on a co-branded, prepaid phone-to-phone calling card. The card will be sold and distributed in conjunction with AOL's instant messaging service. A similar deal was simultaneously announced with CompuServe. Under the terms discussed, AOL and CompuServe will promote phone-to-phone Net telephony cards for their customers, allowing users to place calls over Net2Phone's IP network to virtually anywhere in the world at reduced rates. The calling cards will be marketed throughout CompuServe and Net2Phone will handle back-end fulfillment, including the rating, routing, authorization, and customer service.
Of course, NTOP has long been selling pre-paid calling cards thru its own network of resellers and direct to customer sales. However, these new deals are significant because of their sheer size and the distribution power of AOL and CompuServe. With the rapidly growing worldwide market for pre-paid calling cards currently estimated at $1.5 billion, this deal is loosely valued at several million dollars, but could, over its two year lifetime, prove considerably more valuable.
When the news was released, NTOP shares closed up 3.81, at one point rising as high as 75, before finishing at 66 ó, on news of the deals.
With calling card deals just one more feather in NTOP's cap, this one remains one of my favorite Internet telephony stocks to watch.
Coming Next: Instant Share Price Upper: Internet Telephony
Comments on this article, and the Internet telephony industry in general may
be sent to A. Sahoo at lasertrolysis99@hotmail.com.
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