European Telecom Market to be Hit Hardest by SKYPE – Evalueserve Study

According to a recent study by Evalueserve, ‘The Impact of Skype on Telecom Operators’, the European Telecom market is expected to be hit the hardest due to the fast and accelerating uptake of Skype, which is by far the most successful P2P (peer-to-peer) VoiP solution available around the world today.

The report says that Skype has revolutionised VoiP telephony by offering high quality voice transmission, and by reducing the cost to zero for Skype-to-Skype calls and to a fraction of current long-distance rates for Skype-to-Fixed/Mobile network calls.

European operators are much more exposed due to the characteristics of European telecom markets where the calling and roaming rates, as well as the share of roaming calls is higher and local calls are charged by the minute, as opposed to a flat monthly fee in the US. Worldwide, the figure of regular retail Skype users is likely to be between 140-245 million by 2008, the study reports.

The Evalueserve study further projects that incumbent telecom operators who combine fixed and mobile networks are likely to face a significant risk of permanent reduction in overall profitability by at least 22-26% and reductions in revenue by 5-10% as a direct impact of Skype by 2008.

Marc Vollenweider, CEO and President of Evalueserve said, “Not only that the VoiP solutions offered by incumbents will not be able to offset their lost profits, they would also accelerate the cannibalisation of existing profits. In addition to this, it is not even clear whether such VoiP solutions will be competitive against Skype.”

Presently, Skype has two million users in the US and 13 million users worldwide and the company claims 80,000 new subscribers daily.

The Evalueserve report also states that fixed line operators, and especially long-distance operators, will be much more exposed than mobile operators in a base case scenario, as a much larger share of the fixed line traffic will be exposed to Skype. Additionally, a combination of mobile phones and Skype via Internet delivered by cable may make fixed line access redundant altogether thereby saving the subscription access fees. However, mobile operators will face a more significant exposure, once Skype and other VoiP players offer mobile solutions by reducing roaming fees and mobile voice traffic significantly. The profitability of the high fixed-cost telecom operators is likely to be hit significantly.

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