Skype Rings Up Another Telecom Partnership as IPO Buzz Grows

Skype Rings Up Another Telecom Partnership with KDDI as IPO Buzz Grows Skype has made a trans-Pacific connection with Japan's second-largest mobile carrier, announcing on Oct. 18 that it plans to offer its Internet phone and video chat service to KDDI's customers. The partnership, which is similar Skype's agreement with Verizon (VZ), could bode well for its IPO plans.

Skype had hoped to complete its initial public offering in 2010, but given the recent changes at the company -- such as a new CEO announced earlier this month -- that's not likely to happen before the new year arrives, say people familiar with the company. Former Cisco Systems executive Tony Bates is slated to take the reins as CEO at the end of October.

Converting Users to Paid Subscribers

Industry observers have been biding their time since Skype filed for its IPO in early August, indicating that it plans to raise $100 million, based on its registration filing fee. It has been nearly three months since that filing, which is the average amount of time it takes for a company to query institutional investors and come up with an initial pricing range, says Paul Bard, director of research for Renaissance Capital in Greenwich, Conn.

"We definitely think there will be interest in their IPO," Bard says. "It's the closest deal we've seen from the social networking space. They have a Facebook partnership and a lot of users that they are looking to find ways to monetize. Like other social networking sites, they're looking to convert their users into paid subscribers and see what other services they can layer over their platform."

Skype's recently arranged Facebook partnership allows its users to sign in, then text or call their Facebook friends directly from their Skype accounts.

Videochat on Smartphones

As of June 30, Skype had 560 million registered users, a 41% increase over the same time last year, according to its IPO filing with the Securities and Exchange Commission. The company, however, had only 8.1 million paying users during the three-month period ending June 30. A Skype spokesman declined to comment on the IPO, noting that the company is in a quiet period.

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Skype's partnership with KDDI is modeled on its recent strategic arrangement with Verizon. It calls for the carrier's customers to use Skype on selected smartphone models, without digging into their monthly minute or data usage plans. KDDI plans to launch Skype on its Android IS03 and IS01 models beginning in November. Earlier this year, Skype launched on the Verizon network's phones, and it also created an Apple (AAPL) iPhone app that puts it on AT&T's (T) network.

If Skype is able to price its IPO and get it out the door this year, it would join a surge in new offerings that have flooded the market in the second half of 2010, Bard says. In October alone, there have been 11 IPOs so far, with another 12 scheduled. For the year, a total of 105 companies have gone public, and by year-end, that figure is expected to hit 150, says Bard.

If IPOs reach that number, 2010 would more than double the 64 IPOs that took place in 2009. The IPO market has started to froth, says Bard, based on respectable performances from the new issues during the second half this year, a full pipeline of IPO filings and relative stability in the markets.
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