|
AT&T, Yahoo! call on Net
|
 |
March 31, 2000: 3:11 p.m. ET
Telecom, Net giant buy $1.6B in stakes in Internet telephone firm, Net2Phone
|
NEW YORK (CNNfn) - In two separate deals Friday, Internet telephone company Net2Phone rang up $1.6 billion in investments from Yahoo! and a group of telephone companies led by AT&T.
The AT&T group, which includes British Telecom (BTY: Research, Estimates) and Liberty Media, said Friday it is acquiring a 32 percent stake in Net2Phone for $1.4 billion.
Yahoo! later announced its investment of $150 million for a 5 percent interest in Hackensack, N.J.-based Net2Phone in a stock deal.
AT&T said it will implement Net2Phone technology on its AT&T WorldNet Internet portal within days, allowing users to place telephone calls directly from their computers while online. Net2Phone currently handles 40 percent of all Internet-placed telephone calls.
"This gives us a very persistent presence in these portals and browsers, with voice-over-IP [Internet protocol]," said C. Michael Armstrong, chairman and CEO of AT&T. "The ability to attach other services and applications to that voice service was very much a part of our strategy."
 In afternoon trading, news of the investments sent Net2Phone (NTOP: Research, Estimates) shares up 4-5/8, or 8.4 percent to 60.
Terms of the AT&T deal call for the group to buy four million newly issued Class A shares from Net2Phone for $75 each. The consortium also will buy 14.9 million Class A Net2Phone shares from IDT Corp. (IDTC: Research, Estimates), Net2Phone's controlling shareholder, for $75 per share.
IDT's chairman and chief executive officer, Howard Jonas, said, "I'm delirious. I wish I was a dog, so I could jump in everybody's lap and lick their face; this is unbelievable. This is, I think, the biggest day in telecommunications since Bell called Watson."
Under the second deal, Net2Phone issued to Yahoo! 2.8 million shares of common stock in exchange for 806,000 shares of Yahoo! common stock, valued at $150 million.
"Yahoo!, AT&T and other major players seem to believe there is a tremendous amount of promise in Internet telephony," AT&T's spokesman Burke Stimpson said. "AT&T has been saying that what telephone poles were to our past, Internet protocols will be to our future."
At the close of the transactions, the AT&T group will have a 32 percent stake in Net2Phone, worth roughly $1.4 billion, and a 39 percent voting stake.
"AOL (AOL: Research, Estimates) is on this [Internet protocol] standard ... and we expect to work with Microsoft imminently, so this will be the world standard. MCI WorldCom (WCOM: Research, Estimates) is not going to have the carrier market to themselves anymore," IDT's Jonas said.
Howard Balter, CEO of Net2Phone, told CNNfn that the AT&T and Yahoo! investments brings validation to the company. [WAV 421kb] or [AIF 421kb]
Speaking about whether AT&T sees users making calls via their PCs instead of phones, Armstrong said he saw the use of both, with some substitution.
"People use not just personal computers, but telephones, televisions, wireless and other devices with this technology so that minutes will migrate over time," said AT&T's Armstrong. "We really don't see a mass substitution or a great big cliff ahead of us, but rather that people will use this [Net2Phone applications] in conjunction with activities that they are performing in the Internet portal space."
AT&T will pay $725 million for a 51 percent interest in the group. The other partners in the group are expected to purchase the remaining $675 million partnership interest.
"We think AT&T could make savings, and make an additional profit of $10 to $20 billion a year by using this system," said IDT's Jonas.
In Friday morning trading, AT&T (T: Research, Estimates) was off 1/4 at 57-9/16, IDT (IDTC: Research, Estimates) rose 3-3/8 to 40-5/8, and Yahoo! (YHOO: Research, Estimates) was up 7/8 at 170-3/8. 
--Click here to send e-mail to Michele Masterson
|
|
|
|
|
|
Net2Phone
AT&T
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
