Verizon Said to Be Planning to Put Skype on Its Mobile Phones

Verizon Wireless, the largest U.S. wireless carrier, will include Skype Technologies SA’s Internet- calling software on phones to stave off competition from AT&T Inc., according to two people familiar with the matter.

The service will let customers make Skype calls over the company’s 3G data network, said the people, who requested anonymity because the agreement hasn’t been announced. Verizon and Skype said yesterday that they will hold a joint press conference Feb. 16 at the Mobile World Congress in Barcelona, Spain. The companies gave no further details.

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Verizon is relying on 3G data plans for growth as demand slows for voice calls. Teaming up with Skype could draw new users, who might boost spending on extra features. The agreement sets the stage for similar deals with other carriers, said Vanessa Alvarez, an analyst at Frost & Sullivan in Boston.

“It’s a big win for Skype,” Alvarez said. “The wireless operators and incumbent service providers are starting to think differently and accept these types of partnerships. Others are going to follow.”

Brenda Raney, a spokeswoman for Basking Ridge, New Jersey- based Verizon Wireless, declined to comment. Jennifer Caukin, a spokeswoman for Luxembourg-based Skype, declined to comment.

Skype will be preloaded onto a range of phones, including lower-end models, the people said.

Hong Kong Carrier

Skype’s software has already proven its value in retaining users — and even attracting new subscribers — for at least one company: Hong Kong-based Hutchison Whampoa Ltd. That company’s carrier, known as 3, began selling phones preloaded with Skype’s software in 2007.

The device, called Skypephone, attracted hundreds of thousands of new customers. Almost 80 percent of Skypephone subscribers are new Hutchison customers, Skype told Bloomberg BusinessWeek last year.

Verizon has been trying to differentiate itself from AT&T, the second-largest U.S. mobile-phone carrier, which has exclusive U.S. rights to Apple Inc.’s iPhone. An agreement with Skype, which has more than 520 million users, may give it an edge against AT&T, said Rebecca Swensen, an analyst at IDC, a research firm in Framingham, Massachusetts.

“What’s important is that Verizon understands that, at some point, they are going to be losing voice minutes to the data world,” Swensen said. “This makes their platform more valuable for end-users. It could be a differentiator for Verizon Wireless.”

AT&T’s Network

Skype already works on AT&T’s Wi-Fi networks in the U.S. Skype has said it’s developing a version that will work on AT&T’s 3G network as well.

Skype has been lobbying the U.S. Federal Communications Commission to prohibit carriers from blocking Internet traffic on their wireless networks, something that’s hindered its growth. The agency may vote on these so-called net-neutrality rules this year.

Verizon Wireless is co-owned by Verizon Communications Inc. and Vodafone Group Plc. Revenue from its data plans, which make up almost a third of wireless service sales, grew 46 percent last quarter. That was almost double the carrier’s total sales growth of 23 percent.

Verizon cut the price of unlimited calling plans over its voice network last month, making them $69.99, down from $99.99. The new price is part of a larger move to get subscribers to pay for more data plans. AT&T cut its prices the same day.

Skype aims to reach $1 billion in revenue by 2011. Sales and profit growth accelerated last year, Chief Executive Officer Josh Silverman said in an interview last month. Skype is the largest provider of international calling services, accounting for more than 12 percent of all cross-border voice traffic, according to Washington-based research firm TeleGeography.

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Verizon Communications fell 11 cents to $28.93 yesterday in New York Stock Exchange composite trading. Shares of the New York-based company have dropped 13 percent this year.

Skype is owned by a group of investors led by private- equity firm Silver Lake. EBay Inc., its former owner, retained a 30 percent stake in the company.

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