Telefonica gobbles up Jajah

A realised VoIP business plan

VoIP outfit Jajah got its Christmas wish, €145 million in cash from mobile operator Telefonica.

Telefonica, which operates as O2 in the UK, has bought Jajah lock, stock and barrel, gaining a presence in social networking sites as well as the opportunity to up sell services to the millions of users who signed up for the cheap phone calls Jajah offers.

Jajah competes with Skype and its ilk, offering low-cost Voice over IP phone calls routed over the internet, but differs in that calls are set up through the Jajah server which makes outgoing calls to both parties - so no VoIP encoding is required on the client side. That makes the service easy to use, and compatible with any phone system, but it also means Jajah isn't as cheap to use as rivals that rely on VoIP for end-to-end connections.

In a world where Twitter is worth a billion dollars €145m isn't really that much money, and Jajah has business customers to whom Telefonica would like to be selling services. The service is also well integrated into social networking services including Facebook, MySpace and Twitter.

Jajah users might not be as profitable as normal customers, but they do generate income (in the shape of termination fees paid for all those incoming calls) which makes Jajah a better partner than, for example, Skype. Telefonica would also like a presence on the social networking scene, so it can up sell to consumers as well as businesses.

For the moment Jajah will continue as a separate brand, while the operator tries to work out how to sell a lower-quality voice service without cannibalising their existing offerings, but at least that potential competitor is now in house, and thus more easily tamed.