Summary:

Time Warner has bought 1.46 million shares or 3.1 % stake in Net2Phone, according to documents filed with SEC. The decision indicates that Time Warner and its AOL division might be getting serious about VoIP business. The timing of the announcement is certainly intriguing. Today Liberty […]

Time Warner has bought 1.46 million shares or 3.1 % stake in Net2Phone, according to documents filed with SEC. The decision indicates that Time Warner and its AOL division might be getting serious about VoIP business. The timing of the announcement is certainly intriguing. Today Liberty Media, which is majority controlled by cable don, John Malone increased its stake in IDT Corp., a long distance and voice over IP company promoted by Howard Jonas, a former weenie-vendor turned telecom tycoon. Under the terms of the deal, Liberty Media swapped its interest in Net2Phone for IDT shares.

Liberty Media will exchange all of its direct and indirect interests in Net2Phone for (3,754,480) newly-issued shares of IDT Class B Common Stock. At the close of this transaction, IDT will own 41.2% of the equity of Net2Phone and have voting control. Liberty Media will own 17.2% of IDT Corp. “With this one transaction, IDT brings itself closer both to Net2Phone, the company it created nearly a decade ago and the leader of the Voice over Internet Protocol (VoIP) revolution, and to Liberty Media, a great strategic partner,” said Jim Courter, IDT’s CEO.

I suspect with the interest in VoIP increasing, there is a good chance of Net2Phone shares to catch fire so to speak. Net2Phone, thus far has been trying to work with cable providers to offer VoIP services, albeit with limited success. More recently, the company signed a five-year deal with Millennium Digital Media, which will sell Net2Phone’s voice service to its 250,000+ customers in markets such as Baltimore, Detroit, and Seattle. However, the most interesting part of the whole deal is the investment by Time Warner. Given that AOL has just started to chase the VoIP market in Canada, one suspects this could be part of their move into the US market. Time Warner has been working with Sprint and MCI to roll out VoIP services in the US as well. So this is very curious.

There is something very curious in the SEC filings. There is one box checked X (now less than 5% ownership). According to a very smart person who tipped me off, this might be because AOL had owned shares of the company but sold them and that was the last time AOL/TW filed a statement of beneficial ownership that put the stake at over 5%. But … this is a new purchase Time Warner made on behalf of its subsidiary, AOL. There was report about AOL and Net2Phone working together back in August 2004, in News.com.

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