3 of UK Marries Itself to Skype; Shakes Up the Mobile Market

Ever since Skype’s iPhone client enabled Skype-to-Skype calls (and send IMs) for free over Wi-Fi, I’ve been wondering what the next step towards the mobilization of Skype would be. The answer came today by the way of 3 UK, a 3G wireless operator. The company unveiled a new $3, Skype-enabled SIM card that will allow anyone to make Skype-to-Skype calls and send IMs from any phone on 3’s wireless broadband network. Of course, for the service to work, mobile subscribers would have to buy 3’s data plans, which are often more expensive than those just for voice. Skype accounts for 1.5 million minutes on the 3 network everyday.

From 1 May, there will be no data charges or top-up fees for either contract or pay-as-you-go customers who use Skype on 3’s network. Anyone with a 3 handset will be able to buy a 3 SIM with Skype enabled and talk as much as they want to other Skype users without ever having to pay another penny. During the summer, 3 will expand its offer to make it possible for anyone with a compatible 3G phone to take advantage of free Skype calls, whether or not their phone is from 3.

3 was the first 3G mobile company to offer a phone that offered Skype as a core functionality. It did so with the help of iSkoot, a San Francisco-based company. 3’s move is in sharp contrast to other traditional mobile companies such as T-Mobile, which has been treating Skype like a leper. I applaud 3 for recognizing the undeniable: Mobile is going to be all about data and voice will be just another app running on that data network.

While others have looked at Skype as a potential threat to voice and text revenues we see another advantage. Did you know when you call a friend on a different mobile network their network will charge your operator a fee for carrying the call? This is called a Mobile Termination Rate or MTR and is currently charged at around 4.7p or more for every minute of the call.

At our Mobilize 08 conference last year, 3 executive Frank Meehan explained the rationale behind embracing Skype.

The Skype phone makes us more margin than any other phone in pre-paid with the exception of the iPhone. About 65 percent of the UK market is prepaid and only 5 percent of those are using data. We also have a massive churn in prepaid in all markets where prepaid exists. So we basically told people, if you spend 10 pounds a month and top it off every month, you get Skype for free. That’s driven incredible loyalty to the device. We have a huge level of top-offs and we’re seeing growth on voice and text on those devices. So we built everything into the address book and you’re always logged into Skype and everything is integrated so that ease of use is integrated, and that’s driving usage. It works and it’s very profitable for us.

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