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Net2Phone Out2Dry?

Light Reading
News Analysis
Light Reading
8/26/2004

A Sprint Corp. (NYSE: FON) win could spell trouble for Net2Phone Inc.'s (Nasdaq: NTOP) push into cable telephony.

Sprint picked up a cable-telephony contract with Mediacom Communications Corp.. At least one analyst, Ari Moses, an analyst with Blaylock & Partners, says it could be a sign that cable companies won't be playing into Net2Phone's business model.

"This decision by Mediacom is a meaningful competitive loss for NTOP," Moses writes in a note to clients. "This decision leads us to question whether NTOP can close deals with the other top tier-II providers."

A carrier in its own right, Net2Phone began packaging its services for sale under the Net2Phone Cable Telephony brand in October. Other providers, including 8x8 Inc. (Nasdaq: EGHT) and Vonage Holdings Corp., are trying a similar tactic, offering their prepackaged services to cable providers (see CommPartners Plays Host to MSOs).

But by going with Sprint, Mediacom seems to be snubbing that model, instead going with a "build" model, Moses writes. That's because Sprint's offering adds crucial telecom features such as 911 service to a carrier's own telephony buildout.

There's good news to be had, though. Mediacom's contract is further evidence of cable providers' interest in telephony, a general trend that ought to help Net2Phone. And Moses does expect Net2Phone to pick up a "meaningful share" of the outsourced cable telephony market. The only problem is that the company "has yet to deliver a meaningful slate of customers," he writes, noting that it's announced six deals, with only Liberty Cablevision of Puerto Rico having deployed.

Net2Phone floated a $58.5 million stock offering in November to fuel its push into cable. Participating investors included IDT Corp. (NYSE: IDT) and Liberty Media Corp. (NYSE: LMC), owner of Liberty Cablevision (see Net2Phone Raises $58.5M). Blaylock Partners was one of the stock offering's underwriters.

Net2Phone officials were not immediately available for comment. The company's stock was down 16.5 cents (5%) at $3.17 in midday trading on Thursday.

— Craig Matsumoto, Senior Editor, Light Reading

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materialgirl
materialgirl
12/5/2012 | 1:20:04 AM
re: Net2Phone Out2Dry?
NTOP is a mysterious company. They do offer a service to cable cos, but a big part of a recent quarterly call was about how Liberty Media chose to buy out assets, in Puerto Rico I think, rather than use the NTOP service. That could be a sign of disintermediation. Even after the call, it was not clear what they really bring to the party, or why Liberty chose that route.
netgenius
netgenius
12/5/2012 | 1:19:57 AM
re: Net2Phone Out2Dry?
Looks like Sprint has several cable customers queued up. Why is Sprint winning these?
Skinner
Skinner
12/5/2012 | 1:19:55 AM
re: Net2Phone Out2Dry?
Look at the history, Sprint has the most reliable network. For example look and see who has the fewest FCC reportable outages in past years.
materialgirl
materialgirl
12/5/2012 | 1:19:54 AM
re: Net2Phone Out2Dry?
Is this a new battle, the IXCs helping the cable cos bash the RBOCs with VoIP? How does Sprint keep this service out of its own local territories? Perhaps in the post-UNE world it is now nuclear winter - since the IXCs can't rent lines at a profit, just take those local profits out.
netgenius
netgenius
12/5/2012 | 1:19:17 AM
re: Net2Phone Out2Dry?
This would be Sprint eating its young to ensure that they have the cable/wireless market sewn up before anyone else can get there. The cost of this is potentially serving up their Local business on a platter to the cable competitors/partners.
netgenius
netgenius
12/5/2012 | 1:19:17 AM
re: Net2Phone Out2Dry?
Reliability might be part of it but I doubt it is a large part. My question is why is Sprint first to market with a MGCP solution? What makes them able to do this and ATT can't? Is it their Nortel solution? I attended a meeting at Supercomm where there was talk of some Session Border Controller device that Sprint was using to enable them to be first to market in the cable space.
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