Spanish based telecommunications giant Telefonica (NYSE:TEF, news, filings) announced yesterday its intention to purchase Jajah for €145M in cash, which amounts to about $207M. That's about 6 times what Jajah's investors had originally raised, which means at least someone out there is already having a very Merry Christmas. While the deal is subject to approval by regulators in Spain, I find it hard to believe there will be any major hurdles. As deals go, this one is simultaneously tiny and huge.
It is tiny relative to Telefonica's size. Of course because it is a private company we don't know Jajah's revenue, but we can be pretty certain it is a fraction of a percent of Telefonica's $80B+. And yet, it is a very big deal nonetheless for various reasons that revolve around one simple truth. Jajah is a VoIP application company that specializes in enabling users to bypass and leave behind traditional carriers like, AT&T, FT, and ... Telefonica. They have been remarkably resilient and imaginative, with customers in 200 countries and a steady level of buzz. But to be bought by a PTT and not someone that looks more like Google is, frankly, a bit of a rift in the fabric of the telecom universe. It is as if Verizon were to buy Skype, or AT&T were to revive CallVantage.
For now, Jajah will keep its separate identity as its products are integrated into the European business of Telefonica. But what happens after that is the key. Will Jajah transform Telefonica? Or will Telefonica transform Jajah? If I were a betting man, you'd have to give me pretty darn good odds to go with the former. But it doesn't make any sense for Telefonica to pay this much for Jajah unless there is a larger, deeper plan at work here. It doesn't feel like a defensive move, Telefonica has been quite aggressive lately outside its home turf. Hence, it feels like Jajah's mojo will be directed against Telefonica's PTT brethren somehow in an effort to gain ground.
It's something to watch for in 2010 anyway.