Wal-Mart Skype Offering Indirectly Helps Vonage

Wal-Mart (WMT-NYSE) is increasing it electronic sales, but this morning the press release was specific to Pre-Paid Skype cards now being available in 1,800 Wal-Mart Stores. Shoppers can purchase a $20.00 pre-paid card and redeem it for Skype credit to make inexpensive international calls at rates as low as 2.1 cents per minute. Another pre-paid card is available in stores for a three-month subscription to the Skype Unlimited Calling Plan for just $8.85 for three months of unlimited Skype calls to any landline or cell phone number in the U.S. and Canada.  Up to nine different Skype Certified hardware products are available within branded Skype Internet Communications sections inside Wal-Mart stores’ electronics department. 

What is interesting here is that this indirectly helps Vonage Holdings (VG-NYSE) even though this is eBay’s (EBAY-NASDAQ) Skype service.  Vonage is under a patent fight with Verizon (VZ-NYSE), but Wal-Mart already sells a Vonage Linksys adapter.  Neither company is a one-trick pony for Wal-Mart.  Vonage shares are up just under 1% at $3.50 on the day. 

The press release cites an interesting statistic: According to the Telecommunications Industry Association, 9.9% of all landlines in the U.S. were VoIP lines in 2006, and this will rise to 34.1% by 2010.  As users get more and more used to communicating they may choose to go to a provider such as Vonage rather than choose a SkypeIn full service feature that allows incoming calls with a dedicated phone number.  Maybe it’s a small percentage but if this figure is accurate then that still leaves a lot of room for gains.

Jon C. Ogg
May 14, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.

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