IBasis Merger Transforms Holland's Telecom Into A Wholesale Carrier

A deal to own 51% of iBasis places the company in the ranks of the top four international long distance providers.

By W. David Gardner
InformationWeek
October 5, 2007 06:00 AM

One of the least-known but most-used telephone services in the world, iBasis, of Burlington, Massachusetts, merged this week with Royal KPN, the national carrier of the Netherlands.

The deal, which calls for Royal KPN to own 51 % of iBasis, places the company in the ranks of the top four international long distance providers. IBasis isn't exactly a household word with consumers or even in the telecommunications industry because it works behind the scenes as a wholesale carrier for companies like KPN Mobile, AT&T(T), Verizon(VZ), Vodafone(VOD) Group, China Mobile, Qwest(Q), Skype, Telecom Italia, and Telefonica.

A representative interconnection arrangement, for instance, was announced Wednesday when iBasis reported that it has contacted with Cable & Wireless Panama to route the Panamanian operation's international voice traffic over its iBasis Network. The Panamanian company will route international traffic over iBasis' VoIP network to any global country but largely to neighboring countries including Honduras, Cayman Islands, Costa Rica and Columbia as well as to North American.

Historically, iBasis has been on a roller coaster ride, hitting a $3.3 billion market valuation high in 2000 at the height of the telecom bubble, then plunging to $12 million in 2002; it's been on a relentless upswing since then.

While precise figures for the current fiscal period aren't available, the new combined iBasis-Royal KPN operation would have recorded $1.3 billion in revenue in 2006 with iBasis accounting for $511 million of that total, according to media reports.

The combined company carried more than 20 billion minutes of international VoIP traffic in 2006.

Royal KPN and iBasis had originally announced their intention to merge several months ago, but the deal was held up while iBasis' stock options practices were examined.