AT&T, Yahoo Invest in Net Telephony Player

SAN FRANCISCO (03/31/2000) - It's been a big deal-making day for Internet telephony specialist Net2Phone Inc., with both an AT&T Corp.-headed consortium and Yahoo Inc. announcing separate acquisition investments in the company worth US$1.4 billion and $150 million, respectively.

Yahoo bought a minority equity stake in Net2Phone equivalent to a more than 5 percent share in the company, Net2Phone said in a statement issued today.

Under the terms of the agreement, Net2Phone will swap 2.8 million shares of its common stock for about 806,000 shares of Yahoo common stock, in a deal valued at $150 million, Net2Phone said.

The Yahoo deal comes hard on the heels of an announcement by AT&T Corp. that it is heading a consortium to invest a total of $1.4 billion in Net2Phone for a majority, 32 percent stake in the company.

The investment group includes British Telecommunications PLC and AT&T's cable television programming unit, Liberty Media Group, the U.S. carrier said in a statement issued today. [See "Report: AT&T, BT, AOL to Take $1B Net2Phone Stake," March 31.]AT&T will invest $725 million for a 51 percent interest in the consortium, with the other partners buying the rest of the interest.

Under the terms of the AT&T lead deal, the investment group will buy 4 million shares of newly issued Class A Net2Phone stock for $75 per share. The group will also buy 14.9 million Class A shares for $75 per share from IDT Corp., which currently owns 58 percent of Net2Phone. The deal will give the consortium a 32 percent economic stake in Net2Phone and a 39 percent voting stake.

"This is good news for AT&T and Net2Phone," Jeff Kagan, an independent telecom industry analyst and commentator, said in an e-mail response to questions.

"AT&T gets technology that can reduce costs and increase revenues, and Net2Phone gets a big vote of confidence, putting them on the map, and giving them access to millions of AT&T customers. It's win-win."

Using the Internet to make long-distance calls can help users slice a chunk off their phone bills, according to Net telephony proponents. Critics respond that the Internet isn't reliable enough to carry real-time voice calls, and users have been fairly slow to adopt the technology.

By switching an "Internet switch" on their phone, Net2Phone allows users to choose between calling over a traditional circuit-switched network or an IP (Internet Protocol) network, Net2Phone saidYahoo, based in Santa Clara, California, can be reached at +1-408-731-3300, or at http://www.yahoo.com/. Net2Phone, in Hackensack, New Jersey, can be reached at +1-201-530-4000, or at http://www.net2phone.com. AT&T, in Basking Ridge, New Jersey, can be reached at +1-908-221-2000, or at http://www.att.com/.

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