T-Mobile's Parent, Deutsche Telekom, Invests In VoIP Startup Jajah

The investment marks the first by a cell phone service provider in VoIP and is a signal that the German company is willing to risk the cannibalization of its existing landline service.

Jajah, a startup IP telephone calling company, attracted its second major investment Monday when it announced that Deutsche Telekom, the parent firm of T-Mobile in the United States, made an investment of less than 5% in the firm.

The investment marks the first by a mobile phone service provider in the booming VoIP business and is a signal that the German telecom company is willing to risk the cannibalization of its existing landline service to hold on to its market share. Until now, cell phone companies have been reluctant to promote VoIP technology for fear it will cut into their existing revenue streams.

Intel invested $20 million in Jajah earlier this month. The new investment also positions Jajah to compete with Skype in the booming VoIP market.

"The communication landscape is rapidly evolving," said Andreas Kindt, chairman of Deutsche Telekom's T-Online Venture Fund, in a statement. "This investment aligns perfectly with our strategy."

Founded by Austrian entrepreneurs Roland Scharf and Daniel Mattes, Jajah has also attracted financing from Sequoia Capital. Scharf and Mattes moved Jajah to Silicon Valley and have already signed up 2 million users for their service, which they claim is easier to use than Skype. Jajah has said it expects to sign at least 5 million users by the end of the year.

Jajah users can dispense with cumbersome headphones; a subscriber simply types in a destination phone number on a telephone key pad, the call travels over Jajah's servers, and a few moments later the subscriber is connected with the number called. Long distance calls are typically billed at local rates. Calls between registered Jajah subscribers are free.

Already a symbiotic relationship between Jajah and Deutsche Telekom's T-Mobile is hinted at. The lead promotional notice on Jajah's Web site features T-Mobile's new Wi-Fi enabled Wing smartphone. "The Wing operates on GSM-based wireless infrastructure and like [Apple's] iPhone, gives users high-speed data access via Wi-Fi," the notice reads. "With the release of the Wing, T-Mobile is demonstrating they understand that customers are going to expect high-speed data services, and it's better to be in front of that parade than behind it."

The Jajah site features a demonstration of the Wing using the VoIP service. Jajah has also featured a prototype of Jajah operating on the iPhone, which is due to be released next month.

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