EU To Give Green Light For Microsoft-Skype Takeover

Microsoft is on the verge of winning European approval for its planned $8.5 billion (£5bn) acquisition of voice over IP (VoIP) provider Skype, enabling it to clear one of the last remaining regulatory hurdles in the way of finalising the deal.

According to a report in the Financial Times, the EU competition commissioner Joaquín Almunia will give his blessing for the takeover without further scrutiny, allow it to go through almost immediately. This is despite concerns that Microsoft will end up bundling Skype’s software with its own Windows operating system, damaging competition in the market.

The US Federal Trade Commission cleared the deal in June, concluding that there was sufficient competition from rival online services such as Google Talk to permit the deal to go ahead. Competition reviews are still under way in Russia, Ukraine, Serbia and Taiwan.

Competing with Google and Apple

Microsoft first announced its intention to buy Skype 10 May 2011. The deal, which values Skype at around $13 for each of its 600 million registered users, will allow Microsoft to compete directly with Google and Apple smartphones which already feature video chat.

Under the terms of the agreement, Skype becomes a business division within Microsoft, headed by Skype CEO Tony Bates. Skype’s services will be meshed with a variety of products in Microsoft’s portfolio, including its Lync unified communications platform, Outlook, and Xbox Live.

Microsoft’s bid came after Google and Facebook were reported to be interested in buying Skype,  even though the company lost around $7 million last year on turnover of $860 million. Skype investigated a flotation earlier this year, which was estimated to be worth around $1 billion.

Opponents of the Skype deal have warned that Microsoft could limit Skype to Windows machines, or bundle Skype with Windows on new PCs. Microsoft has employed this tactic in the past with Internet Explorer, giving the company a disproportionate share of the browser market.

Microsoft has assured the European Commission that Skype will always be available on rival software platforms such as Apple’s iOS, Linux and Google’s Android operating systems. However, it admitted that it would have difficulty meeting demands for interoperability with other VoIP platforms, due to a lack of standardisation in the market.

Microsoft cosies up to Facebook

Some analysts have suggested that Microsoft’s acquisition of Skype could end up paying dividends for Microsoft in its competition against Google, by giving Facebook — in which Redmond owns a minority stake — another tool with which to battle for social-networking hearts and dollars.

Facebook has already started introducing video chat, powered by Skype, as part of a partnership announced on 6 July. Zuckerberg has also said a group video chat function — similar to that used by Google+ — is on the drawing board.

Skype is is a vital part of Facebook’s vision for a social web, and Microsoft now owns Skype. More than ever, Facebook and Microsoft will find themselves bound together in the battle of the titans.