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iBasis shares ring in on first trading day

The provider of technology for Internet-based phone service jumps more than 150 percent following an IPO that priced above its range.

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iBasis, a provider of technology that allows telephone calls to be routed over the Internet, jumped more than 150 percent in its first day of trading.

iBasis rose 24.25 to 40.25, after peaking early at 45, on 10.4 million shares today.

Yesterday the company priced at $16 per share, above its expected range, reflecting investor demand for technology shares particularly within the intersection of the telecommunications and Internet industries.

With the IPO, iBasis raised $108.8 million. The shares trade under the ticker "IBAS."

iBasis, formerly VIP Calling, provides the technology needed by telephone companies to route calls over the Internet. According to International Data Corporation, sales in the Internet telephony industry will reach $500 million this year and soar to $12 billion by 2003.

However, the growth won't be free of static. iBasis noted in its regulatory filing that "a number of countries currently prohibit or limit competition in the provision of traditional voice telephony services. Some countries prohibit, limit, or regulate how companies provide Internet telephony [and] some countries have indicated they will evaluate proposed Internet telephony service on a case-by-case basis and determine whether to regulate it as a voice service or another telecommunications service."

The company, according to its prospectus, was contacted by the Israel Ministry of Communications last month. The officials accused the company of providing unauthorized telecommunications services.

iBasis is not alone. Other Internet protocol (IP) telephony companies, such as Net2Phone, also have had their share of red tape in overseas markets.

Net2Phone, which Tune in to CNET News.com TV's IPO Forecast allows PC users to place phone calls via the Internet, had its PC2Phone services blocked by some government-controlled telephone companies in Asia and the Middle East, according to its secondary offering filing.

The blockages cost the company as much as $250,000 in revenue in the first quarter in 2000. The company noted that 69 percent of its customers are located outside the United States, making entanglements with foreign governments a potentially serious issue.

Meanwhile, iBasis could stand to lose a sizable chunk of revenue from its Israel operations. During the nine-month period ended September 30, iBasis generated $1.5 million in revenue from Israel.

iBasis, which is in discussions with government officials, will continue to terminate calls in Israel until a final decision is reached, according to the filing. A spokesman for iBasis could not comment on the issue, noting the company is in an SEC-mandated quiet period due to the IPO.

Sarah Hofstetter, a Net2Phone spokeswoman, said various regions, particularly Asia, have tried to block their service since it was first offered in 1996. But in the most recent flap, most of the issues have been resolved, she said.

Despite these obstacles IP telephony companies are facing in foreign markets, Mark Winther, vice president of worldwide communications for International Data Corporation, said he is not concerned with such moves.

"I don't think this will be a big issue for companies. I think it's difficult for foreign governments to prevent IP telephony from happening in their countries," Winther said. "It also runs counter to the policies for many of these countries with respect to open trade and deregulating markets."

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