IDT Corporation

IDT's Net2Phone enables calls to be made over the Internet using standard telephones. IDT Corporation is a leading provider of long-distance telephone access, Internet access, and global Internet telephony services. Its telecommunications activities include wholesale carrier services and prepaid calling cards. Launched as International Discount Telecommunications Corporation, the company pioneered international callback telephone service with a technology allowing anyone around the world to bypass the high cost of placing international calls from countries outside the United States. The company's first customer was NBC, which needed to be in frequent contact with a three-man team in Barcelona, Spain, preparing for the 1992 Summer Olympic Games. By the end of 1991 the company had 150 customers, some of them Fortune 500 firms, such as PepsiCo, Inc. Few, if any, were foreign enterprises, because they were fearful of angering their national telephone companies--most of them government-owned monopolies. France Telecom threatened legal action, for example, before reducing its own rates so much that Jonas pulled IDT out of the country. International Discount Telecommunications used the expertise derived from, and the calling volume generated by, its call-reorigination business to enter the domestic long-distance business in late 1993 by reselling the long-distance services of other carriers to its domestic customers. As a value-added service for these customers, the company began offering Internet access in early 1994. IDT also introduced an international fax service, offering a new, brand-name machine to any customer who would commit to sending $500 worth of such calls over the next two years and promising free e-mail and Internet access as well. Some 7,000 small businesses had signed up by midyear. The company also got a boost when the Federal Communications Commission denied AT & T Corp.'s 1992 petition to ban callback services. International Discount Telecommunications was offering Internet access to some 10,000 corporate clients in 80 countries in late 1995, when it announced that international computer users could soon use its links to make telephone calls to the United States or Great Britain over the Internet for the price of local calls. In August 1996 the company introduced PC2Phone, which it called the first commercial telephone service to connect calls between personal computers and telephones over the Internet. There were about 350,000 customers for that service in late 1997, when IDT introduced Net2Phone Direct, which enabled users to make both international and domestic calls over the Internet using standard telephones. The company began marketing prepaid calling cards in January 1997. IDT was delivering its telecommunications service over a network of 70 switches in the United States and Europe, and it owned and leased capacity on 16 undersea fiber-optic cables. It was obtaining additional transmission capacity from other carriers. The company also was operating a domestic Internet dial-up network consisting of multiple leased lines. By acting as a 'carrier's carrier,' IDT was providing wholesale carrier service to about 125 domestic and international customers. Wholesale carrier sales represented 39.5 percent of the company's total consolidated revenues in fiscal 1999. Sales of prepaid calling cards--some 50 million in the fiscal year--generated even more money, amounting to 49.7 percent of total consolidated revenues. IDT's rechargeable cards, distributed primarily through in-flight magazines, allowed users to place calls from 43 countries through international toll free services. Principal Subsidiaries: Genie Interactive Inc.; IDT America, Corp.; IDT Debit Card Limited; IDT Europe B.V.; IDT Global Ltd.; IDT International Corp.; IDT Internet Services, Inc.; InterExchange, Inc.; Internet Online Services, Inc.; Media Response, Inc.; Net2Phone, Inc. (56%); Nuestra Voz Direct Inc.; Rock Enterprises, Inc.; Union