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Phone firm gets $20 mln in funding

Rebtel Networks AB, a Swedish company offering to slash the cost of making unlimited international calls on mobile phones to $1 a week, has received $20 million, in an unusually large initial round of venture funding for a European company, the company said on Tuesday.

The funding from Index Ventures and Benchmark Capital, top European and U.S. venture capital firms, goes to a company formed only in January with just a few months of test marketing so far, but which nonetheless already is drawing parallels to the success of Web-calling phenomenon Skype.

Rebtel, short for Rebel Telephone, has just 16 employees.

The company was founded by Hjalmar Winbladh and Jonas Lindroth, two successful Swedish entrepreneurs, with an innovative plan to use the Internet to bypass the expensive charges mobile carriers level for placing international calls.

"The basic concept is we make all calls local," said Greg Spector, chief marketing officer of Rebtel, in an interview. "Each person creates local numbers," he said, adding: "Distance is a myth in the digital world."

"It's absolutely disruptive," Danny Rimer, general partner of Index Ventures in London, said in a phone interview.

"This is not just big for Europe. It's big for anyone who has got friends abroad," said Rimer, who also backed Skype in its early days. "This is a mobile Internet play to reduce your international calling rates to as close to zero as possible."

A year ago, eBay Inc. agreed to pay as much as $4.1 billion to acquire Skype. That company now has signed up more than 100 million users for its Web-calling services.

Rebtel can run on the world's more than 2 billion mobile phones, giving consumers the free or low-cost calling of Skype between international mobile phone users without special software, carrier arrangements or device modifications.

"(Rebtel has) the potential to become bigger than Skype," Jeff Pulver, a leading U.S. advocate for voice-over-internet phone technologies, writing last month on his Web site.

In effect, Rebtel is a Web-based version of dial-around international call-back services. Rebtel sees its service as extending Skype-like services to conventional mobile phones rather than competing with Skype for now, Spector said.

"We believe the relationship between the mobile carriers and their customers is broken," Spector said. "It's broken and it doesn't need to be," he said.

Mobile phone users who sign up on Rebtel's Web site can create local phone numbers for themselves and friends abroad. Details can be found at http://www.rebtel.com/ . The service connects local calls to the Internet using VoIP technology.

This allows a person in San Francisco, for example, to receive a local San Francisco phone number to call a friend in London. The friend in London gets a local phone number to call back to San Francisco, eliminating charges between callers.

Rebtel services can currently be used by residents of more than 35 countries, including the United States, Britain, the Netherlands, Sweden and Poland, according to the company.

Outside of these select countries, calls cost, for example, 4 cents to China. No charges apply for calls that last less than 30 seconds, encouraging callers to call first, hang up and have other callers call back cheaply on Rebtel. It aims to add 10 more countries by the end of the year, Spector said.

Self-funded to date, the new financing will be used to help jump-start Rebtel's growth, expand business development and marketing efforts, and speed up expansion into more countries around the world, the Stockholm-based company said.

Rebtel's co-founders Winbladh and Lindroth also formed Sendit AB in 1994, an earlier mobile Internet software company that was eventually acquired by Microsoft Corp. in 1999 for around $150 million.