Telefonica buys Internet phone provider Jajah

Jajah, which has headquarters in Silicon Valley, California and in Israel, offers free or very low-cost telephone calls such as Skype via Internet.

The company was founded in 2005 by Austrian entrepreneurs Roman Scharf and Daniel Mattes and has about 25 million clients worldwide.

Over the last few weeks, Jajah has attracted buying interest from Microsoft (MSFT.O) and Cisco CSCO.OZ, though financial news website TheMarker said on Sunday it would be sold to Telefonica.

Analysts at Banesto Bolsa described the deal as quite surprising, given that management has never spoken about this possibility, though they acknowledged it was logical given the threat posed to Telefonica's traditional revenues from calls made over the Internet. (Reporting by Robert Hetz; Writing by Judy MacInnes; Editing by David Holmes) ($1=.6986 Euro)