Rupert Murdoch's News Corporation entered into negotiations with Skype in a bid to buy the internet telecoms provider for around $3bn, but the talks broke down, according to the Independent on Sunday.
Skype, which is based in London, is seen as one of the pioneers of internet telephony.
The newspaper said that the discussions fell apart last month, just before Murdoch's son Lachlan quit his father's empire.
Skype was founded by Niklas Zennstr?m, a Swedish businessman who also co-founded Kazaa, the file-sharing software provider and Napster rival that enables users to download music from the internet for free.
Skype's free software allows users to make PC-to-PC internet-based calls worldwide at no cost and is seen as a threat to traditional telephone companies. The company claims over 100 million users, with 150,000 new users signing up daily.
A sale to News Corporation would represent a huge profit to the Skype founders and backers who created the company with funding of $20m.
Officials at both companies declined to comment.