15 Comments

Summary:

That BellSouth is buying Vonage is even a rumor, that’s just loco. Why in the name of god would they pay $4375 per subscriber (total $3.5 billion) when they very well know that Vonage customers bail much before the vital two year pay-off period is over. […]

That BellSouth is buying Vonage is even a rumor, that’s just loco. Why in the name of god would they pay $4375 per subscriber (total $3.5 billion) when they very well know that Vonage customers bail much before the vital two year pay-off period is over. Why would they spend $3.5 billion to buy Vonage when for $6.7 billion they can buy Qwest which has a) 1.122 million DSL customers, you know the kind of technology you need for Vonage to work, and b) $13.809 billion in revenues. I am glad BLS is declining to dignify the rumor and declining to comment.

Andy adds, “The price of $3.5 billion seems almost excessive and for 800,000 customer or so, no real in house technology, a team that would largely go bye bye after acquisition, I don’t see the value.” On further thought, it is more like wishful thinking even though $3.5 billion is the price the Vonage investors would like to get for the company they has stuffed with dollars.

These are tough times for indie VoIP providers, especially with the cable guys getting their act together. Net2Phone is a cheaper option, and despite what people might think BellSouth still is a brand, and it is many times bigger than Vonage. And if…. and that’s a mighty big if, BellSouth does buy Vonage for that price, I will surely put this right up there with classic telecom disasters such as AT&T selling of cable broadband business (because analysts said so!) and MCI merging with WorldCom.

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  1. EXCELLENT NEWS FOR XTEN SINCE VONAGE SELL XTEN’S SOFTPHONE.

  2. Martino Mingione Wednesday, July 13, 2005

    Wow, at $4375 per subscriber, that would mean that each Vonage subscriber would be worth as much as each Cablevision subscriber. The Dolans attempt to bring the cable company private is pegged at that metric. The Adelphia transaction was valued at $3500 per sub.

    Even though the Vonage story is a rumor, do VoIP companies really think that this valuation is realistic?

  3. well see SIRI at close to 10 bil in market cap which gets $13 a month charge per subs then vonage which charge atleast $25 per subs monthly,vonage will have 1.2 mil by year end + don’t forget the video over ip and wirless vonage.

  4. An Absurd Rumor

    Apparently, theres a rumor going around

  5. One more time, there is no revenue in video over IP. After all, VoIP is free with in the walled garden. Similarly, video over IP should be free. Attempts to charge have ended in failure, as demostrated by other providers.

  6. The discussion on cost per subscriber is apples and ornages. That’s valid for discussions on established cable systems, telco CO’s and lines and where cash flow is a primary factor. It’s not valid for valuation of something like Vonage which would be more similar to growth companies. That’s not saying 3.5B doesn’t seem out of line unless there’s a lot that comes with it that’s unknown, since Vonage is private.

  7. Thomas Hirsch Thursday, July 14, 2005

    Look at it this way: How much would it cost to set up a VoIP service with 800,000 paying customers (growing by maybe 50,000 per month)? In addition, how much would it cost to make your trade name almost synonymous with VoIP? Further, if VoIP is just starting its growth, Vonage could easily become huge in a few years — possibly with more customers than BLS now! Looked at it this way, the rumored $3.5 billion price tag makes sense. Also, don’t forget that Vonage must have spent well over $1 billion so far in setting up its business.

  8. Jeff Bonforte Thursday, July 14, 2005

    Thomas (comment above), are you crazy? Vonage spend $1B? Seeing as Vonage has not raised more than about $400mm, it would be hard to believe that they have spent more than $1B. Furthermore, under NO CIRCUMSTANCES does it make sense for Bell South or anyone else to buy Vonage for that much money. How much brand do you think a company could build for $3.5 Billion. More importantly, for that, they could offer VoIP for $5/mo and get their 800k customers in about 3 months…and then go on to lose plenty of money like Vonage will.

  9. Thomas Hirsch Thursday, July 14, 2005

    Jeff – Like several other so-called experts, you do not think things through in a serious manner, perhaps because you are crazy. Look at it this way — AT&T CallVantage has –maybe– 80,000 customers, despite heavy advertising and the AT&T name. That’s roughly 1/10 of Vonage’s customers. Further, in a sophisticated comparison released yesterday by Keynote (or similar name) Vonage was rated best VoIP provider. Some nuts think it is easy to set up and run a VoIP system. That is just not the case. By the way, I have no interest in Vonage, just like to tell it like it is….

  10. It’s interesting to note that one of the early trials of Vonage in the consumer space was done in conjunction with BellSouth. Vonage claim that at the end of the trial period, the majority of participants expressed an interest in staying with them, and that BellSouth ended the relationship. Presumably if BellSouth considered Vonage so threatening/appealing back in early 2002, they could have taken them out for far less than $3.5bn.

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