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Summary:

It’s like déjà vu all over again. Last month, Paul had reported that Vonage will start a wireless service, reselling Earthlink’s MuniFi offerings. Vonage Chairman Jeffrey Citron told us that “bundling Wi-Fi will make it easier for customers to sign up for Vonage VoIP.” That is […]

It’s like déjà vu all over again. Last month, Paul had reported that Vonage will start a wireless service, reselling Earthlink’s MuniFi offerings. Vonage Chairman Jeffrey Citron told us that “bundling Wi-Fi will make it easier for customers to sign up for Vonage VoIP.” That is why I am a little confused about this Business Week story.


While Vonage won’t divulge any details, it did confirm after its Feb. 15, fourth-quarter earnings call with analysts, that it will start selling dual-mode phones offering cellular as well as Wi-Fi access, in the second half of the year.

Maybe it is another wireless provider, but so far we can’t think of anyone who will have a footprint to equal Earthlink. Are they planning to set up an MVNO? Given the trials and tribulations of MVNOs, that road is full of potholes the size of a Hummer! It will take tens of millions of dollars to get a cellular-WiFi MVNO rolling.

Whatever move the company makes, it is a desperate move by a desperate company, which is seeing its subscriber growth slowdown. Cable operators have taken away their sole reason to exist, and they are looking for something… make that anything new. Vonage needs a new story to spin for Wall Street. To anyone who is going to believe this spin as a sign of better times, we say: good luck.

From our archives: Our previous Vonage stories.

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  1. Om, if things go bad for Vonage, as the story sounds, what happens to the customers? Not so much the wireless, but their traditional business. More so out of curiosity, but I did happen to sign up with them this weekend, for my rental properties line, strictly based on price. Do they get snatched up, and if so, by whom/what types?
    Thanks,
    Michael

  2. Maybe you are not right, Om.

    I think there is still enough space for a great cellular/Wifi MVNO. A company that lets you make mobile phone calls wherever you are, using always the cheapest way possible: When in a Wifi zone for the small Vonage prices and outside Wifi for the normal cell phone prices, hopefully with a seamless handover.

    Taking these ideas into account I see for Vonage the Truphone modell as applicable, but directly starting whith a much broader base of clients and Wifi hotspots.

  3. MVNO is a tough road. ESPN couldn’t make it. Helio with a 100k lines and Amped with 30k lines are considered big. No a big market.
    It would be a great for both ELN and Vonage of that phone was a Helio phone.
    “Marketing costs were up 50% this quarter to $96M – just 53% of revenue.” Sub acquisition cost is over $300 (and I would argue even higher than $400). How do you get that back with an ARPU of $27????

  4. Just as Vonage is getting whacked by Cableco VoIP this year, they will get whacked by Cableco MVNO next year or the year after. What is it about Citron that he loves getting into these plays that have such a short lifespan? If this were a small company, I wouldn’t question it, but these guys are too big and owe too much money to play such games.

  5. Or you could just ignore the questions, as per usual….

  6. Michael,

    the interesting question is what do they offer in the long term.

    I think Vonage needs to figure that out: the cheap voice game isn’t going to work, but it is an attractive hook to get customers. they need to figure out a way to upsell the customers.

    i have some ideas but not sure if i can share them right now, and will post later when i have totally thought it through and done some reporting.

    who could buy them? I think that is anyone’s guess. I think Vonage itself should just start gobbling up smaller players, and bulk up through acquisition, instead of blowing millions on advertising campaigns.

    they can lower their costs and get some kind of scale going for them. at that point an alternative carrier like embarq might want to pick them up as a way to get into the bell territories.

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