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Summary:

[qi:004] Vonage (VG), the beleaguered VoIP service provider, has reported its second-quarter earnings, and things are not looking good. The numbers might have impressed some, but the fact remains that the company is walking a tightrope. Looking beyond the revenue (which at $206 million was lower […]

[qi:004] Vonage (VG), the beleaguered VoIP service provider, has reported its second-quarter earnings, and things are not looking good. The numbers might have impressed some, but the fact remains that the company is walking a tightrope. Looking beyond the revenue (which at $206 million was lower than analysts’ expectations), Vonage is experiencing a substantial slowdown when it comes to signing up new customers, and the churn is up.

In the second quarter, the company had 57,000 net adds, down 37% from the first quarter, and substantially below analysts’ expectations. The churn is up 2.5% in the second quarter vs. 2.4% in the first quarter of 2007. And Vonage continues to pay out royalty fees, even while claiming that workarounds are in place. This is proving to be a tough year for VoIP service providers, as evidenced by slowing growth at Vonage and the flameout of SunRocket.

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  1. The Verizon lawsuit is showing its effects. And cable providers often offer their own VoIP services now.

  2. Excluding one-time costs, Vonage posted a loss of $18.2 million, or 12 cents a share. That’s quite an improvement over the $61 million loss posted in the prior quarter.

    That’s a good thing… even if all is not well.

  3. Constance Reader Thursday, August 9, 2007

    But those cable provider offerings are much more expensive than the VoIP company offerings. Unfortunately, they are also much more heavily marketed than standalone VoIP companies besides Vonage, so many consumers aren’t at all aware of the alternatives.

    I remember when I first signed up for a VoIP plan in late 2006. A few days later, purely by coincidence, my local cable company’s sales rep knocked on my door, selling internet phone service. He started into his pitch and I informed him that I already had internet telephone service, thank you, and it was far cheaper than the cable company’s. He asked how much, because he hadn’t even gotten to the price portion of his pitch when I cut him off. You should have seen the poor man’s face fall when I told him I was paying $26 per month for unlimited calls.

    Actually, though, cutting him off with that fact had been an act of mercy. I knew for a fact that the lowest price my cable company offered for phone service was $48 per month, and that only if bundled with cable and internet service. And then I’d have had to watch his face fall even further when I informed him that such a bundle was useless to me. I haven’t had a television for more than five years.

  4. Could be worse! The lack of subscriber adds is no surprise given the pressures of the VZ issue. This entire situation is tragic on so many levels and VZ is already accomplishing their goal of removing competition from the market (their absolute goal imho, this has nothing to do with violation of intellectual property).

    Of course, the real shame in all of this is that Vonage’s service is a winner for the consumer, it is feature rich, has become highly reliable, and is a great value.

    Seems to me Vonage’s challenge is to survive the attack of this absurd patent fiasco, sit back up, and hopefully be able to attract fresh capital to resume their business on its merits.

  5. Om – What do you think about Skype? I like Vonage, but Skype is much more affordable and backed by a much bigger bankroll.

  6. RickMahn.com » Blog Archive » links for 2007-08-10 Friday, August 10, 2007

    [...] GigaOM Vonage, Slow Road To Nowhere? « Hmm, wondering if Vonage will be able to make it. The reality is that voice traffic (and eventually all data) is destined to be a wireless service – period. So when you have mobile service with unlimited minutes, and unlimited long distance and all the (tags: voip communication network) [...]

  7. In Europe, They Like Their VoIP « GigaOM Sunday, September 9, 2007

    [...] (TWC). In the meantime, the independent voice service providers Vonage (VG) and SunRocket have fallen on hard times. Taken together, there were just 11.8 million VoIP subscribers in the U.S. at the end of the second [...]

  8. Vonage: How Low Can You Go? « GigaOM Tuesday, September 25, 2007

    [...] 25, 2007 at 10:40 PM PT | No comments Vonage (VG), the Holmdel, NJ-based VoIP service provider has been on the ropes for so long that you think it can’t get any worse. But it does! Earlier this year the company [...]

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