Vonage, say hello to Grave Dancers

Charter Communications, the St. Louis, Mo.-based cable service provider, is not-so-subtly getting ready for a dance…. on Vonage’s grave. It has launched a promotion hoping to lure worried Vonage customers to switch to its VoIP service. Charter, that currently boasts about 500,000 phone customers, is supposedly a friend of Charter Vonage, and has been trialing Vonage as part of a special $45 voice-and-data bundle.

If other cable providers started following Charter’s example, and offered sops to Vonage customers to switch, Vonage would find itself in deep trouble. The Holmdel, NJ-based Vonage is locked in a vicious patent fight with Verizon that has left it black-and-blue.

With Vonage market capitalization having fallen below $500 million, cable operators should pool their resources, and make an offer for Vonage’s 2.2 million customers. Clearly $700-to-$800 per subscriber – about $1.54 billion-to-$1.6 billion at $700-to-$800 times 2.2 million subscribers – is too high a price. At $250-to-$300 per subscriber, however, cable operators should seriously consider a bid.

At those levels, the company will be valued at $550 million-to-$660 million, which is a premium over the current stock price, but still be cheaper than spending millions on advertising and customer sign-ups. The cable operators can then divvy up the spoils amongst themselves depending upon the region of service, and perhaps pick up a few broadband subscribers in the process. Dividing the spoils is a common practice in the cable business.

Of course, they can wait and watch Vonage get pummeled, and fall further as it gets further embroiled in the legal mess with Verizon. Then we would need to change the headline to one that is inspired by a James Hadley Chase paperback!

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