Blog Post

Vonage, Slow Road To Nowhere?

[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.

8 Responses to “Vonage, Slow Road To Nowhere?”

  1. 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.

  2. 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.

  3. 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.