Ericsson has entered into an agreement to acquire Vonage Holdings Corp. for $21 per share. This represents a total acquisition price of approximately $6.2 billion.
The acquisition will be financed through Ericsson’s existing cash resources, which amounted to SEK 88 billion as of 30 September 2021 on a gross basis, and is expected to deliver near-term revenue synergy opportunities. With the transaction expected to be completed within the first half of 2022, Vonage will become a wholly-owned subsidiary of Ericsson.
The merger agreement was approved unanimously by the board of Vonage and builds upon Ericsson’s stated intent to expand globally in the wireless enterprise, offering existing customers an increased share of a market valued at $700 billion by 2030.
Börje Ekholm, president and CEO of Ericsson, says, “The core of our strategy is to build leading mobile networks through technology leadership. This provides the foundation to build an enterprise business. The acquisition of Vonage is the next step in delivering on that strategic priority. Vonage gives us a platform to help our customers monetize the investments in the network, benefitting developers and businesses. Imagine putting the power and capabilities of 5G, the biggest global innovation platform, at the fingertips of developers. Then back it with Vonage’s advanced capabilities, in a world of 8 billion connected devices. Today we are making that possible.”
Vonage, a global provider of cloud-based communications, has a strong track record of growth and margin evolution. In the 12-month period to 30 September 2021, it recorded sales of $1.4 billion, an adjusted EBITDA margin of 14%, and a free cash flow of $109 million. Moreover, the cloud-based Vonage Communications Platform (VCP), which accounts for approximately 80% of Vonage’s current revenues, serves over 120,000 customers and has more than one million registered developers globally.
Rory Read, CEO of Vonage, says, “Ericsson and Vonage have a shared ambition to accelerate our long-term growth strategy. The convergence of the internet, mobility, the cloud and powerful 5G networks are forming the digital transformation and intelligent communications wave, which is driving a secular change in the way businesses operate. The combination of our two companies offers exciting opportunities for customers, partners, developers, and team members to capture this next wave.”
Ericsson and Vonage – creating a winning combination
Vonage’s presence in the communication platform-as-a-service (CPaaS) segment will provide Ericsson with an opportunity to access a complementary, substantial, and high-growth segment. In addition, Ericsson’s global leadership in 5G technology is expected to provide access to the developing space for open network APIs, which is expected to reach at least $8 billion by the end of the decade with a strong growth profile.
CSP customers will also benefit from monetizing their network investments, optimizing the user experience, and stimulating additional growth opportunities with new and advanced global network APIs and access to Vonage’s unified communications and contact center solutions.
The combination of Vonage’s customer base and developer community and Ericsson’s deep network expertise, 26,000 R&D specialists, and global reach create opportunities to accelerate standalone strategies and innovation in the market. This includes accelerating enterprise digitalization and developing advanced APIs made possible by 5G. Such APIs can be applied to help ensure the quality of critical services like telemedicine, immersive virtual education, and autonomous vehicles as well as experiential performance benefits in gaming, augmented and extended reality, over wireless.
In the longer term, Ericsson intends to offer valuable benefits to the full ecosystem – telecom operators, developers, and businesses – by creating a global platform for open network innovation, built on Ericsson and Vonage’s complementary solutions.