Ericsson bets big on enterprise digitalisation – snaps up Vonage for USD6.2 billion

Ericsson is buying New Jersey based cloud communications provider Vonage for USD21 per share at an enterprise value of USD6.2 billion.

Börje Ekholm, President and CEO of Ericsson

Commenting on the news, Börje Ekholm, President and CEO of Ericsson, said that the core of his company’s strategy was to help build mobile networks through technology leadership and that this acquisition will provide the foundation on which they can build an enterprise business. “Vonage gives us a platform to help our customers monetize the investments in the network, benefitting developers and businesses,” he noted. “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.”

Ekholm stated that network APIs already enable an established market for messaging, voice and video, resulting in “significant potential” to capitalise on 4G and 5G capabilities. Giving Vonage’s one million strong developer ecosystem access to 4G and 5G network APIs, he said, would allow them to develop new innovative global offerings, which would help CSPs to better monetize their network investments, as well as benefiting enterprise customers.

Rory Read, CEO Vonage

Rory Read, CEO of Vonage, echoed this message, stating that Ericsson and Vonage had a shared vision around the convergence of the internet, mobility, the cloud and powerful 5G networks.

Vonage had sales of USD1.4 billion in the year to 30 September 2021, with an EBITDA of 14% and free cash flow of USD109 million. Its Vonage Communications Platform (VCP), which accounts for approximately 80% of its revenues, serves more than 120,000 customers. It has attracted a strong developer ecosystem because it enables them to embed high quality communications – including messaging, voice and video – via its APIs into applications and products, without back-end infrastructure or interfaces.

In addition to its CPaaS offering, Vonage also provides Unified Communications as a Service (UCaaS) and Contact Center as a Service (CCaaS) solutions.

The deal is expected to close in the first half of 2022 and is an all cash offering. It has been approved by Vonage’s board but now requires shareholder approval. On completion, Vonage will become a wholly-owned subsidiary of Ericsson. Ericsson says the deal will deliver revenue growth from white labelling and cross-selling opportunities of USD400 million per year. The deal comes just over a year after Read joined the company from Dell (June 2020).

The Vonage deal follows Ericsson’s acquisition of US-based Cradlepoint in September 2020 which provided enterprise-grade connectivity including cloud-delivered software along with hardware endpoints, support and training.