Swedish telecommunication hardware manufacturer Ericsson has entered into an agreement to acquire Vonage, a cloud-based communication provider, for US$6.2 billion.
Ericsson is expected to acquire all of Vonage’s outstanding shares at an all-cash price of US$21 per share, representing a 28 per cent premium compared to last Friday’s closing price of US$16.37. Following deal completion, Vonage will become a wholly-owned subsidiary of Ericsson and retain its brand name. The 2,200 employees will remain with the company.
Through the acquisition, Ericsson hopes to leverage the Vonage Communications Platform (VCP) to expand its service offerings in the communication-platform-as-a-service (CPaaS) market, which is expected to grow 40 per cent annually to reach US$22 billion by 2025. Currently, VCP accounts for around 80 per cent of Vongage’s revenues and is projected to see an annual growth of over 20 per cent in the coming years.
“Vonage’s strong developer ecosystem will get access to 4G and 5G network APIs, exposed in a simple and globally unified way,” said Börje Ekholm, chief executive officer of Ericsson. “This will allow them to develop new innovative global offerings. Communication Service Providers will be able to better monetize their investments in network infrastructure by creating new API driven revenues.”
In a press release, Ericsson highlighted Vonage’s growth potential. The company saw $1.4 billion in sales the previous year, with a 14 per cent adjusted EBITDA margin. It services over 120,000 customers and supports more than one million developers globally.