In order to create a market for easy-to-adopt global network Application Program Interfaces (“APIs”) that will drive the next wave of digitalization, Ericsson has decided to acquire Vonage, an American cloud communications service provider.
With the acquisition, Ericsson is expected to generate near-term synergies from bringing Vonage Unified Communications as a Service (UCaaS) and Contact Center as a Service (CCaaS) solutions to its existing customers.
Also, Rory Read, Vonage CEO, has been appointed a member of Ericsson’s Executive Team.
Announcing the acquisition, Börje Ekholm, President and CEO of Ericsson said: “We are excited to welcome Vonage as part of Ericsson. With Vonage’s suite of communications solutions – UCaaS, CCaaS and Communications APIs – Ericsson will further expand its offerings into the enterprise space. In the future, network capabilities will be consumed and paid for through open network APIs, creating the opportunity for unparalleled innovation. We have already launched the first network API, Dynamic End-user Boost, based on the existing 4G infrastructure. With Vonage, we will now develop and commercialize these new APIs.”
Börje added that Ericsson is already seeing great progress with frontrunner CSPs, and it aims to launch the first 5G network APIs in the coming year.
Additional information about the transaction
The transaction is expected to be accretive to Ericsson’s EPS (excluding non-cash amortization impacts) and free cash flow before Mergers & Acquisitions (M&As) from 2024 onwards.
Vonage will become a separate business area within the Ericsson Group – called Business Area Global Communications Platform (BGCP). Rory Read, the current CEO of Vonage, is appointed Senior Vice President and Head of Business Area Global Communications Platform and a member of Ericsson’s Executive Team.
With the completion of the transaction, Vonage will continue to operate under its existing name and brand being part of the Ericsson Group.
As of the closing date, Vonage’s financial performance will be reported in Segment Enterprise along with Business Area Enterprise Wireless Solutions and Business Area Technologies & New Businesses as of the third quarter of 2022.
Vonage common stock has ceased trading and will no longer be listed on the Nasdaq Global Select Market.
The acquisition was funded with cash on hand. The USD amount has been hedged with both external transactions and internal netting of Ericsson’s ongoing USD inflows.
The transaction is expected to deliver near-term revenue synergy opportunities, including CSPs selling through their own brands and cross-selling of the combined product portfolio estimated to contribute USD 0.4 billion by 2025. Ericsson also expects to achieve some cost efficiencies now that the deal is complete.
Vonage has a strong track record of growth and margin evolution. Sales were USD 1.4 billion in the 12-month period to 31 March 2022 and, over the same period, the company delivered an adjusted EBITDA margin of 13 percent and free cash flow of USD 93 million.