Swedish mobile telecoms equipment maker Ericsson said on Monday it had agreed to buy cloud communications firm Vonage for $6.2 billion after the deal received “the unanimous approval of the Vonage board of directors” and it’s part of Ericsson’s strategy to expand its presence in the wireless enterprise and broaden its global offerings.
Ericsson said in a statement: “The merger agreement was approved unanimously by the Board of Vonage. The transaction builds upon Ericsson’s stated intent to expand globally in wireless enterprise, offering existing customers an increased share of a market valued at $700 billion by 2030.”
Vonage had sales of $1.4 billion in the 12-month period to Sept. 30 2021 with a margin on adjusted earnings before interest, tax, and depreciation (EBITDA) of 14% and a free cash flow of $109 million. The cloud-based Vonage Communications Platform serves over 120,000 customers and more than one million registered developers globally.
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.”
“Today Network APIs are an established market for messaging, voice and video, but with a significant potential to capitalise on new 4G and 5G capabilities. Vonage’s strong developer ecosystem will get access to 4G and 5G network APIs, exposed in a simple and globally unified way. 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. Finally, businesses will benefit from the 5G performance, impacting operational performance, and share in new value coming from applications on top of the network.”
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.”
“We believe joining Ericsson is in the best interests of our shareholders and is a testament to Vonage’s leadership position in business cloud communications, our innovative product portfolio, and outstanding team.”
For Ericsson, the acquisition builds on the success of the integration of Cradlepoint in September 2020. Cradlepoint has continued to develop strongly under Ericsson’s ownership.
Ericsson said it expected the deal to boost earnings per share – excluding non-cash amortization impacts – and free cash flow from 2024 onwards. The deal is expected to close in the first half of 2022, subject to Vonage shareholder approval, regulatory approvals, and other conditions.
