Ericsson Surprises with $6.2 Billion Vonage Acquisition

In a pre-Thanksgiving bombshell, Ericsson is acquiring UCaaS-CCaaS-CPaaS provider Vonage in a deal worth $6.2 billion.

Raul Castanon is senior research analyst with 451 Research, part of S&P Global Market Intelligence. He said the key driver for this deal is likely Vonage’s leading position as a global CPaaS provider.

451 Research’s Raul Castanon

“The acquisition should give Ericsson a boost into the CPaaS segment, with cloud-based modern communication services for the enterprise such as contact center, communications APIs and VoIP,” he said.

Vonage‘s board unanimously approved the merger. The transaction builds on Ericsson’s stated intent to expand globally in wireless enterprise.

Moreover, it builds on the success of the integration of Cradlepoint in September 2020. Ericsson says Cradlepoint has continued to develop strongly under its ownership.

Ericsson will acquire all of Vonage’s outstanding shares at $21 per share.

Vonage Brand, Business to Continue

On completion expected in the first half of 2022, Vonage will become a wholly owned subsidiary of Ericsson and will continue to operate under its existing name. Vonage’s employees will remain with the company and Vonage CEO Rory Read will join Ericsson’s executive team.

Börje Ekholm is Ericsson‘s president and CEO.

Ericsson’s Börje Ekholm

“The core of our strategy is to build leading mobile networks through technology leadership,” he said. “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.”

The cloud-based Vonage Communications Platform (VCP) serves more than 120,000 customers and more than 1 million registered developers globally. The API platform within VCP allows developers to embed communications – including messaging, voice and video – into applications and products. Vonage also provides UCaaS and CCaaS solutions as part of VCP.

VCP accounts for approximately 80% of Vonage’s revenues and grew in revenue by more than 20% over the past three years. Vonage’s management team projects annual growth of over 20% for VCP in the coming years.

Shared Ambition

Read said Ericsson and Vonage have a shared ambition to “accelerate our long-term growth strategy.”

Vonage’s Rory Read

“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,” he said. “The combination of our two companies offers exciting opportunities for customers, partners, developers and team members to capture this next wave.”

The deal should allow Ericsson to build synergies with its 4G and 5G networking technology, Castanon said. Specifically, Vonage’s communications APIs business could help its existing customer base of communication service providers monetize their investments in Ericsson’s technology.

According to 451 Research’s CPaaS Market Monitor, the digitalization of customer and employee experiences, accelerated by the COVID-19 pandemic, has set the stage for the next leg of CPaaS growth, Castanon said. Total market revenue grew 48% in 2020 and is projected to increase at a CAGR of 28% through 2025.