Legal Battles Take Toll As Vonage Posts Third-Quarter Loss

HOLMDEL, N.J. — VoIP provider Vonage recorded a $161 million net loss for the third quarter, thanks in large measure to its costly legal settlements with Sprint and Verizon.

The company also announced a tentative settlement in its patent dispute with AT&T. According to a statement issued by Vonage, "The general terms being discussed by the parties would require Vonage to pay $39 million over five years. AT&T would agree to dismiss the lawsuit against Vonage, and Vonage would agree to dismiss a case against AT&T which is also outstanding."

Vonage's third-quarter revenues rose 30 percent vs. the same period last year, climbing to $211 million. The firm added 78,000 new subscribers in the quarter, an increase of 38 percent. The firm now has 2.5 million VoIP lines in service.

As previously announced, Vonage continued to shave marketing expenses, spending $62 million in the third quarter to hock its service, down 56 percent from the year-ago quarter. The company spent $206 in marketing costs per new subscriber, the lowest acquisition cost in two-plus years, the company said.

Churn over the quarter increased to 3 percent, up from 2.5 in the second quarter of this year.

The company's cash reserves felt the brunt of a pair of legal settlements announced earlier in the month, falling to $194 million from $356 million.

Depending on how the Court of Appeals decides Vonage's pending petition for rehearing regarding two of the Verizon patents, Vonage will either pony up $80 million to Verizon if Vonage wins the rehearing or if the injunction is vacated, or pay $117.5 million if it loses or if the stay is lifted on the injunction.

Vonage is already on the hook for $80 million for its settlement with Sprint.