Vonage Sub Growth Stalls

By Staff On Sep 4 2008 - 6:00am

Vonage added 2,000 net new subscribers for its second quarter, ended June 30.

The company had lured 30,133 new customers in the first quarter of this year and 165,646 in the year-ago quarter.

Vonage finished the quarter with 2.6 million lines in service. Churn fell from 3.3 percent in the first quarter to 3 percent in the second.

Quarterly revenues grew 11 percent to $228 million, thanks to a boost in average revenue per line. The company reported a net loss of $7 million.

Vonage spent $65 million on marketing for the quarter, down from $68 million in the year-ago quarter. The marketing costs per gross subscriber line addition fell from $287 in the second quarter of 2007 to $283.

The VoIP firm has a "leaky bucket" when it comes to its customers, observed Paul Brodsky, analyst, TeleGeography. "That's there biggest problem right now."

Vonage's customers don't need contracts and are easily swayed to alternative voice providers, Brodsky said. "With 20 minutes of Web searching you can find half a dozen or more companies that offer essentially the same thing that Vonage does. At the end of the day, it's cheap voice."

However, he added, at 2.6 million subscribers the company has a "solid customer base." With a funding tentatively secured for its looming convertible debt and with most of the damaging patent litigation behind it, they've addressed some of the uncertainty lingering around their viability, he said.