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Vonage to Resell DSL Service as Sub Growth Slows

Holmdel, N.J — Vonage will resell broadband service to residential and small-business customers, the company said last week.

The new service, dubbed Vonage Broadband, will be offered to new and existing Vonage subscribers through a partnership with Covad. Vonage will deliver DSL services with maximum download speeds of 3Mbps or 6Mbps, the firm said. Pricing was not announced, but the service is expected to debut by the end of the year.

The VoIP firm earned $225 million for its first quarter ending March 31, up from $196 million in the year-ago period. It posted a net loss of $9 million, down from a loss of $79 million in the year-ago quarter.

The pace of customer acquisitions slowed considerably, with Vonage reporting 30,133 net subscriber line additions through Q1 2008 vs. 56,016 in the prior quarter, and down from 165,646 in the year-ago quarter. Churn increased on a year-over-year basis as well from 2.4 percent in Q1 2007 to 3.3 percent in 2008.

Vonage ended the quarter with more than 2.6 million lines in service.

The company continued to restrain its marketing, spending $61 million in the quarter vs. $91 million in Q1 2007. It spent $216 per gross subscriber line addition in the first quarter, down from $273 in the year-ago quarter. Vonage said that it would boost ad spending in the fourth quarter. The firm also said it would focus on “increasing the quality of its customer base by targeting customers with low acquisition costs and high lifetime value.”

The company has $190 in cash, restricted cash and marketable securities.