Ericsson (NASDAQ: ERIC) will acquire Vonage (NASDAQ: VG) for $21 per share. The cash offer for this global provider of cloud-based communications services including Voice over IP (VoiP) and collaboration solutions, would represent a total acquisition price of approximately $6.2 billion. The acquisition will be conducted by means of a merger agreement.
Over 120,000 clients and over one million registered developers use the Vonage Communications Platform (VCP), which is hosted in the cloud. VCP’s API platform enables developers to integrate high-quality communications – such as messaging, audio, and video – into their apps and solutions without the need for back-end infrastructure or interfaces. As part of the Vonage Communications Platform, Vonage also offers Unified Communications as a Service (UCaaS) and Contact Center as a Service (CCaaS) solutions.
Ericsson will get access to a complementary, sizable, and high-growth market as a result of Vonage’s position in the Communication Platform as a Service (CPaaS) segment. With increased expenditures in 4G and 5G networks, as well as a thriving ecosystem of innovative apps and use cases that use the capabilities of contemporary networks, business demand for programmable networks has risen.
By providing API-enabled communications services, CPaaS solutions democratize network access. By 2025, the CPaaS industry is estimated to have grown by 30% annually to $22 billion, according to Ericsson.
The merger consideration represents a premium of 28 percent to Vonage’s closing share price on 19 November 2021 of $16.37 per share, and a premium of 34 percent to the volume-weighted average share price over the 3 months to 19 November 2021 of $15.71 per share.
“Today, network APIs are an established market for messaging, voice and video, but with a significant potential to capitalize on new 4G and 5G capabilities,” said Börje Ekholm, President and CEO of Ericsson. “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.”
5G Technology, Open Network APIs
Ericsson’s worldwide leadership in 5G technology on the other hand is projected to provide Vonage access to the growing market for open network APIs supported by 5G, which is estimated to reach at least $8 billion by the end of the decade and has a high growth profile, according to Ericsson. With new and sophisticated global network APIs and access to Vonage’s unified communications and contact center solutions, CSP customers would be able to monetize their network investments, improve user experience, and stimulate further growth potential.
The deal is projected to generate near-term revenue synergies, such as white-labelling and cross-selling of the combined product portfolio, which is expected to generate USD 0.4 billion in revenue by 2025. Following the completion of the acquisition, Ericsson expects to generate some cost savings.
“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,” said Rory Read, CEO at Vonage. “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.”