The Anonymous Analyst

Commenting on technology & communication issues around the world with focus on USA and India. Also ramblings on other subjects.

Monday, June 05, 2006

Vonage IPO and its aftermath

Om Malik, Andy Abramson, Andy Kessler, and others in the blogsphere have been talking about the Vonage IPO for months now and now that it has become a dud, it has gathered more force among the entire blogging community. I have found only a few balanced blogs, which try to list out things which Vonage has done right as well as wrong. Thanks to James Enck and Jon Arnold, we have heard about another VoIP provider, Telio, in Scandinavia, which went public recently.

Jon mentioned very relevant points in his post about how Vonage mktg is so old-school, a lot more of viral marketing would have helped. A lot more of incentives to current subscribers might have also helped. I take VoIP from Lingo, from Primus. I am not very satisfied with the service quality, but they have a lot of free calling to Western European landlines and a lower price of $20-21/ month. They have a very rudimentary referral program and they do not promote it a lot too. The main advantage from this service is the free unlimited US calling; I am not too concerned about E911 - I have mobile phones, which could help with that, besides as per regulation, the VoIP providers are E911 enabled.

Now, coming back to the subject of my posting, truly, it is very easy to throw mud on the Vonage management. A lot of the blogging community, which is predominantly analysts, academics, consultants, journalists, authors, technologists etc and not many executive types (apologies to Alec Saunders, Tom Evslin) has a natural tendancy to express their own opinion about the world outside and they have not in most cases got prior experience in doing the kind of stuff, which they write about. I am sure this is too much of a generalization, but I think I will go with it for now.

Also recently there was a comment from an analyst, who was instrumental in bringing Jeff Citron to Vonage and his comment was that the shares would be $24 in one year or so. I cannot locate the link now.

Now, all the statements about Vonage are based on the presumption that they are standing still while the Comcasts, CableVisions continue their VoIP rollout. But the experienced management team at Vonage including the 3i folks are very sharp folks and they are sure to be doing something soon. Which brings me to the core of this post, which is that VONAGE is building a MVNO service. This is from a pretty reliable source and I am sure that they are proceeding on this path. Now that would be a pretty good way to increase revenues, reduce churn, especially if they are able to provide an integrated service.

So who could Vonage tie up with - it has to be T-Mobile, beyond doubt. SprintNextel is in bed with the Cable MSOs, VerizonWireless and AT&T will not partner with someone who will take up their own revenues. So it has to be T-Mobile. They key point is what kind of integrated services Vonage might provide.