IP Democracy: Vonage Growth Soars as It Seeks Bigger IPO


voip.jpgToday’s the day to hear about just how fast independent VoIP providers are growing. First, Skype announced this morning it has passed the 100 million registered user mark (and some commentators question just how many of those users are active).

Now, Vonage has come out with a revised S-1 registration statement for its IPO showing booming customer gains. During Q1 06, Vonage added almost 422,000 gross subscribers, with the net gains totalling approximately 328,000, up from Q4 05 and year-ago levels. By the end of Q1 06, Vonage served approximately 1.6 million VoIP lines.

But, as was clear from the company’s initial filing, Vonage’s growth does not come cheap. During Q1 06, Vonage lost $72.8 million on revenue of $118.9 million (up from a loss of $69.9 million during Q1 05), with marketing expenses chewing up $88 million during the quarter. Vonage said it spent an average of $209 per gross subscriber addition.

Maybe that’s why the IP voice upstart doubled the amount of money it seeks in its debut on the public market. Vonage said in its filing that it plans to raise $530 million by selling 31.25 million shares at $16 to $18 per share, more than double the $250 million it planned to raise in January.

Vonage Operational Data
2003 2004 2005 1Q05 1Q06
Gross subscriber line additions 91,522 364,214 1,099,641 280,123 421,890
Net subscriber line additions 77,936 304,849 878,472 249,333 328,279
Subscriber lines 85,717 390,566 1,269,038 639,899 1,597,317
Average monthly customer churn 2.48% 1.82% 2.05% 1.70% 2.11%
Average monthly revenue per line  $  33.4  $   27.9  $      27.0  $   26.3  $      27.7
Average monthly telephony services revenue per line  $  30.1  $   26.6  $      25.9  $   25.0  $      26.0
Average monthly direct cost of telephony services per line  $  15.3  $     8.1  $         8.4  $     7.8  $         8.7
Marketing cost per gross subscriber line addition  $   129  $    154  $       221  $    198  $       209
Employees 189 648 1,355 1,045 1,416


Posted by Cynthia Brumfield on April 28, 2006 3:00 PM to IP Democracy