Months ago I speculated to a Wall Street sell side analyst that Vonage's ideal suitor was Bell South. Everyone told me I was nuts. Then in mid summer Rich Tehrani speculated Bell South was going to buy Vonage. People started saying he was nut. Even I began to question it. Now Om is weighing in with some thought once again as well as others who want to keep tabs on this.
If anything the Skype sale to eBay helped pump in some artifical life into Vonage's value. The company, which has 1 million or so lines in service certainly is the leader in customer numbers. But what continues to drive at me and cause my concern for an over heated price is what does Vonage have beyond the ability to market well that gives them the kind of price tag they seem to be asking for.
First their churn rate according to competitors is one of the highest in the PSTN VoIP 1.0 sector. As contracts expire, if not before, Vonage loses customers either to one of the other players, back to the RBOC's for PSTN or to the cable companies, the last of which offer local folks to install, service and usually support those less technically inclined.
Vonage had the benefit of being the first mover to take advantage of early adopteritis, beating VoicePulse and Packet 8 in the marketing department even though both seemed to come out around the same time.
So after that ever changing 1 million customer lines and some marketing what does Vonage have that can't be built or bought for a lot less than 1.5 billion...So far no one has said.
