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Vonage Narrows Q4 Loss, but Sees Growth Slipping

7:00 am on February 19, 2007 | Category: Business, VoIP

Broadband phone provider, Vonage, managed to narrow its losses in the fourth quarter of 2006, but failed to attract as many new customers as in 2005, despite its continued investment in marketing.

Vonage, a pioneer in the residential VoIP industry, is facing a growing tide of competition from established telecom and cable operators, which can draw on the advantages of existing customer relationships and â€œbundlingâ€ of services.

Vonage ended the final quarter of 2006 with a net gain of 166,267 customers, bringing its entire subscriber base to a record high of 2.2 million. Its growth seems to be gradually ebbing off, however, when compared with subscriber additions of 207,252 in the last three months of 2005.

The standalone VoIP provider’s fourth quarter revenue increased by an impressive 91% compared with last year’s results, but remained far from generating a profit. Vonage made a net loss of $65 million in Q4/2006, compared to losses of $72 million in the same three-month period a year previous.

Vonage seems to have succeeded in its attempts to develop a large base of customers that will later be useful in driving profits, and is finally beginning to scale back on its expansive marketing efforts. The company is even expecting to generate a small operating profit by the first quarter of 2008.

As well-established rivals pull out all the stops to compete, however, the real test of Vonage’s success will likely be its ability to retain customers and prevent a major â€œsubscriber drainâ€ into the pockets of cable operators.

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