Ericsson to buy cloud provider Vonage in US$6.2b deal

[HONG KONG] Ericsson has agreed to buy Vonage Holdings in the US for an enterprise value of US$6.2 billion as it strives to build market presence in cloud communications services.

The Swedish telecommunications group will pay US$21 per share for Vonage using existing cash, according to a statement Monday (Nov 22). The offer represents an equity value of about US$5.3 billion based on some 252 million shares outstanding.

Ericsson's push into cloud-based services comes at a time as its earnings have been hampered by both lost business in China and component shortages from a global supply-chain squeeze. The company said on Monday that it remains fully committed to its long-term Ebita margin target of 15-18 per cent.

"Vonage gives us a platform to help our customers monetise the investments in the network, benefiting developers and businesses," said Ericsson's chief executive office Borje Ekholm.

The US company's cloud-based communications platform accounts for 80 per cent of its US$1.4 billion annual revenues and enables developers to embed services such as messaging or video into their products. That customer base and developer community is seen as a key draw for Ericsson.

Vonage itself had been under pressure from activist investor Jana Partners and was working with advisers to run a strategic review of the business. That review included the possibility of a full sale of the company, Bloomberg News reported in September.

BLOOMBERG