RealTime IT News

Report: Vonage Preps For IPO

Having won VoIP converts on Main Street, Vonage is reportedly aiming at Wall Street.

The Edison, N.J., company will reportedly file paperwork for a $600 million IPO, a move that illustrates the rapid ascension of VoIP from niche to mainstream in just a few short years.

Although Vonage has been a venture capital darling, going public would give it a war chest to supercharge its expansion.

Brooke Schulz, a Vonage spokeswoman, declined comment on the IPO report published on the Daily Deal's Web site last night. The article cited sources familiar with the matter.

Vonage currently has about 800,000 subscribers and is on track to crack the one million mark by year's end. Most users are in the United States and Canada, but Vonage has also been establishing itself in the United Kingdom and is scouting the Asia-Pacific region.

As VoIP becomes more reliable and accepted, Vonage has also been trying to reach into the business market.

Earlier this month, it began testing a service for small and medium businesses. In addition, it teamed with wireless broadband provider TowerStream to deliver VoIP to corporate customers.

Although it has seen torrid residential growth, Wall Street would surely like to see the company lock in business customers to diversify its revenue and provide an opportunity to sell add-on services.

Filing paperwork to go public would also require that Vonage detail its finances. Rivals have questioned Vonage's blanket advertising strategy, saying the costs of acquiring customers could put the company in a hole.

But Vonage hasn't shifted strategy, believing that signing up customers now is crucial in the early stages of the technology's adoption.

An IPO will not be without risks however, as the company will be required to point out in its prospectus to potential investors.

Given the converging nature of communications, a slew of rivals now offer VoIP. Telecoms including AT&T and Verizon have large customer bases, as do cable operators like Comcast and Time Warner .

There's also movement by Internet giants such as American Online and Google to introduce VoIP-enabled messaging and other services to their customers.

Then there's Skype, an Internet telephony phenomenon in its own right, which has amassed 50 million registered users for its free service. The European company is also working to add paid services to its mix and has been mentioned as a possible acquisition target for large Internet and media companies looking for a ready-made VoIP constituency.

Finally, while regulations have been breaking Vonage's way, there are still some requirements regarding Enhanced 911 services that could cause a speed bump in Vonage growth.

All told however, just the fact that Vonage is even in position to go public speaks volumes about VoIP.