Ericsson’s plan to acquire Vonage, announced today, aims to expand Ericsson’s enterprise business and also create new opportunities for Ericsson’s wireless network operator customers by facilitating the development of new 4G and 5G applications leveraging application programming interfaces (APIs).
“Our focus is on expanding the monetization of APIs,” said Ericsson President and CEO Borje Ekholm on a conference call with media and the financial community today to announce the deal.
According to Ekholm, the company has developed APIs to support the development of new enterprise applications that would leverage 4G and 5G connectivity but has no way of bringing them to market. The company sees the Vonage acquisition as a means of reaching that market.
Vonage initially emerged two decades ago as a provider of voice over IP communications for the consumer market, but its focus has shifted in recent years to the enterprise market. The company’s Vonage Communication Platform, a cloud-based communication platform as a service (CPaaS) offering, now generates 80% of the company’s revenue and serves more than 1 million registered developers globally, according to a press release.
The CPaaS market is expected to reach $22 billion by 2025, growing at 30% annually, Ericsson said. By the same date, the company expects the API market to be worth more than half of the radio access network market.
Ericsson Vonage Deal
Ericsson plans to operate Vonage under its existing name as an Ericsson subsidiary, with separate financial reporting. The deal represents an enterprise value for Vonage of $6.2 billion and is expected to close in the first half of 2022 after obtaining regulatory and shareholder approvals.
Ekholm said Ericsson has received “positive reactions” from a number of wireless service provider customers about the plan. Asked about competition with large service provider customers that offer wireless and wireline services, Ekholm noted that the two separate units are accustomed to being in competition with one another in the enterprise market.