REG - Telefon AB Ericsson - Ericsson completes acquisition of Vonage

Telefonaktiebolaget LM EricssonAnnouncement

22/07/2022 07:00

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RNS Number : 3718T  Telefonaktiebolaget Lm Ericsson  21 July 2022

Ericsson completes acquisition of Vonage

●     As of July 21, 2022, Vonage becomes wholly owned subsidiary of
Ericsson

●     With Vonage on board, Ericsson will create a market for easy to
adopt global network Application Program Interfaces ("APIs"); this will drive
the next wave of digitalization

●     Ericsson will generate near-term synergies from bringing Vonage
Unified Communications as a Service (UCaaS) and Contact Center as a Service
(CCaaS) solutions to its existing customers

●     Rory Read, Vonage CEO, appointed member of Ericsson's Executive
Team

Ericsson (NASDAQ: ERIC) has completed its acquisition of Vonage Holdings Corp.
(Vonage) (NASDAQ: VG), supporting Ericsson's strategy to leverage technology
leadership to grow its mobile network business and expand into enterprise. The
acquisition provides Ericsson with access to powerful building blocks to offer
a full suite of communications solutions including, Communications Platform as
a Service (CPaaS), UCaaS and CCaaS.

By leveraging the Vonage CPaaS offering, Ericsson aims to transform the way
advanced 5G network capabilities are exposed, consumed and paid for. This will
provide the global developer community, including Vonage's more than one
million registered developers, with easy access to 4G and 5G network
capabilities via open Application Program Interfaces (APIs).

For communications service providers (CSPs), global network APIs - such as
location and quality of service APIs - provide new opportunities to expand
their profit pools to monetize 5G network capabilities. For Ericsson, global
APIs provide a new material growth opportunity. The existing market for
communications APIs - such as video, voice and SMS - is currently growing at
30 percent annually and projected to reach USD 22 billion by 2025.

Accessing network capabilities in an open, intuitive, and programmable way via
global APIs will enable developer communities to create applications for any
device that benefits from connection to the 5G network. Developers can utilize
network characteristics such as user authentication, bandwidth,
responsiveness, energy efficiency, security, identification and reliability -
or network information such as device information or predictive coverage.

These new and innovative consumer and enterprise applications will further
drive the rollout of 5G and network Capex.

To accelerate growth in Vonage's UCaaS and CCaaS solutions, Ericsson intends
to increase R&D investments and offer these solutions to CSPs, enabling
Ericsson's existing customers to sell through their own brands, and accelerate
growth. Ericsson will also complement existing communications offerings to
small and medium sized companies with the Vonage UCaaS and CCaaS solutions
which will form a strong part of Ericsson's offerings to both CSPs and
enterprises.

Börje Ekholm, President and CEO, says: "We are excited to welcome Vonage as
part of Ericsson. With Vonage's suite of communications solutions - UCaaS,
CCaaS and Communications APIs - Ericsson will further expand its offerings
into the enterprise space. In the future, network capabilities will be
consumed and paid for through open network APIs, creating the opportunity for
unparalleled innovation. We have already launched the first network API,
Dynamic End-user Boost, based on existing 4G infrastructure. With Vonage, we
will now develop and commercialize these new APIs.  We are already seeing
great progress with frontrunner CSPs, and we aim to launch the first 5G
network APIs in the coming year. We will continue to create new, enhanced
applications and services for enterprises, while driving continued innovation
on Vonage's UCaaS and CCaaS applications, helping businesses create new
digital experiences for better communications, connections and engagement.

"By linking the network world with the global developer community, we're
creating a paradigm shift that will put the network at the center, allowing
the CSPs a new monetization opportunity supporting increasing investments in
high-performance networks."

"4G was the platform that allowed the consumer to digitalize. It opened new
business models and created some of the fastest-growing companies in history.
With 5G, we have an innovation platform, unlike anything we've seen before,
offering almost limitless opportunities to develop super-fast, highly
reliable, low-latency and mission-critical services. With 5G, we will see
accelerated digitalization of enterprises with Vonage's UCaaS and CCaaS suite
being a solid growth platform."

Vonage was recently named the leader in the Omdia Universe: Selecting a CPaaS
Platform 2022 report, ranked in top positions on customer experience and
solutions capability. It currently serves over 120,000 business customers, has
a global community of more than one million registered developers and a highly
scaled platform with a combined 25 billion messages and minutes per year.
This, combined with Ericsson's deep network expertise, industry-leading
portfolio and global scale, is expected to enable Ericsson to seed and
accelerate the market for global network APIs. CSPs will benefit from global
reach, beyond national or regional setups.

The acquisition will also further strengthen Ericsson's presence and long-term
commitment to the United States, where it has a 120-year history of conducting
business.

Rory Read, Vonage CEO, says: "Vonage was born out of innovation and is today a
global leader in business cloud communications. This partnership will
strengthen our offerings to businesses across the globe by leveraging
Ericsson's leadership in 5G, global market presence and strong R&D
capabilities. With the demand for UCaaS, CCaaS and Communications APIs growing
rapidly, the combined expertise, talent and innovation is good news for our
customers and partners."

He adds "The way we work, shop, learn, see a doctor, exercise and entertain is
fundamentally changing. Together, Ericsson and Vonage will be at the heart of
the next wave of the digital transformation, providing enterprises, CSPs and
end users with innovative applications and services that will change how
business gets done. We will drive deeper connections and engagement among
employees and across customer touchpoints, making for exceptional
experiences."

 

Additional information about the transaction

The transaction is expected to be accretive to Ericsson's EPS (excluding
non-cash amortization impacts) and free cash flow before Mergers &
Acquisitions (M&As) from 2024 onwards.

Vonage will become a separate business area within the Ericsson Group - called
Business Area Global Communications Platform (BGCP). Rory Read, current CEO of
Vonage, is appointed Senior Vice President and Head of Business Area Global
Communications Platform and a member of Ericsson's Executive Team.

With the completion of the transaction, Vonage will continue to operate under
its existing name and brand being part of the Ericsson Group.

As of the closing date, Vonage's financial performance will be reported in
Segment Enterprise along with Business Area Enterprise Wireless Solutions and
Business Area Technologies & New Businesses as of the third quarter
2022.

Vonage common stock has ceased trading and will no longer be listed on the
Nasdaq Global Select Market.

The acquisition was funded with cash on hand.  The USD amount has been hedged
with both external transactions and internal netting of Ericsson's ongoing USD
inflows.

The transaction is expected to deliver near-term revenue synergy
opportunities, including CSPs selling through their own brands and
cross-selling of the combined product portfolio estimated to contribute USD
0.4 billion by 2025. Ericsson also expects to achieve some cost efficiencies
now that the deal is complete.

Vonage has a strong track record of growth and margin evolution. Sales were
USD 1.4 billion in the 12-month period to 31 March 2022, and over the same
period, the company delivered an adjusted EBITDA margin of 13 percent and free
cash flow of USD 93 million.

Ericsson remains committed to the previously communicated long-term financial
targets of an EBITA margin of 15-18 percent and Free Cash Flow before M&A
of 9-12 percent of sales; as well as the 2022 EBIT margin target of 12-14
percent for the Ericsson Group excluding Vonage.

Vonage is currently engaged with the U.S. Federal Trade Commission to resolve
an investigation into historic consumer practices which was initiated in 2020.

 

 

NOTES TO EDITORS:

RELATED LINKS

Vonage (https://www.vonage.com/)

Ericsson Enterprise Services
(https://www.ericsson.com/en/portfolio/cloud-software--services/enterprise-services)

Dynamic End User Boost
(https://www.ericsson.com/en/portfolio/new-businesses/one-network-solutions/dynamic-end-user-boost)

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About Ericsson

Ericsson enables communications service providers to capture the full value of
connectivity. The company's portfolio spans the business areas Networks, Cloud
Software and Services, Enterprise Wireless Solutions, and Technologies and New
Businesses. It is designed to help our customers go digital, increase
efficiency and find new revenue streams. Ericsson's innovation investments
have delivered the benefits of mobility and mobile broadband to billions of
people globally. Ericsson stock is listed on Nasdaq Stockholm and on Nasdaq
New York. www.ericsson.com (http://www.ericsson.com)

About Vonage

Vonage, a global cloud communications leader, helps businesses accelerate
their digital transformation. Vonage's Communications Platform is fully
programmable and allows for the integration of Video, Voice, Chat, Messaging
and Verification into existing products, workflows and systems. Vonage's fully
programmable unified communications and contact center applications are built
from the Vonage platform and enable companies to transform how they
communicate and operate from the office or anywhere, providing enormous
flexibility and ensuring business continuity. Vonage Holdings Corp. is
headquartered in New Jersey, with offices throughout the United States,
Europe, Israel and Asia. www.vonage.com (http://www.vonage.com)

 

Forward-looking statements

This release includes forward-looking statements, including statements
reflecting management's current views relating to the growth of the market,
future market conditions, future events, financial condition, and expected
operational and financial performance, including, in particular the following:

- Our goals, strategies, planning assumptions and operational or financial
performance expectations

- Industry trends, future characteristics and development of the markets in
which we operate

- Our future liquidity, capital resources, capital expenditures, cost savings
and profitability

- The expected demand for our existing and new products and services as well
as plans to launch new products and services including research and
development expenditures

- The ability to deliver on future plans and to realize potential for future
growth

- The expected operational or financial performance of strategic cooperation
activities and joint ventures

- The time until acquired entities and businesses will be integrated and
accretive to income

- Technology and industry trends including the regulatory and standardization
environment in which we operate, competition and our customer structure.

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statements.

Important factors that could affect whether and to what extent any of our
forward-looking statements materialize include, but are not limited to, the
factors described in the section "Risk Factors" in the latest interim report,
and in "Risk Factors" in the Annual Report 2021.

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only as of the date that they were made. We expressly disclaim a duty to
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events or changes in circumstances or changes in expectations or the
occurrence of anticipated events, whether as a result of new information,
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