Vonage's subscriber growth grinds to a halt

Thu Aug 7, 2008 2:27 PM EDT
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Vonage Holdings Corp.'s subscriber growth nearly ground to a halt in the second quarter, as the Internet telephone company said Thursday it gained just 2,000 lines in the period.

Chief Executive Officer Marc Lefar said the company made some progress in keeping its existing customers, but a pullback in TV advertising led to lower recruitment of new customers.

The company had underestimated, he said, how much traffic the TV advertisements were driving to its Web site and other recruitment channels.

Vonage posted a quarterly loss of $6.9 million, or 4 cents per share, compared with a loss of $23.2 million, or 15 cents per share, in the same period a year ago.

Sales were $228 million, up 11 percent from last year.

Analysts polled by Thomson Financial had expected a loss of 6 cents per share on $227 million in revenue.

The company was a pioneer in Internet telephone service, supplying customers with adapters that let them plug their home phones into their broadband connections.

It added hundreds of thousands of customers per quarter as recently as two years ago, but growth tapered off as Vonage battled patent lawsuits and faced growing competition from similar services provided by cable companies.

The Holmdel, N.J.-based company ended June with 2.6 million subscribers, up from nearly 2.5 million a year before.

Churn, or the percentage of customers leaving each month, was at 3 percent, down from 3.3 percent in the first quarter but up from 2.5 percent in the second quarter last year.

The company has been trying to improve customer service, in part by increasing training for its support personnel and introducing new adapters.

"We're pleased with some of the progress we've seen on churn," Lefar said. "We still have a ton of work to do there."

Making its marketing more effective has been another priority for the company, which spends 29 percent of its revenue on advertising.

Shares of Vonage fell 7 cents, more than 5 percent, to $1.26 in afternoon trading.

Citigroup analyst Michael Rollins reiterated a "hold" rating on the stock Thursday, saying an upcoming convertible debt refinancing should provide support. But he remain cautious on the fundamentals of the business.

(This version CORRECTS Corrects Lefar's title. UPDATES stock price.)

© 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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{"commentId":2392887,"authorDomain":"kikaiju"}
kikaiju

Maybe shrinking numbers are a reflection of how annoying their TV ads have become. I am a little tired of watching the Superior Vonage woman hip-slam Phone Company Guy. She comes across as "the smartest woman in the room" and he's just a milquetoast. Neither inspires feelings of "I see myself as one of these people."

More to the point, I don't have a land line phone that needs replacing. I don't need VOIP.

I use my cell phone for all calls and I am far from the only person who has gone wireless. So, Vonage only offers products that are of no use to me. So, no sale.

{"commentId":2392887,"threadId":"327705","contentId":"1728741","authorDomain":"kikaiju"}
    Reply#1 - Thu Aug 7, 2008 3:48 PM EDT
    {"commentId":2394101,"authorDomain":"fdbryant3"}
    FDBryant3

    I wonder if they are losing business to magicjack.

    {"commentId":2394101,"threadId":"327705","contentId":"1728741","authorDomain":"fdbryant3"}
    • 1 vote
    Reply#2 - Thu Aug 7, 2008 5:35 PM EDT
    {"commentId":4783538,"authorDomain":"kremit-defrog"}
    Kremit

    been customer since 2005.. initially, I did have troubles with vonage trying to solicit services and features to me that I would not use, using luring phrases such as: "It's free for first three months" and "Won't cost you anything to try." Ugh! Just take my "No" any of the first eight times and leave me alone!!

    Anywho, account coming up for rebill in 1 week, they suspend me prematurely. I pay, see the money removed from my card, but account still suspended, still can't make outgoing calls. This took place over the duration of the entire weekend. Never realized, but it is tougher than I thought to be w/o a phone for that much of your off of work..

    Monday, I tried to contact vonage and resolve matters only to waste time and build further frustration. First thing I wasn't a big fan of was the fact the agent couldn't hear me on his end. WTF? You work at a VoIP company and your VoIP isn't even set up right THERE?!? To me, that'd be like walking into a TV station and seeing tv monitors display: "No Signal Found" or walking into a bank and reading: "Deposits only, No cash on hand."

    Eventually this became a bigger problem than my suspended account I was calling about in the first place. Since I knew rep agent couldn't fix the audio, else he should have, I asked to be put thru to someone to notify them of that issue. About ten minutes and an "I'm sorry, all managers are busy." excuse, I'm told to wait on hold cause agent see's that my account has been paid, but still remains in suspended status. He tells me: "Hold on cause I have to talk with a supervisor about what we're going to do."

    So wait... let's press pause... there was NO supervisor available to me DIRECTLY? but there's a supervisor that is willing to channel conversation thru you?!? Well, I never got that answer... I got disconnected before either the agent or the manager could return.

    Called back, tried to work with second agent, who also couldn't hear me... after conflicting with me in regards to a supervisor contact, I finally grew aggrivated and hung up. Tried 3rd time, asking for super off the bat.. round and round and round it goes... did it stop? when I hung up the phone...

    so, that's it... my account has been paid over 72 hrs ago, still sitting in suspended status and no one at the customer service center gives two @!$%#s to do what they're being paid to do... seems like they'd rather answer calls, play solitaire and complain that they can't hear you... and when they don't claim they can't hear you, it's a "We'll have to look into this and call you back." So I go back to my suspicion of windows solitaire from 8am-7pm EST..

    Emailed some corporate heads, hoping that'll spark a fire under someone's ass...

    {"commentId":4783538,"threadId":"327705","contentId":"1728741","authorDomain":"kremit-defrog"}
      Reply#3 - Mon Jan 12, 2009 8:00 PM EST
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