There has been an explosion of rumors and stories regarding former VoIP child star Vonage (NYSE:VG, news, filings) lately. The only one that was true turned out to be that Vonage is working on an iPhone app, the rest have been inventions of the street. As rumors go, they have generally been transparently silly, such as the AT&T buyout rumor over the last few days. Where is the imagination? Put some effort into it! You want a better buyer for Vonage? I’ll give you one…
Apple.
Think about it… Right now Apple (NASDAQ:AAPL, news, filings) sits between the carriers and VoIP as something of a reluctant gatekeeper. They have an agreement with AT&T not to allow VoIP outside of WiFi, but this is at AT&T’s behest – Apple doesn’t actually give a hoot about it. What they want, in the end, is to sell more devices *and* more services using those devices. They didn’t just build the iPod, they built iTunes alongside it. Selling VoIP alongside the iPhone is obvious addition held back only by their need for the carrier’s bandwidth. The iPhone is unstoppable right now, and when AT&T’s exclusivity disappears and LTE and WiMax increase throughput by orders of magnitude, carriers would be in a tough position.
Nothing would scare the carriers more than a device their consumers DEMAND that cuts into their precious, overpriced wireless voice business. But they won’t all turn it down, the FCC may not even let them and one crack in the dam would be enough. If you successfully combine Vonage, which already has scale but not enough residual marketing power to grow, with Apple, which may have the greatest raw consumer marketing power of this decade, you get Apple iVoice – your new phone company – and a whole lot of dumb pipes, both wireless and wireline.
It couldn’t happen right away of course, or those pipes won’t get built. And it probably won’t happen at all, because Apple is in the business of making money the easy way and not starting a war even if it might win. The carriers would simply have to find a way to buy them off. But still, it would be a transformational M&A, whereas AT&T’s only real reason to buy Vonage would be to bury it in a deep hole somewhere.
In the end, voice is just data and Apple knows that. If the wall between the two breaks down, as it must sometime over the next 5 years, why should they let Google and Skype have all the fun?
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Categories: Mergers and Acquisitions · VoIP · Wireless
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Hey Rob,
How about NGT Telecom 😉
Hmm, that’s a name I haven’t heard much of lately – they’ve been kind of quiet. But I don’t think they’re too likely to buy Vonage! 😉
It wouldn’t be the first time an enemy was purchased simply for the purpose of burying it. However, I think Vonage has its eye set on a more lucrative path, not one that lends to an easy exit strategy.
The company can very likely do a great deal to enhance its portfolio, depending on how it pursues the use of SIP trunking, ENUM-like capabilities, combined with high-definition codecs.
Even video-conferencing and file transfers a la Skype are not out of the question. Perhaps the latter (Skype) or its heirs might even be a better fit than either AT&T or Apple, since Vonage already has its meat hooks into the machinery required to complete calls into traditional networks, thus making it dually attractive as an add-on to an otherwise all-IP framework.
Just a few thoughts en route from the copper mines to the silica maze.
frank@fttx.org
merge it with skype ??
I can’t believe that all of you missed the most substantial reason for the jump in the interest of Vonage stock! China, India, and every other emerging market country is excited about worldwide long distance for one flat rate of $24.99. As Americans we have such an ignorant knowledge of numbers of citizens in other countries it is almost funny. While we report an average of 350 million people living, breathing and making phone calls within our borders, countries like China and India boast 10 times that number of citizens. Read the blogs . . . they are excited that they can speak to relatives around the world for a low monthly fee without additional charges. No one has even mentioned the impact this could have on businesses operating worldwide who incur huge monthly long distance bills through AT&T. Basically, who cares about the Apple IPhone application right now, it’s in the works and will eventually be News rather than a rumor.
Right on Tom.