Ericsson Buying Vonage For $6.2B To Boost API, 5G And CPaaS Capabilities

‘Imagine putting the power and capabilities of 5G, the biggest global innovation platform, at the fingertips of developers. Then back it with Vonage’s advanced capabilities in a world of 8 billion connected devices. Today we are making that possible,’ said Ericsson CEO Börje Ekholm.

In the largest acquisition in its history, Ericsson is diving deep into the Communications Platform-as-a-Service market with its $6.2 billion acquisition of Vonage with plans to take its API and 5G capabilities to the next level.

“Imagine putting the power and capabilities of 5G, the biggest global innovation platform, at the fingertips of developers,” said Ericsson CEO and President Börje Ekholm in a statement. “Then back it with Vonage’s advanced capabilities in a world of 8 billion connected devices. Today we are making that possible.”

Ericsson predicts that the deal will deliver revenue synergy opportunities, including white labelling and cross-selling of the combined portfolio, of approximately $400 million by 2025.

The goal is to vastly expand Ericsson’s wireless enterprise global footprint, spearheaded by adding Vonage’s cloud-based Vonage Communications Platform (VCP), which serves over 120,000 customers and over one million registered developers. Specifically, the API platform within VCP allows developers to embed communications—such as voice, video and messaging—into applications and products without the need for back-end infrastructure or interfaces.

[Related: CyrusOne To Be Acquired, Taken Private By KKR, GIP For $15B]

“Network APIs are an established market for messaging, voice and video, but with a significant potential to capitalize on new 4G and 5G capabilities. Vonage’s strong developer ecosystem will get access to 4G and 5G network APIs, exposed in a simple and globally unified way. This will allow them to develop new innovative global offerings,” said Ekholm. “Communication Service Providers will be able to better monetize their investments in network infrastructure by creating new API-driven revenues. Finally, businesses will benefit from the 5G performance, impacting operational performance, and share in new value coming from applications on top of the network.”

Combining Vonage’s customer base and developer community with Ericsson’s network expertise, 26,000 R&D specialists and global reach, the companies plan to create new opportunities to accelerate strategies and innovation. This includes accelerating enterprise digitalization and developing advanced APIs made possible by 5G.

Ericsson said these APIs can be applied to help ensure the quality of critical services like telemedicine, immersive virtual education and autonomous vehicles over wireless.

Vonage CEO Rory Read said the convergence of the internet, mobility, cloud and 5G networks is forming a digital transformation and intelligent communications “wave” that is changing the way businesses operate.

“The combination of our two companies offers exciting opportunities for customers, partners, developers and team members to capture this next wave,” said Read in a statement.

With enterprise demand for programmable networks increasing, CPaaS solutions can help by democratizing network access by offering API enabled communications services. The fast-growing CPaaS market is expected to reach $22 billion by 2025, growing at 30 percent annually, Ericsson said.

The transaction is expected to be completed within the first half of 2022.

Looking at the financial terms of the deal, Ericsson will acquire all of Vonage’s outstanding shares at an all-cash price of $21 per share.

Vonage will become a wholly owned subsidiary of Ericsson and will continue to operate under its existing name. The Holmdel, N.J.-based communications specialist captured $1.4 billion in sales from September 2020 to September 2021.

Vonage’s 2,200 employees will remain with the company and the Vonage’s CEO Read will join the executive team of Ericsson, reporting to Ekholm.