Vonage met Wall Street’s expectations for Q2 sales and lost two cents per share less than analysts predicted. But subscriber growth was disappointing.
Vonage (VG) has taken its foot off the gas pedal, and growth has slowed to a halt. The company added 2,000 net new subscribers during the quarter, below its expectations, and down from 57,000 new subscribers in Q2 2007.
To get there, Vonage had to sign up 231,000 gross subscribers — meaning 229,000 subscribers left the service during the quarter.
We realise that Vonage has ratcheted down its growth rate on purpose over the last year to avoid impulsively signing up subscribers that would quickly leave the company — costly wastes of time.
But new CEO Marc Lefar will have his work cut out finding subscribers interested in Internet-based home phone service that haven’t already signed up for similar service from their cable company. While Vonage added 166,000 net new subscribers in the last year, cable giant Comcast (CMCSA), for example — whose phone service is available to fewer people — added 2.5 million phone subscribers in the last year, almost as many as Vonage’s entire customer base.
On Vonage’s earnings call, Lefar notes that just a quarter of Americans with broadband Internet access are currently subscribing to digital voice services. But that doesn’t mean that the remaining 75% are easy bait. Cable companies’ phone subscriber growth is already slowing, and many of those households will eventually go wireless-only. And any substantial growth will require spending a lot more money on marketing.
Revenue: $227.5 million vs. $227.3 million consensus
EPS: -$0.04 vs. -$0.06 consensus
Business Insider Emails & Alerts
Site highlights each day to your inbox.