Founded in 1876, the Swedish multinational networking and telecommunication company, Ericsson has entered into an agreement to acquire Vonage Holdings Corp, an American publicly held business cloud communications provider, for $ 21 per share. This represents a total acquisition price of approximately $ 6.2 billion.
Ericsson is currently the fifth largest cable operator in the U.S. providing services to 1.5 million homes and businesses across 22 states. With this acquisition, they plan to strategically build a leading mobile network globally. Börje Ekholm, President and CEO of Ericsson believes, “The core of our strategy is to build leading mobile networks through technology leadership.
This provides the foundation to build an enterprise business. The acquisition of Vonage is the next step in delivering on that strategic priority. Vonage gives us a platform to help our customers monetize the investments in the network, benefitting developers and businesses.”
Furthermore, he added, “Today 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. 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.”
Rory Read, CEO of Vonage believes that the combination of both countries will provide exciting opportunities for customers, partners, developers, team members. Ericsson and Vonage have a shared ambition to accelerate a long-term growth strategy. Read also mentioned that the state of internet is converging, powerful 5G networks are forming the digital transformation and intelligent communications wave, which is driving a secular change in the way businesses operate. “We believe joining Ericsson is in the best interests of our shareholders and is a testament to Vonage’s leadership position in business cloud communications, our innovative product portfolio, and outstanding team”, said Read.
Vonage’s presence in the CPaaS segment will be highly beneficial for Ericsson. CPaaS, Communication Platform as a Service, is a cloud-based platform that enables developers to add real-time communications features to their own applications without needing to build backend infrastructure and interfaces. It will provide Ericsson with an opportunity to access a complementary, substantial and high growth segment. With increasing investments in 4G and 5G - and a flourishing ecosystem of new application, demand from enterprises for programmable networks has been accelerating. The CPaaS market is currently expected to reach USD 22 billion by 2025, with a growth percentage of 30 annually. With Ericsson’s global leadership in 5G technology, it will provide access to the developing space for open network APIs (An application programming interface (API) is a connection between computers or between computer programs. It is a type of software interface, offering a service to other pieces of software), which is expected to have a growth of $ 8 billion by the end of the decade.
The combination of Vonage’s customer base and developer community and Ericsson’s deep network expertise, including 26,000 R&D specialists and a global reach of both the platforms, will create opportunities to accelerate standalone strategies and innovation in the market. These opportunities include accelerating enterprise digitalization and developing advanced APIs made possible by 5G. Such APIs could be used to ensure the quality of critical services like telemedicine, immersive virtual education and autonomous vehicles and to improve the performance benefits in gaming, augmented and extended reality.
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