Vonage announced on Feb 8 that it intends to issue an IPO in an attempt to raise $250 million. This move underlines some of the problems mainstream VoIP providers are having.
The problem for Vonage is that while its subscriber base is growing, it is still losing money. According to the IPO filing, Vonage lost $189.6 million on sales of $174 million in the first nine months of 2005.
The company spends so much on marketing that it is almost impossible to make money from low spending subscribers. Average single line subscribers paid $26.73 per month in 2005. But the company spent $213.77 per subscriber on marketing. That means it would take more than 8 months to recoup their up front marketing costs.
Market share is also shrinking and the competition is ramp View the rest of this article
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