Vonage rings up Telesphere acquisition for $114m

Contact: Mark Fontecchio Kenji Yonemoto

Vonage goes back to the business telephony market for another acquisition as its previous play there helped the hobbled consumer VoIP vendor return to growth. Its purchase of Telesphere Networks for $114m in cash and stock values the target at about 3x trailing revenue, compared with the 2.1x it granted to Vocalocity a year ago. Telesphere has 1,200 business customers, as well as a deeper service offering with other elements of unified communications, going beyond the pure VoIP for small businesses that was Vocalocity’s bread and butter. That likely accounts for some of the higher multiple in this deal, but doubtless some of it also comes from Vonage’s confidence that its new tack is working.

The broad abandonment of landlines for mobile phones hit Vonage hard. The company’s revenue ticked down a few percentage points for several consecutive years. In the year since buying Vocalocity, the target’s revenue growth has accelerated, contributing $24m to Vonage’s top line and growing 52% year over year in the last quarter, compared with 38% growth a year ago. That’s playing a role in Vonage’s return to growth. Before the acquisition of Telesphere, the company was projecting $886m in 2014 revenue, which would be its biggest year since 2009.

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