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Ericsson gets US clearance for Vonage take-offEricsson gets US clearance for Vonage take-off

Swedes say last hurdle cleared for $6.2 billion cash acquisition of US cloud-based comms provider.

Ken Wieland

July 15, 2022

3 Min Read
Ericsson gets US clearance for Vonage take-off

It looks like all systems go for Ericsson's $6.2 billion cash purchase of Vonage. The Swedish supplier confirmed today it received takeover clearance from the US Committee on Foreign Investments.

"This represents the final requisite approval to complete the deal," said Ericsson in a brief statement. According to Ericsson and Vonage, the transaction will close no later than July 21 (as originally planned).

Speaking on Ericsson's earnings call yesterday, CEO Börje Ekholm said Vonage was "an important building block" to execute what he calls the "global network platform."

Figure 1: The Swedish supplier says last hurdle is cleared for the $6.2 billion cash acquisition of Vonage. (Source: Ericsson) The Swedish supplier says last hurdle is cleared for the $6.2 billion cash acquisition of Vonage.
(Source: Ericsson)

The global network platform sits within Ericsson's fairly new Enterprise division, which also houses the Cradlepoint business Ericsson acquired in 2020.

High ambition

Ericsson first tabled its bid for Vonage, a cloud-based communications provider, last November. The rationale for the deal, as outlined by Ekholm at the time, was to create an "open global innovation platform."

Vonage's some one million registered developers, envisaged Ekholm, will be able to access various 5G network QoS APIs (quality of service application programming interfaces) – covering the likes of latency, security, throughput and, by implication, network slicing – across the footprints of multiple communications service providers (CSPs).

The CEO framed the Vonage takeover as not only a "next step in developing Ericsson and growing the company by capturing additional market opportunities," but also as a way to add value to Ericsson's core networks business.

The markets weren't impressed, however, lopping off nearly 6% of Ericsson's share price – and wiping about $2.6 billion off its market capitalization – as soon as they got wind of the Vonage deal.

News of US approval on the Vonage bid was met, not surprisingly then, with a collective shrug of the shoulders by investors. Ericsson's share price barely shifted in early morning trading.

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The Stockholm-headquartered company saw its share price drop by more than 11% yesterday after releasing its latest set of financials, which revealed that Ericsson's core profitability was lower than predicted.

Another fine mess

Vonage approval comes against an awkward and embarrassing background in the US, where Ericsson's top brass are bracing themselves for fines from the US Securities and Exchange Commission (SEC) – up to $300 million according to some reports – for alleged misconduct at its Iraqi operations.

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— Ken Wieland, contributing editor, special to Light Reading

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About the Author(s)

Ken Wieland

contributing editor

Ken Wieland has been a telecoms journalist and editor for more than 15 years. That includes an eight-year stint as editor of Telecommunications magazine (international edition), three years as editor of Asian Communications, and nearly two years at Informa Telecoms & Media, specialising in mobile broadband. As a freelance telecoms writer Ken has written various industry reports for The Economist Group.

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