Vonage: New apps and a bid to become internationally relevant

It remains to be seen whether Vonage can make much traction against Skype's installed base, but the opportunities abroad are huge.
Written by Larry Dignan, Contributor

Vonage on Wednesday rolled out Vonage Mobile, new iPhone and Android apps, that allow for texts and calls while undercutting Skype rates.

It remains to be seen whether Vonage can make much traction against Skype's installed base. Vonage's international calling rates are 30 percent less than Skype.

But that's only part of the story. The larger tale here goes well beyond a mobile app. Just a few years ago, Vonage was on financial death watch. The company has rebuilt a balance sheet that looked like it wasn't worth the paper it was printed on. Mark Lefar, CEO of Vonage, talked last month about how the company refinanced its debt twice in the last 13 months, cut those liabilities in half and trimmed interest rates in the 20 percent range to less than 4 percent.

In other words, Vonage is poised to report positive earnings growth on Feb. 15. Today, Vonage is known for more than its quirky commercials. So what's the strategy? Can Vonage really grow beyond its U.S. base?

The answers to those questions were outlined during Lefar's talk a month ago. Here's the short version of Vonage's strategy.

Grow international. Fifty percent of Vonage customers are on the Vonage World plan and 35 percent regularly make international calls. Vonage has opened three bilingual sales and services sites. Hispanic callers are the primary target. Lefar said that the consumer communications market outside North America tops $300 billion.

Snatch share in the U.S. In the U.S., Vonage research shows there are more than 20 million households that are looking to switch carriers.

Mobile growth. Lefar said there are free VoIP players that have invested as much in mobile. Vonage's new apps use the phone's established contact list. The plan is also to add feature phone software and a low-cost international roaming service.

For Lefar, Vonage's mobile efforts at the very least will bring in more active users. "What we are finding is that those who download the applications do become active users. The issue becomes one of frequency of use, pricing structure, and simply getting penetration of those downloads," said Lefar.

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