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Vonage Expands UCaaS Portfolio

Businesses interested in unified communications as a service, or UCaaS, have plenty of choices -- too many. Yet Vonage sees an opportunity in offering yet another -- and in so doing become known as more than just a provider of over-the-top VoIP services for consumers.

Toward that end, the company last week announced its intent to acquire Telesphere Networks, a UCaaS provider established in 2006 and based in Scottsdale, Ariz. Telesphere owns and operates its own MPLS network, offering SIP trunking, MPLS networking, and hosted contact center services -- as well as a full-featured UCaaS experience.

Vonage, a pioneer in hosted VoIP, provides home phone service for international and domestic callers in the US, Canada, the UK and Brazil. It has reported Q3 2014 revenue of $215 million.

The Telesphere deal, valued at $114 million in cash and stock, follows on the fall 2013 acquisition of Vocalocity for $130 million, also in cash and stock. Vonage has since rebranded Vocalocity as Vonage Business Solutions (VBS), and has grown its hosted VoIP service revenue by 52% in a year. With the addition of Telesphere, Vonage CEO Alan Masarek said business communications services now represent almost 20% of revenue.

Clark Peterson, president of Telesphere, said he sees the potential for accelerated growth. "Our customers will have choices like none they've had before. Everyone knows cloud communications is where the industry is going, and Vonage will be the clear leader," he said.

The combined portfolio will benefit both Vonage's consumer base and enterprise businesses, said Masarek, who joined the company just last week from Google, where he had been director, Chrome & Apps, since the June 2012 acquisition of his prior company, Quickoffice.

VBS, an over-the-top service like Vonage, does well with small business accounts, typically those with fewer than 50 seats. Telesphere brings to Vonage MPLS networking, its own channel, robust UC features, large customers -- some with more than 1,000 seats -- and a Platinum-level partnership with Polycom. In addition, Vonage could potentially leverage and extend Telesphere's proprietary agent portal ChannelSphere, which allows partners to build proposals. Currently VBS sells services direct to businesses, but Vonage has plans to build an indirect channel.

Vonage said it has no plans to combine Telesphere and VBS at this time, and has retained Peterson as president of the entity to be known as Telesphere, a Vonage company.

Masarek said he believes Vonage will be able to significantly accelerate Telesphere's sales. "We are going to push real hard in the business space," he said.

Vonage has a strong marketing capability, and its brand is tightly associated with VoIP. With VBS and Telesphere, Vonage is suddenly a top provider in the space, with deep pockets, a broad range of services, and a proven track record in marketing.

From a technology perspective, Vonage utilizes mostly internally developed technologies. Telesphere uses internally developed solutions as well as components from BroadSoft. Last month, Wainhouse Research recognized Telesphere as the top BroadSoft-based provider.

Telesphere has developed an impressive provisioning and service management portal known as Zeus that provides customers the ability to control, administer and monitor UCaaS and network services in real-time. Telesphere also is expanding internationally through a UK-based data center.

As I spoke with Masarek, he suggested that Telesphere and Vonage together will be a formidable company with significant increases in revenue and valuation -- and he made it abundantly clear that Vonage is dead serious about enterprise UCaaS. While he declined to comment about future acquisitions toward that end, I certainly wouldn't be surprised to learn of another.

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