Ericsson plans to acquire Vonage for $6.2 billion to offer tools for embedding communication services in 5G applications running on the Stockholm-based company's telecom and enterprise infrastructure products.
On Monday, Ericsson announced plans to acquire the New Jersey-based communication platform as a service (CPaaS) provider. Under the deal, Ericsson would gain more than 1 million developers capable of embedding video, messaging and voice services in software. At the same time, Vonage's customer reach would become global.
Ericsson President and CEO Börje Ekholm told investors the acquisition would broaden the company's customer base for 5G networking. The next-generation wireless technology will eventually drive every workflow, process or transaction, he said in a conference call.
"Our shared intent with Vonage is to develop a platform that allows developers to access network capabilities," he said. "[Vonage has] a robust and established developer community that … has the experience to build applications using strong and easy-to-use APIs."
Vonage's APIs let developers integrate its cloud-based communication services into their software. Ericsson could also use the API platform to develop new products for the 5G market.
"This [combination] will allow us to win the next wave of platform services, as we both enhance existing communication services and develop new and advanced use cases," Ekholm said.
Zeus Kerravala, founder of ZK Research, said Ericsson had been expanding its 5G network services for a while. Last year, the company bought wireless WAN provider Cradlepoint for its APIs, which help applications use the 5G network more efficiently. With Vonage's APIs, Ericsson can provide developers with a broad range of tools to add communications into applications, he said.
Other CPaaS firms, like market leader Twilio, have been expanding their offerings, as well. Twilio has acquired multiple companies in recent years, including IoT firm Electric Imp, data platform provider Segment, customer-engagement business ValueFirst, and messaging company Zipwhip.
Metrigy analyst Irwin Lazar said developers could use Vonage APIs to write better games and video applications like telemedicine on Ericsson hardware.
"That's what they're banking on," Lazar said. "The goal is to derive more value out of their 5G infrastructure."
Ericsson said it would pay for the acquisition in cash. Vonage will retain its name and operate as a subsidiary. Vonage's 2,200 employees will remain with Ericsson, and its CEO, Rory Read, will join its executive team and report to Ekholm.
Vonage's board unanimously approved the agreement, but Vonage shareholders and regulatory agencies must also sign off on the deal. The companies expect to close the transaction in the first half of 2022.
Mike Gleason is a reporter covering unified communications and collaboration tools. He previously covered communities in the MetroWest region of Massachusetts for the Milford Daily News, Walpole Times, Sharon Advocate and Medfield Press. He has also worked for newspapers in central Massachusetts and southwestern Vermont and served as a local editor for Patch. He can be found on Twitter at @MGleason_TT.