Telecoms equipment maker Ericsson to buy cloud firm Vonage for $6.2 bn

Mobile telecoms equipment maker Ericsson said on Monday it had agreed to buy cloud communications firm Vonage for $6.2 billion.

The deal was the Swedish firm’s biggest in years and follows its acquisition of U.S.-based wireless networking company Cradlepoint for $1.1 billion in 2020.

“The merger agreement was approved unanimously by the Board of Vonage,” Ericsson said in a statement.

“The transaction builds upon Ericsson’s stated intent to expand globally in wireless enterprise, offering existing customers an increased share of a market valued at $700 billion by 2030.”

Vonage had sales of $1.4 billion in the 12-month period to Sept. 30 2021, with a margin on adjusted earnings before interest, tax and depreciation (EBITDA) of 14% and free cash flow of $109 million.

The acquisition marks a new phase after a period since Borje Ekholm took over as CEO in 2017.

He has focused on restructuring and refocusing the business after Ericsson branched out into multi-media in the early part of the 2000s. It struggled to fit its purchases into its operations, weighing on margins and profits.

The cloud-based Vonage Communications Platform serves more than 120,000 customers and more than one million registered developers globally.

Ericsson said it expected the deal to boost earnings per share – excluding non-cash amortization impacts – and free cash flow from 2024 onwards.

The deal is expected to close in the first half of 2022, subject to Vonage shareholder approval, regulatory approvals, and other conditions.