June 25th, 2007
Vonage's $3.99 a month offer to defectors would be huge sign of desperation
Andy notes our fellow blogger Tom Keating’s report that Vonage seems to be preparing a deal for defecting customers that would only charge them $3.99 a month to stick around for the following 12 months.
When or if Vonage announces such a deal, they will portray it as a golden opportunity for them to prove their worth by proving to doubting customers that they really shouldn’t leave.
But that’s just the Vonage distortion field. If you come here often, you know it well.
What’s really at play here is a desperate image by Vonage to reduce churn. That’d be the percent of subscribers who leave in any given month, and are not going to return.
For any service provider, churn can be a major concern. And for Vonage, churn of 2.4% in the first quarter of calendar 2007 was even a bit higher than 2.3% in the preceding quarter.
Recalling the imagery of passengers jumping off a sinking ship, churn is both a weak link and an ugly sore, hugely problematic to investors and especially to prospective acquirers.
Prospective acquirers such as the private equity firms I’d bet you are eyeing Vonage.
Russell Shaw is an enterprise computing journalist, analyst and author based in Portland, Oregon. See his full profile and disclosure of his industry affiliations.
