April 4th, 2005
Seven reasons why Sprint should buy Vonage--now
Yes, it is a revolutionary idea. And no, I have no direct or indirect evidence that such a deal has even entered the mind of either party.
But let me tell you why I think Sprint buying Vonage would make perfect business sense.
Out of all the major national telecom providers, Sprint is the only one without a major, direct-to-consumer VoIP sales play. It appears that, to date, Sprint’s VoIP initiatives have focused on Sprint Enterprise VoIP Servicesfor the corporate user, and on working with cable providers to enable them –underscore "them" — to offer their own branded services. The latest of these, announced today: three new agreements with regional cable companies claiming a total of 250,000 subs.
Those efforts are strategically sound. But, when I read reports that IDC is predicting 3 million residential VoIP subs by the end of this year, and 27 million by 2009, branded VoIP enterprise push and unbranded cable partnerships are not enough.
See, Sprint is the sole national telco without a major consumer VoIP initiative. As the consumer VoIP market mushrooms, Sprint is going to feel pressure on several fronts:
- From the giants: SBC-AT&T and, presumably, Verizon-MCI;
- From the cable giants, such as Comcast;
- From the well-capitalized, VoIP pure playssuch as Vonage and Packet 8;
- From the VOIP deep discounters;
- From the softphone folks.
Five reasons so far, and counting…
At the same time,a trend linebetween cheap VoIP and Wi-Fi is going to put intense price pressure on:
- Sprint’s long-distance network;
- Sprint’s PCS cellular network, andNextel’sofferings.
Vonage, and Vonage alone, has the availability and the market recognition to arm Sprint with the competitive strength it will need to compete in VoIP.
We’e not talking low-hanging fruit here. Would Vonage cost a bundle? Oh, yea. But nowhere near Sprint’s current $34 billion market cap.
At the same time, it would serve Vonage to sell. They are at the peak of market cachet, but the game is in an early enough stage that the full marketing, research and regulatory guns of the bigger ILECs have not been fully deployed yet.
From a strategic point of view, should Sprint buy Vonage? Do you think I have a point? Or, seven of them? Post a TalkBack.
Russell Shaw is an enterprise computing journalist, analyst and author based in Portland, Oregon. See his full profile and disclosure of his industry affiliations.
