Vonage Churning Subscribers, Stomachs

Published on August 5, 2009
by John Paczkowski

peptoadCan this really be true? Vonage posted another quarterly profit?

Indeed it is: The Internet phone service provider reported a second-quarter profit of $2.3 million, or a penny a share. Wall Street had been expecting a loss of three cents a share. Great news.

Sadly for Vonage, however, the news was tainted by an increase in subscriber defections. The company lost 89,000 net subscribers during the quarter as churn rose to 3.2 percent from three percent. It ended the quarter with just 2.5 million lines.

“While our financial performance was strong, our subscriber base did not grow at expected levels due in part to the challenges of the current economy and the increasing impact of wireless substitution,” said Vonage Chief Executive Marc Lefar. “During the quarter, we launched our new marketing campaign, which we anticipate will drive new customer acquisition over time.”

“Anticipate” seems a generous word here. “Hope” is perhaps a better one. To lose almost 90,000 subscribers in a single quarter at time when the lousy economy should be inspiring cost-conscious consumers to sign up for Vonage‚Äôs discount service seems rather bleak. That better be some marketing campaign.

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