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Vonage Boosts Value of Offering

April 29, 2006|From the Associated Press

NEW YORK — Vonage Holdings Corp., the country's largest Internet telephone service, on Friday more than doubled the amount it expected to raise in its initial public offering and reported record subscriber growth.

Vonage, which in February said it expected to sell shares valued at $250 million, said in a regulatory filing Friday that it planned to sell 31.25 million shares at $16 to $18 each, putting the total value of the offering at about $530 million.

The Holmdel, N.J.-based company has been the leader in selling voice over Internet protocol, or VOIP, service to the masses. However, its early lead has been narrowing as cable companies, in particular Time Warner Cable Inc., have started marketing VOIP to their own subscribers.

But in Friday's filing, Vonage said it had more than 1.6 million subscribers April 1.

That indicated a gain of 328,000 customers in the first quarter, the company's strongest ever and a reversal of the trend of slowing growth, according to Stephan Beckert, an analyst at research firm TeleGeography.

"It's such a huge increase in subscriber growth, it's kind of shocking," Beckert said. "Now the challenge is going to be making money off those subscribers."

Vonage charges $24.99 a month for unlimited domestic calling. From January to March this year, it lost $72.8 million on revenue of $118.9 million. It spent $88.3 million on marketing, giving an indication of where the IPO money is expected to go. Vonage was the top advertiser on the Internet last year and for the first three months of this year, according to Nielsen/NetRatings.

Vonage expects to take home $494 million from the IPO after underwriting fees, but both the price and the number of shares offered in an IPO can vary substantially from early filings.

No date was set for the IPO, but companies typically go public within a few months after setting an estimated price, unless events intervene.

The 31.25 million shares to be sold represent 20% of the company's stock.

Venture capital and investment firms New Enterprise Associates, Bain Capital, 3i Group, Institutional Venture Partners and Meritech Capital Partners will own 45% of the company. Founder and Chairman Jeffrey Citron will own 31%.

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