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.

(Reporting by Simon Johnson, Editing by Louise Heavens)