News
The new non-cash impairment charge is in addition to the $2.9 billion impairment logged last year
Ericsson acquired application programming interface (API) specialist Vonage back in 2022 for $6.2 billion, saying at the time that it would play a central role its in ongoing growth strategy.
The idea, in short, was that Ericsson would work together with Vonage to develop network APIs, allowing app developers to gain deeper access to telcos’ 4G and 5G networks, including features such as user authentication, bandwidth, responsiveness, energy efficiency, and security. This, the companies said, would allow developers to better leverage the network to create unique and interesting applications.
In particular, the partners said they would work to build a Global Network Platform for APIs, essentially allowing app developers to rollout their apps across any telco network running on Ericsson equipment – a task that would previously have required unique coding for each telco partner.
At the time, Ericsson claimed that the communications API market would swell to $22 billion by 2025, growing at a CAGR of 30%.
In reality, however, things have moved far more slowly than predicted. App developers’ appetite to get deep into telco networks has been slim, while competition from rival platforms, including Amazon, has been fierce.
By last year, the Swedish operator had announced a non-cash impairment of $2.9 billion – almost half of the acquisition’s value – citing ‘the significant drop in the market capitalization of Vonage’s publicly traded peers, increased interest rates and overall slowdown in Vonage’s core markets.’
Today, the company’s fortunes continue to slide, with Ericsson writing off a further $1.1 billion for Q2 this year.
In total, this leaves Vonage worth only around a third of what Ericsson paid for it just two short years ago.
Ericsson attributed this reassessment of Vonage’s value as being related to “deterioration in the market environment and elective decisions we have made to refocus our investments in strategically prioritized areas”, according to Niklas Heuveldop, Head of Business Area Global Communications Platform and CEO of Vonage.
Despite this, Vonage appears committed to further developing its Global Network Platform.
“We continue to advance our strategy to build a Global Network Platform for network APIs, which was the strategic impetus for the Vonage acquisition. We recently announced additional partnerships with leading mobile network operators and we see continued positive momentum across the industry,” said Heuveldop.
“Through this strategy, we are making advanced 5G network capabilities available to the world’s developer community to accelerate the innovation of value-added applications for industry and society. This will open up new revenue streams for our operator customers and spur growth in the telecom industry.”
At this point, there is no doubt that Ericsson paid far too much in its acquisition of Vonage. Just how much it overvalued the company, however, remains to be seen.
Keep up to date with the latest international telecoms news by subscribing to the Total Telecom daily newsletter
Also in the news:
Dutch operators finally get their hands on midband 5G spectrum
Virgin Media O2 completes first stage of Shared Rural Network
Xavier Niel’s $4.1 billion bid for Millicom is too low, company says