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Ericsson pays $6.2 bn for cloud comms systems vendor Vonage

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The rationale is that Vonage cloud developers can give CSPs interfaces all over the enterprise

Ericsson has announced an agreement to acquire cloud-comms vendor Vonage for $6.2 billion (€5.5 billion) cash. Though the deal had the unanimous approval of the Vonage board of directors, opinion is divided in the telecoms industry, with one analyst saying it’s "brave" to imagine Vonage’s developers can write "for mobile and networking".

Ericsson said its strategy is to expand its presence in wireless enterprise and broaden its global offerings with the Vonage Communications Platform (VCP), which creates 80% of Vonage’s total revenues and has 1 million registered developers globally.

According to Ericsson it can now attain a bigger share of a market that is predicted to be worth $700 billion by 2030.

Vonage developers can serve 5G slices

“Vonage gives us a platform to help our customers monetise the investments in the network, benefitting developers and businesses,” said Börje Ekholm, President and CEO of Ericsson. “Imagine putting the power and capabilities of 5G, the biggest global innovation platform, at the fingertips of developers.”

Not everyone is convinced. This acquisition has very little to do with 5G, according to industry watcher Dean Bubley of Disruptive Analysis who wrote an extensive analysis on Linkedin, “it's more about increasing Ericsson exposure to enterprises, without overly scaring its telco customers.”

Interfaces take CSPs to better places

According to Ericsson its customers, such as mobile operators, will need better network application programme interfaces (APIs) to provide messaging, voice and video services. Ekholm said there is, “significant potential to capitalise on new 4G and 5G capabilities. Vonage’s strong developer ecosystem will get access to 4G and 5G network APIs, exposed in a simple and globally unified way. This will allow them to develop new innovative global offerings.”

Comms service providers will need these new API driven revenues to get their more money on their investment in network infrastructure. In turn, their business clients will benefit from better 5G and operational performance, with applications on top of the network making a much more valuable contribution to output. 

CSPs could boost enterprise GDP

Bubley continued in his analysis on Linkedin, “It's not obvious to me that a developer doing SMS appointment reminders for dentists is going to suddenly pivot to consuming 5G Network Slices, quality of service APIs, or writing apps for energy optimisation on an OpenRAN radio network".

The Vonage deal could be a response to Mavenir's acquisition of Telestax, Bubley explained, adding, “If Ericsson is getting more serious about enterprise and cloud again, the acquisition makes sense. However, if this really is about access to developers for 5G APIs, and about the wireless enterprise, then this is a mis-step.”