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Vonage Subscribers Go AWOL, Shares Plummet

Vonage Holdings Corp. (VG) on Wednesday reported a second-quarter profit, attributed to cost-cutting, even as it lost 89,000 net subscribers.

The New Jersey-based VoIP service provider posted net income of $2.3 million, compared to losses of $6.9 million a year earlier. Still, customers cut the broadband phone cord as many opted instead for all-cellphone use, an increasingly popular trend in a recession. Vonage now has a customer base of 2.5 million lines and is making less average revenue per user, to boot.

“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,” Vonage CEO Marc Lefar said in a prepared statement.

Once again, Vonage’s business model is called into question. The company faces stiff competition from cable operators and telecom rivals and, despite new marketing campaigns and incentives, is having difficulty selling itself.

Investors apparently agree. About 30 minutes before the closing bell, Vonage’s shares had plunged 8.33 percent to 44 cents.


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