Vonage Gobbles UCaaS Provider Telesphere for $114 Million

**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in Q3 2014.**

VoIP provider Vonage is buying Arizona-based Telesphere for its UCaaS expertise.

New Jersey-headquartered Vonage said in a Securities and Exchange Commission filing on Wednesday that it will pay $114 million for Telesphere. The amount could be adjusted due to Telesphere’s working capital at closing, and be reduced depending on Telesphere’s outstanding debt and unpaid expenses at that time. Vonage will use cash for about 80 percent of the total transaction and cover the remaining 20 percent with its common stock.

Each company’s board has approved the deal, which is expected to close before the end of the year.

Telesphere did not immediately respond to an inquiry about what this acquisition means for channel partners. Presumably, Vonage will fold Telesphere’s indirect initiative into Vonage Business, where Zane Long serves as channel chief. Clark Peterson, CEO of Telesphere, is slated to join Vonage as president of Telesphere.

Buying business-centric Telesphere makes sense for Vonage, which has been making inroads into the SMB and enterprise segments over the past couple of years through its Vonage Business Solutions division. Telesphere targets SMBs and distributed organizations with services including collaboration, call center solutions, mobile office and HD multipoint video conferencing.

“A year after Vonage moved into the rapidly growing UCaaS market, we are substantially expanding our presence within the sector through the Telesphere acquisition,” said Marc Lefar, whose last day on the job as Vonage CEO is today – Alan Masarek steps in tomorrow. “This is an important next step in the continued execution of the company’s long-term growth strategy.”

Lefar added that Vonage Business Solutions has ramped up its revenue growth from 38 percent to 52 percent in one year, “and we are confident in our ability to accelerate growth at Telesphere as we bring it under the Vonage umbrella.”

Indeed, adding Telesphere to Vonage Business Solutions brings an average seat size per customer of more than 40, and average monthly recurring revenue per customer of almost $3,000, Vonage said. Telesphere expects its 2014 revenue to total around $40 million, and has more than $50 million under contract for next year.

“Our two businesses complement each other well and will fortify Vonage’s scale in the high-growth market for unified communications,” Peterson said. “I am very excited about our future together.” 

Vonage announced the Telesphere transaction on the same day as its quarterly earnings. Vonage reported $215 million in revenue, up from $204 million a year ago – largely due to the Vonage Business acquisition – and net income of $14 million, down from $15 million in the same quarter last year.

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