Tuesday, November 13, 2007

Vonage and Telio Revisited

This is a brief post, and is really an add-on to my Friday post about Vonage's Q3 earnings. I still contend that Vonage's Q3 performance had more good news than bad news, and based on comments received so far, at least few others agree.

That said, I'm sure I'm one of a small handful of people outside Scandinavia following Telio, another residential VoIP pureplay that went public around the same time as Vonage. I've compared these two extensively in the past - most recently about a year ago - but I'm not about to rehash all that now.

Telio's Q3 numbers were announced the other day, and they continue show good growth, and more importantly, profitability and decent margins. They just passed the 140,000 threshold for subscribers, and while that's a fraction of Vonage, it's huge on a per capita basis. A couple of other good news items of note - Telio's subscribers are using the service heavily to make calls, which validates the premise of using VoIP to reduce telephony costs. Also, Telio just launched service into the business market, which is a new frontier for them, and those results should start showing up next quarter.

I'm sharing this update for two reasons. First, to draw attention to Telio's continued success. No doubt, the minimal presence of cablecos makes for a less competitive environment than the U.S., but they are doing plenty of things right, and are certainly out-doing everyone else in their home market. Furthermore, they haven't run into any patent infringement lawsuits, and from all accounts, there don't appear to be any major barriers to growth. So, I'll keep telling this story to show that residential VoIP can be a viable business if it's done right.

Secondly, since the timing of their Q3 numbers was so close to Vonage's, it only made sense to revisit these companies. While Vonage is far from being healthy, as I noted the other day, there are at least some signs of life. Plus, I'd be remiss if I didn't note that if Vonage wasn't having these litigation issues, their Q3 numbers would have been much more impressive and their prospects much brighter. So, together these two companies should give us cause to think that pureplay VoIP isn't quite dead, and certainly not over in Norway.

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