Vonage Struggles to Move Past Lawsuits
Despite its continuing legal troubles, Vonage was still able to add new customers and is on the verge of settling a suit brought against it by AT&T.
The two sides have agreed to terms in principle that have Vonage pay AT&T $39 million over five years to settle all claims. Both sides will dismiss any legal actions outstanding.
Vonage's settlement with AT&T will be its third over patent disagreements. It already had a settlement with Sprint Nextel for $80 million and Verizon for between $80 and $120 million.
$132 million of the company's $161.7 million loss for the quarter was due to charges taken because of these settlements. Without them, Vonage would have done fairly well, and would have improved upon the $62.1 million loss in posted in the year ago quarter.
Even with all its legal troubles and diminished advertising, Vonage said it added 72,000 new customers in the quarter. It ended the period with more than 2.5 million customers.
Bankruptcy seemed almost a sure bet during the height of the VoIP's patent troubles, however with the worst of the legal problems behind it, the company still seems to have enough cash-on-hand to pull out.
According to the balance sheet, Vonage ended the quarter with $154 million in cash.
"We are executing against our strategy to fix the fundamentals of our business," Vonage chairman Jeffrey Cintron said in a statement. "We are acquiring customers more effectively and running the business at an improved cost structure. While this has resulted in positive changes in our business, we have much more to do."
There is a lot of work to do. It still is paying quite a lot to get new customers, $206 as of the last quarter. This is down, however, from previous quarters; when it was paying $300 or more. Additionally, churn is still very high, rising to 3 percent in the third quarter.
Cintron said that much of the problem could be in customer service, evidenced by the fact that seven out of 10 customers were leaving due to a poor experience. Many were calling customer service several times in order to get problems fixed, he admitted.