Vonage to Offer Calling on All Mobiles, Challenging Skype
Vonage Holdings Corp. (VG), the biggest U.S. provider of telephone service over the Internet, said it will let users of its home plans make calls with a second device such as a mobile phone.
The new feature, called Extensions, represents another round in Vonage’s competition with rival Skype Technologies SA, which is being bought by Microsoft Corp. (MSFT)
Extensions will be free to add to an existing subscription plan, Vonage said today. The feature could make the service more attractive to users who make international calls with their mobile phones, Chief Executive Officer Marc Lefar said in an interview. It also may reduce the number of people who leave Vonage each month, a churn rate of 2.5 percent in the latest quarter, and attract new customers.
“We think it’s going to be a real boon for prospects,” Lefar said. “Whether it’s your home phone or your mobile phone, it simply works.” Holmdel, New Jersey-based Vonage added a net 3,345 subscriber lines in the quarter ended in March, for a total of 2.4 million.
Vonage fell 11 cents to $4.03 yesterday in New York Stock Exchange composite trading. The shares have risen 80 percent this year. The company went public in 2006 at $17 a share.
Extensions may help Vonage compete more aggressively with Luxembourg-based Skype, Lefar said. After seeking to service consumers’ homes for years, both companies are now pursuing users’ mobile devices. Vonage offers a variety of subscription plans, ranging in price from $12 to $65 a month.
Skype’s service is available on smartphones and feature phones from Verizon Wireless, and both Vonage and Skype have Web-calling applications for smartphones. Extensions will make Vonage’s service available on simpler, cheaper phones. Skype already offers Skype To Go, a service that lets consumers make international calls with any mobile phone.
The Extensions service works as a virtual calling card. To use it, consumers can go to Vonage’s website and add a second phone number to their service plan. To make a call from a mobile phone, a user dials a special U.S. number, enters a four-digit Vonage PIN and dials the destination number.
Over the next few weeks, the company will offer downloadable apps for iPhones and Android-based devices that will enable one-touch dialing from a customer’s contact list using Extensions. In the next few months, Vonage also plans to introduce mobile-only calling plans that will work with any phone, Lefar said.
Skype, meanwhile, has been adding an array of features to its mobile apps. In January, Verizon announced that subscribers who use 4G smartphones will be able to make Skype video calls.
Researcher TechNavio expects the North American market for mobile Web-based calls to grow an average of 57 percent a year from 2010 to 2014.
The challenge for Vonage will be contending with Skype’s name recognition, said Will Stofega, an analyst at IDC.
“Skype is a brand everyone associates with calling,” he said. “It’d be tough to catch them.”
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