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Thursday, November 08, 2007

Legal, Customer Acquisition Costs Plauge Vonage

After settling with Sprint/Nextel and Verizon Communications, Vonage Holdings Corporation Inc. (NYSE: VG) announced today that they have entered into discussions with AT&T to settle as well.

With the tally for payments on the first two settlements estimated in the $160,000,000 to $200,000,000 range, Vonage recently reported that it costs them $206 to acquire each new customer during Q3 also that their customer churn rate has hit 3%. Both of these developments have been less than soothing to shareholders despite shares trending upwards this morning as earnings trumped analyst loss estimates by about three cents.

Vonage lost nearly $162 million ($1.04 per share) during Q3, with $132 million attributed to settlement payments. With lawsuits seemingly in their rear view mirror, bankruptcy may not be imminent in the near future as many expected.

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