lost less money in the fourth quarter of 2006 than a year earlier, but it didn’t attract as many new subscribers to its VoIP (voice over Internet Protocol) service despite heavy marketing.
The company, a pioneer in selling phone service that uses packet data networks instead of traditional circuits, now faces competition from cable operators and the established telecommunications carriers. The big players recognize the potential cost benefits of the technology as well as its flexibility, including the ability to give subscribers a browser-based portal for using voice mail and changing service preferences. But those big players are also bundling VoIP with other services, such as broadband Internet access and TV.
Vonage ended the fourth quarter with a net gain of 166,267 subscriber lines, bringing its customer base to more than 2.2 million. But that was less than the 204,591 subscribers it gained the previous quarter as well as its gain in the fourth quarter of 2005, when it added 207,252 subscribers.
Revenue soared to $181 million, up 91 percent from a year earlier, and the company’s net loss narrowed. Vonage lost $65 million, or 42 cents per share, compared with a loss of $72 million in the fourth quarter of 2005. The company’s margins also improved, according to a statement Thursday.
But Vonage has built its business on being an early mover and drawing a big base of customers that can later drive profits. The company’s marketing costs still amounted to 53 percent of revenue in the fourth quarter, although this was down from 71 percent a year earlier.
Vonage still expects to reach its goal of making an operating profit, adjusted for certain factors, as early as the first quarter of 2008, the statement said.