Vonage tentatively settles AT&T patent lawsuit, reports loss
VOIP provider Vonage has tentatively agreed to settle a patent infringement
lawsuit filed by rival AT&T, with the smaller company paying about $39 million,
Vonage announced Thursday.
Vonage's tentative agreement with AT&T follows patent settlements last
month with Verizon Communications for $80 million to $120 million, depending
on the results of its appeal of a court ruling on two patents, and with Sprint
Nextel for $80 million.
"With most of the litigation behind us, let me say we're excited to refocus
on running our business," Jeffrey Citron, Vonage chairman and interim CEO,
said during a conference call on the company's quarterly financial results.
The AT&T patent infringement lawsuit was over technology called "packet
telephone system" that allows VOIP (voice over Internet Protocol) to work.
The two companies will "work diligently" to finalize the settlement,
Vonage said in a news release. "If negotiations of a definitive settlement
agreement fail, then Vonage intends to vigorously defend itself in this matter,"
the company said.
For the third quarter, ended Sept. 30, Vonage reported a net loss of $161.8
million, compared to a loss of $62.2 million for the third quarter of 2006.
Excluding legal charges, such as the payments to Verizon and Sprint Nextel,
the company's net loss was $16.2 million.
Vonage's revenue for the quarter was $210.5 million, up from $161.8 million,
in the third quarter of 2006. Vonage added 78,000 subscriber lines during the
quarter, compared to 57,000 in the second quarter of this year. Vonage now has
2.5 million lines in service, the company said.
The company is working to improve its marketing efforts and customer experience,
Citron said. Vonage's customer turnover, or churn, rate of 3 percent was "simply
unacceptable," he said.
Customers calling Vonage to report problems often have long hold times and
sometimes have to call several times to get their problems resolved, he said.
Those situations are also "unacceptable," Citron said.
Vonage is launching a comprehensive plan to improve customer service, including
simplifying the installation of the Vonage service, implementing new call-answering
technology, and adding new customer relationship management software, Citron
said.
"While churn remains a problem, we know from our survey data that this
issue is poor execution on our part, and therefore, we believe, a fixable one,"
Citron said. But the company doesn't expect a turnaround in the customer service
area for "a quarter or two," he added.
IDG News Service
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