Vonage Canada: Subscriber Mystery Solved

Ever wondered about Vonage Canada's subscriber base? I've asked senior management on a regular basis for a number – even a ballpark number – but got nowhere. The answer, I think, is about 52,000, which is much higher than anyone estimated given the scuttlebutt was 15,000 to 20,000. So where does the 52,000 figure come from? Well, if you read through to the end of Vonage's S-1 filing, the company breaks out its Canadian and U.K.sales. In the first-quarter, Canadian sales were $4.25-million. You divide that number by Vonage's average revenue per subscriber ($27 a month X three months) and, voila, 52,000 customers. One thing that is a bit of a puzzler is it appears Vonage Canada has had tremendous momentum in the last quarter or two because sales for all of last year were US$7.6-million, which works out to about 23,000 subscribers using the $27 ARPU figure x 12 months.
Update: My Financial Post story on Vonage's first day of trading can be found here. The Streetcom's Jim Kramer has a rant about Vonage, in which he concludes it is a “piece of junk”.
Update II: Vonage shares down another 11% today to $13.17, which means it has lost 23% from the IPO price, or a cool $575-million. closed down $1.85 to $13 so the value of the company has dropped by $588-million in two days. Yikes! Buying opportunity or dead dog?

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Anonymous

Mark,
You have the right concept, but not the right answer. Assuming the revenue per user for the Canadian service was $27, then the average number of customers for Q1 would be 52,000. However, the average for the quarter will be less than their current subscriber base.
If Vonage Canada finished 2005 with 40,000 subscribers (a crude estimate that assumes smooth growth throughout 2005 to get an average of 23,000 for the year, with very few to start the year), it would have grown to 60,000 to 65,000 by the end of Q1 (and would be growing by up to 8,000 per month).
On the other hand, the $27 (US) average revenue is for all subscribers. The Canadian average could be higher (given that prices in Canada are higher). This would reduce the average customer number — to 45,000 assuming the revenue per user in Canada was closer to Vonage's older US number of $31.
The information Vonage provides (as limited as it is) implies they were somewhere close to 60,000 (+/- 10%) as of the end of March. Continued growth would bring them over 70,000 today, and possibly in the 80's.