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How Vonage acquisition of UCaaS provider Telesphere benefits customers

In buying UCaaS provider Telesphere, Vonage would expand reach in the UC market and add important UC services for call centers.

If the planned Vonage acquisition of Telesphere goes through, the combined company would reduce long-distance costs of Telesphere's business customers while Vonage customers would get access to more advanced cloud-based unified communications (UC) features.

Vonage announced Wednesday that it would acquire UC as a service (UCaaS) vendor Telesphere for $114 million in cash and stock. If the deal closes as expected by the end of the year, Telesphere would become a Vonage company, with current Telesphere CEO Clark Peterson staying on as president of the new business.

The acquisition builds on Vonage's $130 million purchase of hosted IP PBX vendor Vocalocity in 2013. Vocalocity transformed Vonage into a VoIP provider for small business, not just consumers.

Vonage has almost 200,000 users on its business platform, called Vonage Business Solutions (VBS), making the company the fifth-largest provider of hosted IP PBX in North America, according to market research firm Frost & Sullivan. The majority of its commercial customers have fewer than 10 employees.

Telesphere adds UC business services

Telesphere adds a number of hosted UC services to VBS, particularly those related to call centers. Such features include audio conferencing, soft phones, speech-recognition dialing, visual voicemail and fax-over-email.

"The contact center is one of the biggest solutions (for Telesphere)," Frost & Sullivan analyst Elka Popova said.

Telesphere's average customer has between 50 to 100 users, which is substantially more than Vonage's current average.

Under Vonage, Telesphere customers could get lower long-distance rates, Popova said.

"Vocalocity was able to cut long-distance termination costs -- the long-distance costs for their business customers -- by 60% using Vonage's network," Popova said. "This is what Telesphere customers will also get, if they become part of the Vonage organization."

The termination cost, or rate, is what one carrier will charge another when a customer of the latter calls someone on the former's network. The name refers to the "termination" of the call on one network as it is transferred to the other. Such fees add to the overall expense of the long-distance service.

An uncertainty in the Vonage acquisition that could affect customers of the combined company in the future is how Vonage will operate two different UC platforms.

Vonage uses Vocalocity while Telesphere licenses the technology from BroadSoft, Popova said. Vonage has not said whether it would move to a single platform or operate the two separately.

"I don't see why they would transition customers from one platform to the other, at least existing ones," Popova said. "But it's challenging for any service provider to manage so many platforms."

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