Vonage sets launch date for cut-price phone service

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The Independent Online

Vonage, the 3i-backed US telecoms group, yesterday said it would launch its internet-based telephone service in the UK on the 28 December which it promised would undercut every existing fixed-line telecoms operator in the country, including BT Group.

Vonage, the 3i-backed US telecoms group, yesterday said it would launch its internet-based telephone service in the UK on the 28 December which it promised would undercut every existing fixed-line telecoms operator in the country, including BT Group.

John Rego, the company's chief financial officer, said: "The price plans will be very competitive and they will beat all the incumbent pricing."

Vonage services route fixed-line telephone calls over the internet, making them much cheaper than calls routed over traditional networks. In the US the company has two consumer tariffs similar to the sort of pricing used by mobile phone groups and which will be imported into the UK.

For just $14.99 (£7.75) a month it offers 500 minutes of local and long-distance calls throughout the US and Canada, and for $24.99 a month it offers unlimited calls across North America. Mr Rego said Vonage's UK prices would prove cheaper when calling mobile phones from a fixed line.

Vonage plans to adopt a business model that will supply equipment to consumers for free, similar to the one adopted by BSkyB when promoting its new digital television service.

Mr Rego said: "To use the service you will need a broadband internet connection. We provide the box for free. It is a plug-and-play design so any consumer can buy it and have it up and running in five minutes." The company will sell its service through retailers such as Tesco and Carphone Warehouse as well the internet.

Mr Rego said Vonage would unleash a heavy marketing and advertising campaign in the new year, similar to its US campaigns which centre around sports such as baseball and American football. In the UK it will target football and use television, internet and press advertising.

In the US the company has 275,000 lines in service and claims to add more than 25,000 each month to its network. It says more than 5 million calls a week are made using its service.

Mr Rego said Vonage was ready to launch in the UK because broadband take-up had reached sufficiently high levels to justify the investment, although he refused to say how much the company was spending on its UK launch.

The UK has more than 5 million broadband connections among residential and business users, and Vonage will be targeting both markets.

The system works by simply plugging a standard home phone into a Vonage box which is then plugged into a modem and transmits voice calls across the internet. It works with cable broadband connections as well as broadband supplied over traditional telephone wires.

The company has expanded rapidly in the US and in August completed a $105m financing round which brought the total amount invested in the company by its backers, including 3i, to $208m.

Mr Rego said: "We've grown 400 per cent in the past four quarters and are targeting the 200 million broadband connections that will be up and running worldwide by 2006. Singapore will be our next launch."

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