Vonage Holdings Corp. (ERICB) Earnings Call Transcript & Summary

Hello, everyone, and welcome to today's second call, covering Ericsson's announcement today to enter into a merger agreement to acquire Vonage for USD 21 per share in cash, corresponding to USD 6.2 billion value. With me here today are Börje Ekholm, President and CEO, Ericsson; and our CFO, Carl Mellander. As usual, we will end the presentation with a Q&A session. [Operator Instructions]. Details can be found in today's press release in our -- on our website, ericsson.com/investors. But before starting, I would like to read the following: During today's presentation, we will be making forward-looking statements. These statements are based on our current expectations and certain planning assumptions, which are subject to risks and uncertainties. The actual result may differ materially due to factors mentioned in today's press release, and discussed in this conference call. We encourage you all to read about these risks and uncertainties in our annual report. With that said, I would like to hand over to you, Börje. So please Börje.

Thank you, Peter, and a warm welcome to everyone on the call and very happy, you could join us with rather short notice. So Vonage is the leader in the communications platform industry, provides enterprise services across Communications as a Service offering, and it's an attractive market with a significant annual growth. Vonage has a large global customer base of 120,000 enterprises. It has over 1 million registered developers and significant sales growth and free cash flow generation. There is a strong stand-alone business, and as we have gotten to see over the time of our engagement with the company and the business, we've been absolutely impressed with their performance. And we are very committed to continuing to invest in the business as it sits today. And that is about investing in R&D and sales and marketing to further accelerate their growth prospects on a stand-alone basis. We see very good growth prospects as well as margin development in the current business. But over time, we will together, build the next-generation revenue opportunity by monetizing quality-of-service capabilities in the 4G and 5G networks. We will leverage our joint capabilities to establish a global network platform for open innovation, which we'll go through a little bit more here, in today's call. The reason we do this is to ensure that the infrastructure investment that service providers make in 4G and 5G networks, can be fully monetized and help accelerate the digitalization of enterprises and supporting developers in creating new and premium as well as exciting user experiences, using advanced 5G network APIs. So in addition to consumer-use cases, 5G is really designed for enterprises, and it can make wireless the primary choice of their connectivity. But this will require the global development community to get access to the capabilities that reside in the network, in an easy-to-consume fashion. With Vonage, we take an additional step, very important step, to bring enterprises on to wireless networks. This acquisition will bring value for the full-wireless ecosystem, including CSPs developers and businesses. We intend to report Vonage as a new segment of our business, and the current Vonage CEO, Rory Read, will report to me, and he will also be part of the Ericsson leadership team. Before we get into the details of the acquisition, let me start by recapping the strategic journey, we've done over the last few years. And this is a slide, presented at the market update in 2020. We have, all along, built on the strength of our core business, which is underpinned by investments in R&D to deliver technology leadership in 4G and 5G and has generated a turnaround and a robust financial performance. This strong position today, means that we can enter an exciting next chapter, ahead of us. It gives us a platform to focus on growth for Ericsson that captures underlying market opportunity and adds value to our core business, which will all benefit our service-provider customers. The enterprise market has more of a software-like revenues, with high growth profile and attractive profit pools, longer term. As you all know, M&A is an important route to growth and achieving scale quickly. So to take advantage of current market growth, we will continue to leverage, discipline M&A and adding businesses with potential for high margins as well as high returns, but they should also, strategically, align with our ambition to strengthen our core as well as our enterprise ambitions. Today, we take an important step on accelerating that effort by acquiring Vonage. Also, building on the success of the integration of Cradlepoint. And that has continued to develop very well under our ownership. We will have a live [indiscernible] integration of Vonage. But we also see that the success of [indiscernible] has given us a bit more confidence in our ability to also create value with acquisitions. Our overall strategy remains with two legs. The first leg, and I want to really emphasize this, is, of course, the growth in the core business, where we continue to invest in overall technology leadership and developing a strong portfolio that can support market share gains in the market, but we're also growing, thanks to the increased TAM that we will get from wireless networks, as we bring enterprise traffic on to wireless networks. And the second leg is a focused expansion into enterprise. In the last 18 months, we have extended our presence in the very-attractive Enterprise Wireless Network segment, and that includes our Wireless Edge Solution, acquired through Cradlepoint, last year, dedicated network, cellular IoT and mission-critical networks, and we expect to see a market growth here of 20% to 30% per year. The second leg of the enterprise strategy, and that's underpinning today's announcement, is to establish a global network platform, where we can leverage Vonage communication platform and extend it into 5G, allowing for open innovation and support in the creation of new experiences and full monetization of network investments. The first reason we are acquiring Vonage, is because it provides key capabilities that enhance our position in the market. We have a healthy and growing as-a-service business, which is the Vonage communication platform, which presents limited technicality and accounts for about 80% of their revenues. That business, and Carl is going to go into more of the details, is growing at a healthy 25% per year. That was reported at the end of third quarter. It includes the API known as Communication-Platform-as-a-Service, or CPaaS component that has actually grown 43%, significantly ahead of the market. The business has a healthy gross margin profile, about 45%, and the strong leadership team that's been able to drive both growth and margin improvement in the underlying business. But again, Carl will go through a bit more about this. The second reason for the acquisition, is that Vonage creates impetus for the second leg of our strategy, developing a global, open network innovation platform. Our shared intent with Vonage is to develop a platform that allows developers to access network capabilities, which literally puts the power of the wireless networks at their fingertips. They will get access to advanced features such as latency and speed in the 5G network, in an easy, accessible way. To do so, we need some key building blocks that Vonage provides, the first being a robust and established developer community that knows how to build applications, using strong APIs. And here, it's worth to remember that the Vonage has more than 1 million registered developers. We, at Ericsson, have already developed quality-of-service-related APIs that have been tested in networks around the world. But to take the next step for these KPIs, we need to put them in the hands of the developers. And that -- so working with the developer community, will be truly critical. We believe we need a highly-engaged developer community to take advantage of these features and designing new types of applications. The platform will simplify network complexity and provide a one-stop shop for developers to access advanced network capabilities, across the global network of CSPs. So Vonage operates in 3 key market segments for APIs, Communication-Platform-as-a-Service, the CPaaS, Unified-Communication-as-a-Service, UCaaS and Contact-Center-as-a-Service, CCaaS. All 3 are seeing strong growth, driven by accelerating digitalization of enterprises as well as the wider society. Analysts expect combined growth of 17%, up to 2025, which means a total addressable market of $69 billion. We anticipate Vonage growth to outperform the market, driven by, among other things, a strong starting position in the API business and particularly for high-value APIs such as video. To put that in some perspective, Vonage market share is about 7% today. And this is a very large market, but -- because by the middle of this decade, the total market will be worth more than 50% of the global RAN market, at that point in time. So it clearly, adds a very large, available market to us. 5G is the largest platform for innovation, ever. And that's the vision we have had for a long time. We expect that almost all interactions, like whether it is calling a taxi or getting a bank account, will require embedded communication. And 5G brings this to a new level. Almost all workflow and processes, we use some sort of communication and network API. And you can think about low-latency real-time gaming, you can think about high capacity for ambulatory care, for example, or telemedicine. And in order to enable that, we need to provide the ecosystem and especially the developers with a global, unified way to access network capabilities in an easy way. Vonage ecosystem of more than 1 million registered developers, 120,000 enterprise customers and the back-end connection across -- over 200 CSPs, allows them to abstract network complexity and expose functionality to developers. We, at Ericsson, provide the underlying technology that makes those connections possible and powers the network. In 5G, we have defined even more advanced network capabilities such as quality of service and network slicing. All those will allow developers to vary speed, latency and security to power new applications and new use-cases that we don't see today because it leveraged capabilities that will come in the future. To do so on a global scale and support in the creation of new use-cases, we believe that the platform that can connect with multiple CSPs, will be globally required. We intend to work with the ecosystem to extend Vonage's existing communication platform to support those new use-cases and create a global, open network innovation platform. We will leverage Vonage's developer community and enterprise reach. We will drive usage of the advanced APIs and ensure that the full ecosystem benefits from the monetization of 5G investments beyond mobile broadband. As a first step, we will work with [ bonus ] to embed advanced network capabilities into their existing communication APIs. We believe, those network APIs will be growing very fast, and they will be growing on the back of 4G and 5G build-outs of the networks. We estimate the market to be -- and this is a conservative estimate, based on willingness to pay for performance, a market to be $8 billion by 2030. We expect to be able to capture a sizable market share there, based on our leadership position in 5G as well as a good starting point with the Vonage platform. So with that, we will put the power of the network at the fingertips of developers and allow for the development of the next wave of premium communication experiences. So to recap, by combining Vonage developer ecosystem, enterprise customer base as well as API platform with our 5G technology leadership, R&D capability, global reach and CLP ecosystem, we believe we can accelerate services to the benefit of that whole ecosystem. This will allow us to win the next wave of platform services, as we both enhance existing communication services and develop new and advanced use cases. In doing so, we will achieve near-term synergies by extending the current Vonage portfolio through our CSP channel, and enhancing their R&D capability and scale, creating revenue synergies of up to $400 million by 2025, and that's strengthening over time. In the long term, we expect to capture an attractive market share in the global network API market of -- that we conservatively estimate to be $8 billion by 2030. And now over to you, Carl, who will spend some time providing a little bit more details on Vonage's market position and historical performance.

Thank you, Börje. And then let me start by providing an overview of Vonage and their capabilities. The company was formed in 2001 with a consumer VoIP offering. Then, since 2013, Vonage started on the journey to become a communications platform business, which they call the Vonage Communication Platform, or VCP for short. And this transformation included the acquisition of Nexmo, which is the base of their API business. And API, as everyone knows, application programming interfaces. Of course, that's a software intermediary that allows applications and disparate systems to talk to each other, powering and connecting mobile and web apps, enabling the digital value chain. And Vonage has then continued to evolve that offering through acquisitions of various players, including NewVoiceMedia and TokBox, to name a few. And they've been on a journey to consolidate these assets into one, single business communication platform. And now, we can see this approach gaining very strong traction in the wider Communication-as-a-Service market. VCP is focused on delivering value to a large business customer base, with offerings targeting all sizes of companies, from the small home office, all the way to large enterprises. And as Börje mentioned earlier, Vonage also, has a large base of developers that has grown from approximately 150,000 to more than 1 million over the last 5, 6 years. And we intend, of course, to continue fostering that base and accelerating the great work that Vonage is doing in that space. The company has around 2,200 employees, globally. Some of the key sites are New Jersey and San Francisco in the U.S., but also the U.K., Singapore and Israel. Revenue is, as you can see here in the pie chart, broadly distributed globally, with most of them a consumer VoIP business and a significant portion also, of the VCP revenue in the U.S. market, but also with significant international footprint in the API business. The bar chart on the bottom right, shows you how the revenue mix is changing, and this really reflects the transformation that I mentioned earlier, where ECP is really the strong growth driver, now representing around 80% of total revenue in Vonage. And we expect Vonage to continue to demonstrate strong growth, above the 17 projected market growth that Börje showed earlier, between 2020 and '25. So I talked about VCP being the big growth driver. And let me just briefly describe here, the VCP business and its 3 key offerings. In essence, Vonage is building a unified and API-first communication platform, leveraging best-of-breed capability in support of business communication. And to do this, the combined communication API business, providing key capabilities such as messaging, voice and video and not least, conversational AI. And combining that with Unified-Communication-as-a Service and Contact-Center-as-a-Service capabilities. Unified Communication offerings are targeting business customers with a full suite of voice, video and collaboration capability. And the Contact Center offering is focused on the mid-market, and that provides easy access to Contact Center management capability in the cloud. The Vonage Contact Center solution is highly integrated with Salesforce, and it is the top-rated Contact Center offering on the salesforce at [ Exchange ]. The Vonage also has customers across key segments that have seen significant growth as part of the accelerating digitalization of society that Börje mentioned earlier. And here to the right, you see some examples of that. and segments here such as Remote Health Care, Transportation, Remote Education and so on, are really key growth levers for the VCP solution, and they drive significant opportunities for Vonage and Ericsson, as we now jointly extend the current capabilities here. While we see a huge potential in this case, moving forward, we also see significant improvement in historical trends, providing proof points of the strength of Vonage. And Vonage today has a revenue of almost USD 1.4 billion, on a rolling 4 quarter basis. As we said before, growth in the overall revenue of the company, has been impressive, driven exactly by the VCP growth, which you can see in the blue collar on the chart here to the left, on a rolling 4-quarter basis, until Q3 this year, VCP grew by 20%. And while the consumer VoIP business declines, you can see the green part here in the chart, we still see a healthy business in that segment, with high margins. providing strong cash flows in support of the transformation and growth of the company. And the growth in VCP, as mentioned, fueled by growth in the API business, mainly with messaging and the video being the key growth drivers. Middle section of the slide, the adjusted EBITDA here has been fairly flat, as you can see, on the group level. But with an underlying mix shift, where the VCP profitability improvement is remarkable, reaching now profitability, on a rolling 4-quarter basis, in Q3 2021. And I will come back to that trend a bit more on the next slide. But staying on this and talking about free cash flow first. You see, it reached USD 109 million. That represents 8% of revenue during this rolling 4 quarters, as of Q3 this year. And the improvement we have seen here in 2021, in Vonage, has been driven by an overall improvement in profitability, but also working capital efficiency. Vonage also, I can say, has a fairly light balance sheet, mainly comprising IP, and the CapEx mainly relates to capitalized R&D. As we saw on the previous slide, the VCP business has seen momentous improvement, driven by clear focus from the current management team. And all these improvement actions will continue with full force. Those actions include driving growth across Vonage's products in API and Unified Communication and Contact Center businesses, all of which drive significant margin improvement and scalability in the business as well. There has also been significant work by the management team on driving efficiencies across functions, including as one example, enabling the sales team to grow the business with a smaller cost footprint. And on this slide, you really see the resulting profitability improvement here. It's an impressive trajectory. So this transaction, and as stated, the acquisition price here amounts to USD 6.2 billion, on a fully-diluted cash and debt-free basis, i.e., enterprise value. which means, around SEK 55 billion are using [ 8.9 ] as the exchange rate, as an example. And the acquisition price of $21 per share corresponds to a premium of 28%, relative to Friday's closing price, which was $16.37. The SEK 55 billion can be seen in relation to the more than [ 31 billion ] of free cash flow before M&A that Ericsson generated, on a rolling fourth quarter basis, until Q3 this year. As mentioned, closing is expected within the first half of 2022, subject to shareholder [ expense ] and regulatory approvals. And we will fund this transaction by cash at hand. As you will recall, our gross and net cash balances, by the end of Q3, were SEK 88 billion and SEK 56 billion, respectively. We will communicate more around the impact on our financials, post closing. But I would like to make a few comments, already now. So one is, it's expected to add more than USD 1.4 billion to Ericsson's revenue, on a pro forma basis, based on Vonage's 2021 guidance, with a rather limited impact on Ericsson's gross margin percentage. And given the nature of this acquisition, our preliminary PPA indicates a meaningful amount of goodwill, around SEK 40 billion, again, applying the same exchange rate as before, of 8 -- 90, but also other intangible assets, around SEK 20 billion, which we will amortize over time, according to the accounting principles. And those amortizations will have an impact on EBIT, of around SEK 2 billion per year. Obviously, this is noncash. We expect this transaction to be accretive to EBITDA, on an absolute basis, in 2022 on onwards, with variations between the years. And when it comes to earnings per share, if we exclude the noncash amortization impact that I just mentioned, earnings per share is expected to be accretive, from 2024 and onwards. And on cash flow there -- and although Vonage is stand-alone, it's free cash flow positive, there are certain changes in payouts of unvested share-based compensation that will result in a slight negative free cash flow impact, the first 2 years. But thereafter, again, from 2024, it is expected to be accretive to free cash flow. Rory mentioned already, we intend to report this as a separate segment in the Ericsson Group, and this is to ensure transparency. Finally, I want to underline that we remain fully committed to our long-term targets of EBITDA -- an EBITDA margin of 15% to 18%, excluding restructuring charges and the free cash flow before M&A, of between 9% and 12%, as well as the 2022 EBIT margin target of 12% to 14%, excluding restructuring charges for Ericsson Group, excluding Vonage. So with that, thank you so much. And I hand back to you, Börje.

So thanks, Carl. In closing, I would like to emphasize that our strategy remains true to our core, to extend our leadership in mobile networks, that is and will be our engine. It's the center of all we do, the center of our capabilities. But in addition, we continue to grow in this highly-attractive enterprise market. Vonage is a leader in the business communication platform business, and it provides us with an opportunity to address the enterprise market and create scale, in terms of customers and developer market access. We intend to continue to invest and accelerate Vonage's current business and drive synergies in support of the current business plan. But what you also see with this discussion, is that the key here is that it will actually start to create 5G applications and 5G use-cases, based on easily-exposed APIs or network APIs. This will actually help us to also extend the 5G cycle longer and generate demand for mobile infrastructure, of 5G mobile infrastructure, as there will be opportunities for our service-provider customers to monetize the network in a better way, in a 5G world. So we are excited about this opportunity with Vonage that it actually creates an enterprise business, but that also support our core business to extend the quality, the market or the cycle in the 5G investment world. So together, we can elevate the 5G ecosystem by developing this global network platform for the full benefit of CSPs, developers and businesses. And with that, thank you very much, and let's go to you, Peter.

Thanks, Börje. So we have now 30 minutes for Q&A. So Mark, could you remind the participants about how to connect to Q&A, please?

[Operator Instructions]

Thanks, Mark. We will have the first question from [indiscernible] at [indiscernible], can you hear me?

Yes, I can, Peter. Thank you very much, and thank you for the presentation. Just two questions, please, a quick one for each of you. Börje, you spoke about [ 7% ] market share within VCP at the current time, with the market growing to around 69 billion by 2025. Do you have any ambitions or targets, you can share with us, for how much you would hope or target to grow that 7% market share during that period, please? And then, just a quick one for Carl. Please, Carl, the 2 billion dilution to EBIT from this amortization. Can you give us an indication of for how long will that continue? In the case of [ Creative Point ], it was 2 years, I believe. Any further clarity you can give us, would be much appreciated.

Thanks for the questions. I -- given that this is an ongoing transaction, we -- I want to refrain from giving specific guidance on Vonage. And we have -- I think, you should just look at their guidance to the market, instead. But you can also understand from the comments we have that we have a bit more ambitious plans, when we can accelerate.

Yes, [indiscernible] good. Thanks for the question. Yes. So we are amortizing, basically, over 10 years, as I said, and the intangible assets are going to be around 20 billion, and we amortize around 2 per year.

We'll have the next question from an image Frank Maaø at DNB.

So while I appreciate many of the goals you're trying to achieve with this acquisition of Vonage, including the 1 million developer community that you get access to and the long-term strategic idea. Could you please explain why you think, it's necessary to own the company rather than partner with companies in the CPaaS space, such as this one or others, and work with developer community that way?

It's a great question, and we have spent quite a lot of time looking at the different alternatives. Partner with one alternative or -- we also looked at "could we build up our own ecosystem?" So there are a couple of different ways to do it. What we feel is critical, is actually that we will have to define the APIs in the future. And that's where we believe, it's the tight interaction between the developer community, and our network capability is going to be critical to make that successful. And it's actually going to be critical, in order for us also, to monetize our capabilities. So we felt that the only way to ensure that we protect that ability to, longer term, monetize the infrastructure assets, is -- well, I don't think, by the way, the right word is to control the ecosystem, but actually to have access to the ecosystem, directly, without having any intermediates. I think, one should think about the developer ecosystem, is something that actually needs to be open, needs to be looking at different APIs for many different companies and actually develop applications, based on that. But by having them close to us, we believe it's a much easier and frictionless interaction that can ensure also monetization for us, long term.

On a slightly different topic, but I mean the software revenues of the company, how much -- what was the software share of revenues, compared to, for instance, messaging being pushed through, I mean, SMS termination business and so on?

That seems to be your question, Carl.

Yes. I would say -- I mean, the key business here is as-a-service. not really selling software, from that point of view, but this is as-a-service business, and that's the 80%, represented by the VCP. And the other part is, as you know, the consumer VoIP business.

And I will move to the next question from Simon Leopold at Raymond James.

Two for me, please. The first one is, just if you could give us a sense of who you would view as the competitors or the comparable companies, particularly to Vonage's VCP segment? And the second one is, and I understand this, one it will be a little bit tricky to answer, but nonetheless, I want to ask, are you mostly done doing acquisitions for the time being? I know, you were very clear in the last earnings call and your intent to make acquisitions, should we consider this, for the time being, done with making these acquisitions? Or what do you think the pattern might be?

If I take the latter one. We have been very clear about the ambition to do M&A. We've been very clear about the ambition in, I would say, our two areas. We're not going to expand outside those two areas. But I do think, if attractive M&A comes, they will be, and they are accretive, I think then, we will tack them along, in order to strengthen those two businesses in enterprises. We're also going to see that we continue to make technology acquisitions into our core business, like we did with [indiscernible]. But you can also hear from that we -- I think, we need to focus on making sure Vonage's success now. We feel good about where we are with Cradlepoint, but you can see, we're going to add smaller into those areas to make them successful.

And Carl, are you ready for the second question about competitors?

Yes. The second question around the competitive landscape. I'd say, Vonage is active in this Communication-as-a-Service space, and there are other players, obviously, in the same space. Some that are [Technical Difficulty] billion, of course, each one having their own focus. It's a different focus, of course, between all these players. And one of the strengths of Vonage is the video capabilities, where, I think, they are a leading player.

I'm assuming you don't want to identify any of the competitors by name. I guess, I'm just looking for a little bit more context as to who the closest competitors might be.

It's well market. Yes. So I'm sorry, I don't think we should end into discussing competitors, right? Especially where we are in this whole situation. So it's a well-researched market. So there are a lot of coverage on the CPaaS market. So you can get quite a lot of information there.

We will move to the next question. It's from Paul Silverstein.

I want to pick up -- I apologize, but I want to pick up on the competition question, from two perspectives. One, not only is it well researched, but it's an incredibly broad landscape of competitors from RingCentral to 8x8 to Amazon, Google, Microsoft and a ton of other players. But more importantly, what I really want to understand, are you not concerned, to the extent that Vonage and those others compete against your traditional customers -- traditional service providers, including wireless operators? Is there no concern -- I understand the concept of coopetition, or being a supplier and being a competitor is not unknown. But this is going to bring you into competition with your customers, to some extent. Is that not a concern, did you vet this, run this by any of your major customers, especially in the U.S., where Vonage's revenues are concentrated?

We have run that by some of our customers, not all because we simply can't do that. We also have rather positive reactions from a number of customers. So I think, it's a highly relevant question to us. But the reality is, our focus is actually on expanding the monetization of the network APIs, both in 4G as well as 5G. The communication APIs is a well-defined market, call it messaging, video, voice, et cetera, that's well defined. It's not really a big topic anymore. But the industry needs to define the new APIs, and that's where we can help our service-provider customers to actually monetize their assets, their infrastructure assets, in a new way, through these new type of APIs. What we have seen is that we develop them, but we can bring them to market right now. We have no one to help us develop applications on top of them. So they become just nice capabilities to look at but aren't really user-friendly. So we need to make that happen. So I view this as a win-win, together with the industry. So the mobile operators are front and center of our ambition here. We're not even trying to be remotely close to competing with them. We view this as much more complementary.

Well, Borje, just to be clear, I appreciate that you conveyed this with all that many customers. But on the wireline side of the house for AT&T and Verizon, this is going to compete with their enterprise business. And I just want to make sure you're indicating that you either have gotten indications from them that not a problem, or you're not concerned that it will be a problem.

Let's put it this way. I can't go into -- we have some very large customers in the U.S. I'm not going to tell you who we talk to or not talk to. But what we do is that we have looked at the way we are going to compete in the future and the way we're going to build the business. The reality is, the wireline side of a new operator is, in a way, a bit threatened by use-cases on wireless. That is no news. It will always be the case. So as we see it, wireless will become the key access technology for large enterprises, and they need applications, in order to make that work. then you can change the way you digitalize. You are fully flexible. You increased flexibility in the business, you increased the type of workflows, you're not bound by a fixed environment anymore. And we think, that is a major use-case of 5G. But for that to materialize, we clearly need to have applications. So think about telemedicine, for example. You will -- that will most likely, both be a fixed business, and it will be a wireless business, but we need to develop those applications. And honestly, Ericsson will not develop the applications.

We'll move again to Frank Maaø at DNB.

Yes. Just a follow-up on the API part of the business, and what you're trying to achieve with programmability, basically, of the stack here because today, I mean, the telco stack and the SMS and voice and video and so on, the Vonage and the competitors have basically, been pretty high above that stack. And now we're trying to, in the future, go deeper into the network with these network APIs. The question is, most operators have more than just Ericsson equipment in the telco stack, a lot of other vendors as well. And to get that programmability and API side, the infrastructure of others. Are you also -- what thoughts do you have on that will...?

Yes, it will have to be multi-vendor. You really have to succeed in -- I don't think, it's easy, right? That -- but what I do think is that, that capability is needed, in order to drive 5G use-cases. And we believe, you need to have a deep network understanding, in order to create those type of APIs.

Frank. We will move to the next question, which is from Michael Robbins at Citi.

Two questions, if I could. First, a question we're receiving is, what percent of revenues of Vonage specifically, come from China? And the second question, just more broadly. It seems like, at the moment, there's some degree of separation between [ collaboration ] services within the enterprise and then the Unified Communications that connect to the outside world. What's your world view on the convergence of these services? And how do you see that, in terms of future opportunity and direction for Vonage?

Carl, you can start with the first one on China.

Yes, the exact revenue, by market, is not publicly -- it's not published, but I can say that it's a limited footprint in China. That's as much as I can say today.

And Borje, the second question? .

You're right. This is a constantly-changing market. I would also say that it's also a segmented market. So you have different players in different parts of the ecosystem or customer segment. And what we see is that actually, Vonage has a rather strong offering, that's complementary, for example, to our own wireless office, very suitable for SMEs. And that's an area where, we believe, we can invest more and actually grow that presence that they have already today.

It doesn't seem that we have any further question, and maybe, Mark, you can check that, once again.

[Operator Instructions]

Okay. I have a question here from Rick Smith at Smith Capital. Rick, please.

Sorry, if I missed this, besides HSR and [ SIFI ] is, where the regulatory is needed?

Sorry, [indiscernible]

Yes, I will have. It's the regulatory filing. It's . And then, there are a lot of other countries as well. I count them on top of my head, but there are a couple of antitrust filings we need to do in a couple of countries.

Do you need to [ file ] on China?

As far as, we know, no.

Thanks, Rick. Then, we will have the last question here from [ Amit Hasani ] from Citigroup, Amit?

Can you hear me?

We can hear you perfectly, Amit.

I just really wanted to circle up on the synergies of the deal, if I may. So you've identified revenue synergies by 2025. I'm just trying to get a sense for, how do you go about delivering those revenue synergies? And what's the pathway beyond 2025, will we start seeing them come through in '24, '25, a bit early? Just really trying to get a sense for how the acceleration comes through, in terms of revenue synergies and go to market? And secondly, if I may, I also wanted to touch upon the fact that you're looking to make this, sort of, an open -- if I understand, the APIs are going to be multi-vendor, they are going to be quite in support of an open ecosystem. Do you see a competitive risk there, that in trying to facilitate faster development of 5G, you might be potentially, also helping some of your direct competitors?

Maybe Carl, you can start with the first one on synergies?

Yes, certainly, I can. So as you saw and read in [ Harbor], we aim for revenue synergies of USD 0.4 billion by 2025. And we expect them to ramp over time. But realistically, I would say, 2023 is when we see some of it and then ramping up towards that, 0.4% in 2025. And then continue beyond that, of course, continued growth after that. And it comes in different forms. But of course, one is, bringing the Vonage offering to our CSP customers, whether white labeling or other methods of expanding their footprint, in terms of offerings.

Good. And then maybe, Borje, you can take the second part of the question?

Yes. Can you repeat? I could just not hear the second part.

Can you repeat that, Amit?

I have a really bad [indiscernible] so I don't know.

Happy to. My second question was with regards to the APIs. My understanding is that you're really looking to make them multi-vendor, independent, in a way to, sort of, foster an open ecosystem, basically drive this faster, sort of, development of 5G into the enterprise, do you see a potential risk, you might be helping competition along the way, in doing so? What guarantees that this translates into meaningful market share for Ericsson itself?

I think, you have to look at it from two dimensions. Because you're right, it's going to also help competitors, but we see that unless we have an open, call it, open APIs, we are not going to help the industry, right? So we need -- and there will not be created in the industry, nobody would create applications, based on only our APIs. So it is true that we will help competitors, somehow. But we think we will have a very strong starting position by being able to actually define a large number of those APIs, together with the developers in Vonage, but also the service providers that, therefore, can help drive the market, even if they're available. And by the way, with our market share outside of China, if that helps the overall industry, we are actually going to generate quite a lot of business. And we -- so on our base business, we are not so concerned about that. That's actually going to be helpful as well. Around the API side, specifically, with the capabilities we have, we don't believe it's very easy for anybody else to develop a similar type of business very quickly, with the head start we get with the developer ecosystem. So no, I'm not -- I recognize, we will always have multiple choices of APIs and different providers and different operators, and it might surely help some competitors, but we have a good chance of establishing a very solid business on our own. And I think, it's fair to say, it will always be created, this type of APIs, because they're going to be needed, somehow, for the industry to develop use-cases. So the reality is, it's all about how you leverage the capabilities in a 5G network, in a new way and not only hand off the benefits to the over-the-top players, right? With 4G, you could handle -- all the economic value has gone to the over-the-top players. But I think, in 5G, where you need to have a much deeper understanding of the network, in order to drive those APIs, we have a very good chance to reverse that equation.

Borje, before we end, maybe you could wrap this session up.

Yes. So thank you very much, everyone, for listening in. We are very excited about this acquisition. And I would say, first of all, is, we have a very strong core business in mobile networks. We're going to continue to grow that, both through share gains, but also through growth in the whole market. But we are also going into enterprises. Our prepackaged wireless enterprise solutions is one of the key parts that was built through the Cradlepoint acquisitions and then our own dedicated networks, IoT, et cetera. And now, we're getting into creating an open-network platform for innovation, which will help our customers to monetize 5G investments and actually create a very strong business on our own. And we know, the Vonage business is strong as it is today and very good, and we're going to continue to invest in growing that. But the second step is that we can see that we can create 5G APIs that are going to be very substantial market size in a few years' time, and we can get a portion of that. So we're very excited about the connection between our core business, which is, again, the networks and the wireless 5G APIs that we are going to launch in the Vonage setup, that will actually feed back to generate more ability to invest in the network. And basically, create a, call it, the quality-of-service indicators in the network that are going to be needed. So that's going to drive our core business, but it's also going to support the creation of the whole new business. So with that, thank you very much for listening in, and I hope you have a good rest of the day.

Thank you.

Thank you so much.