Hello, everyone, and welcome to today's second call, covering Ericsson's announcement today to enter into a merger agreement to acquire Vonage for $21 per share in cash, corresponding to a $6.2 billion value. With me here today are Börje Ekholm, President and CEO of Ericsson, and our CFO, Carl Mellander. As usual, we will end the presentation with a Q&A session. In order to ask question, you will need to join this conference by phone. Details can be found in today's press release on our websites, ericsson.com/investors. 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 expectation and certain planning assumptions, which are subject to risk 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 this risk and uncertainties in our annual report. With that said, I would like to hand over to you, Börje. Please, Börje.
Thank you, Peter. A warm welcome to everyone on the call, and very happy you could join us with rather short notice. Vonage is a leader in the communications platform industry, providing enterprise services across the communications as a service offering. Sorry, my laptop just stopped blanked out. 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. They're a strong standalone business.
As we have gotten to see over the time of our engagement with the company and the business, we've been utterly impressed with their performance. We are very committed to continuing to invest in their business as it sits today. That is about investing in R&D and sales and marketing to further accelerate their growth prospects on a standalone basis. We see very good growth prospects, as well as margin development in their current business. 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 investments that service providers make in 4G and 5G networks can be fully monetized and help accelerate the digitalization of enterprises, supporting developers in creating new and premium as well as exciting user experiences using advanced 5G network APIs. In addition to consumer use cases, 5G is really designed for enterprises, and it can make wireless the primary choice of their connectivity. 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, a 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. 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. To take advantage of current market growth, we will continue to leverage disciplined M&A and adding businesses with potential for high margins as well as high returns. 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 5G integration of Vonage. We also see that the success of Cradlepoint 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. We're also growing thanks to the increased TAM that we will get from wireless networks as we bring enterprise traffic onto wireless networks. 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. We expect to see a market growth here of 20%-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 Communications 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.
They have a healthy and growing as-a-service business, which is their Vonage Communications Platform, which presents limited cyclicality and accounts for about 80% of their revenues. That business, and Carl gonna 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 a strong leadership team that's been able to drive both growth and margin improvement in the underlying business. 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. Here it's worth to remember that they, the Vonage, has more than a million registered developers. We at Ericsson have already developed quality of service-related APIs that have been tested in networks around the world.
To take the next step for these KPIs, we need to put them in the hands of the developers. 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 a global network of CSPs. Vonage operates in three 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 three 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 a 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. 5G brings this to a new level.
Almost all workflow and processes will use some sort of communication and network API. You can think about low latency real-time gaming. You can think about high capacity for ambulatory care, for example, or telemedicine. 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 TSPs, 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 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 the global open network innovation platform. We will leverage Vonage 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 Vonage 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, the 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. 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.
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 CSP 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 phased in over time. In the long term, we expect to capture an attractive market share in the global network API market or that we conservatively estimate to be $8 billion by 2030.
Now over to you, Carl, who will spend some time providing a little bit more details on Vonage market position and historical performance.
Thank you, Börje. Let me start by providing an overview of Vonage and their capabilities. The company was formed in 2001 with a consumer VoIP offering. Since 2013, Vonage started on the journey to become a communications platform business, which they call the Vonage Communications Platform, or VCP for short. This transformation included the acquisition of Nexmo, which is the base of their API business. 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. Vonage has then continued to evolve that offering through acquisitions of various players, including NewVoiceMedia and TokBox, to name a few.
They've been on a journey to consolidate these assets into one single business communication platform. 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. As Börje mentioned earlier, Vonage also has a large base of developers that have grown from approximately 150,000 to more than 1 million over the last five, six years. 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. The revenue is, as you can see here in the pie chart, broadly distributed globally, with most of the 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 VCP is really the strong growth driver, now representing around 80% of total revenue in Vonage. We expect Vonage to continue to demonstrate strong growth above the 17% projected market growth that Börje showed earlier, between 2020 and 2025.
I talked about VCP being the big growth driver, and let me just briefly describe here the VCP business and its three key offerings. In essence, Vonage is building a unified and API-first communication platform, leveraging best-of-breed capability in support of business communication. To do this, they combine the 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. 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 AppE xchange. Vonage also has customers across key segments that have seen significant growth as part of the accelerating digitalization of society that Börje mentioned earlier. Here to the right, you see some examples of that. Segments here such as remote healthcare, 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 huge potential in this case moving forward, we also see significant improvement in historical trends providing proof points of the strength of Vonage.
Vonage today has a revenue of almost $1.4 billion on a rolling four-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 color on the chart here to the left. On the rolling four-quarter basis until Q3 this year, VCP grew by 20%. While the consumer VoIP business declines, you can see the green part here in the chart, we still see healthy business in that segment with high margins, providing strong cash flows in support of the transformation and growth of the company. 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 four-quarter basis in Q3 2021. We'll come back to that trend a bit more on the next slide. Staying on this and talking about free cash flow first, you see it reached $109 million. That represents 8% of revenue during the rolling four-quarter as of Q3 this year. 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 IT, and the CapEx mainly relates to capitalized R&D. As we saw on the previous slide, the VCP business has a 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's 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. On this slide, you really see the resulting profitability improvement here. It's an impressive trajectory.
This transaction, and as stated, the acquisition price here amounts to $6.2 billion on a fully diluted cash and debt-free basis, i.e. enterprise value, which means around SEK 55 billion using 8.9 as the exchange rate as an example. 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 SEK 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 acceptance and regulatory approvals. 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. I would like to make a few comments already now. Vonage is expected to add more than $1.4 billion to Ericsson's revenue on a pro forma basis based on Vonage's own 2021 guidance, with a rather limited impact on Ericsson's gross margin percentage. 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. also other intangible assets, around SEK 20 billion, which we will amortize over time according to the accounting principles.
Those amortizations will have an impact on EBIT of around SEK 2 billion per year. Obviously, this is non-cash. We expect this transaction to be accretive to EBITDA on an absolute basis in 2022 and onwards, with variations between the years. When it comes to earnings per share, if we exclude the non-cash amortization impact that I just mentioned, earnings per share is expected to be accretive from 2024 and onwards. On cash flow then, although Vonage standalone is 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 two years. Thereafter, again, from 2024, it is expected to be accretive to free cash flow.
Börje 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 margin of 15%-18%, excluding restructuring charges, and the free cash flow before M&A of between 9%-12%, as well as the 2022, EBIT margin target of 12%-14%, excluding restructuring charges for Ericsson Group, excluding Vonage. With that, thank you so much, and I hand back to you, Börje.
You are muted.
Thought that was.
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. 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.
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 or 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. We are excited about this opportunity with Vonage, that it actually creates a enterprise business, but that also support our core business to extend the call it the market or the cycle in the 5G investment world. Together, we can elevate the 5G ecosystem by developing this global network platform for the full benefit of CSPs, developers, and businesses.
With that, thank you very much. Let's go to you, Peter.
Thanks, Börje. We have now 30 minutes for Q&A. Or could you remind the participants about how to connect to the Q&A, please?
Thank you. If you wish to ask a question, please dial zero one on your telephone keypads now to enter the queue. If you wish to decline from the polling process, please press zero two. If you're streaming the webcast, please mute the webcast audio whilst asking a question to minimize any audio feedback.
Great. Thanks, Mark. We'll have the first question from Peter Kurt Nielsen at ABG. Peter Kurt, 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. You spoke about 18.7% 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? 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 Cradlepoint, it was two years, I believe.
Any, you know, further clarity you can give us would be much appreciated. Many thanks.
Thanks for the question.
Thanks for the question.
I. You know, given that this is a ongoing transaction, I want to refrain from giving specific guidance on Vonage. I think you should just look at their guidance to the market instead. You can also understand from the comments we have that we have a bit more ambitious plans when we can accelerate.
Hi, Peter Kurt Nielsen. Thanks for the question. 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 billion per year.
Okay. Thank you very much. That's helpful. Thank you.
Thanks.
Thanks, Peter Kurt. We'll have the next question from Frank Meeuwissen at DNB. Hi, Frank.
Hi. Thank you for taking the question. 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. Now, 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 the others, and work with the developer community that way?
It's a great question, and we have spent quite a lot of time looking at the different alternatives. Partner was one alternative, or we also looked at could we build up our own ecosystem. 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. That's where we believe it's the tight interaction between the developer community and our network capabilities is going to be critical to make that successful. It's actually gonna be critical in order for us also to monetize our capabilities. 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 as something that actually needs to be open, needs to be looking at different APIs from many different companies and actually develop applications based on that. 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.
Thank you. If we may have a follow-up?
Sure.
On a slightly different topic, but I mean the software revenues of the company. What's 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 a SaaS business, and that's the 80% represented by the VCP. The other part is, as you know, the consumer VoIP business.
Okay, fine, Frank.
Yeah. Yeah.
Okay, thanks to Frank, and I will move to the next question from Simon Leopold at Raymond James. Good morning, Simon.
Morning. Thanks for taking the question. Two from 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 will be a little bit tricky to answer, but nonetheless, I wanna ask you, are you mostly done doing acquisitions for the time being? I know you were very clear in the last earnings call on 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? Thank you.
If I take the latter one, you know, 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 gonna expand outside those two areas. I do think if attractive M&A comes, they will be, and they are accretive, I think then we will take them along in order to strengthen those two businesses in enterprises. We're also gonna see that we continue to make technology acquisitions into our core business, like we did with Cradlepoint. You can also hear from that, you know, I think we need to focus on making sure Vonage is a success now.
We feel good about where we are with Cradlepoint, but you can see we're gonna add smaller into those areas to make them successful.
Thanks, Börje. Carl, are you ready for the second question about competitive?
Yeah. The second question around the competitive landscape. No, but I say, Vonage is active in this communications as a service space. There are other players obviously in the same place. Some are the same as Twilio, of course. Each one having their own focus. It's different focus of course between all these players. One of the strengths of Vonage is their video capabilities, where I think they are a leading player.
Thanks, Carl. You good with this, Simon?
I'm guessing you don't wanna be named.
Sorry, what was that? You broke up there a bit.
I'm sorry. I'm assuming you don't wanna 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 a well-researched market. Yeah, I'm sorry, I don't think we should enter into discussing competitors, right? You know, it's a well-researched market, so there are a lot of coverage on the CPaaS market. You can get quite a lot of information there.
Thank you.
Thank you.
Thanks, Simon. We'll move to the next question. It's from Paul Silverstein. Hi, good morning, Paul.
I appreciate y'all taking the question. I apologize, but I wanna pick up on that 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. More importantly, what I really wanna 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 co-opetition, or being a supplier and being a competitor is not unknown. This is gonna bring you into competition with your customers to some extent. Is that not a concern?
Did you vet this or 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. I think it's a highly relevant question to ask. 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. 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't bring them to market right now. We have no one to help us develop applications on top of them. They become just nice, you know, nice capabilities to look at, but aren't really user-friendly. We need to make that happen. I view this as a win-win together with the industry. 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, Börje, just to be clear, I appreciate that you couldn't vet this with all that many customers. On the wireline side of the house for AT&T and Verizon, this is gonna compete with their enterprise business. I just wanna make sure you're indicating that you either have gotten indications from them that's 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. You know, we have some very large customers in the U.S. I'm not gonna tell you who we talk to or not talk to. What we do is that we have looked at the way we are going to compete in the future and the way we're gonna build the business. You know, the reality is the wireline side of any operator is in a way a bit threatened by use cases on wireless. That is no news. It will always be the case. 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 increase flexibility in the business.
You increase the type of workflows. You're not bound by a fixed environment anymore. We think that is the major use case of 5G. For that to materialize, we clearly need to have applications. Think about telemedicine, for example. That will most likely both be a fixed business and it will be a wireless business. We need to develop those applications, and honestly, Ericsson will not develop the applications.
Okay. I'll take the other questions offline. Thank you.
Great. Thanks, Paul. We'll move again to Frank Meeuwissen at DNB. Frank, you're back.
Yes. Hi. Thanks for that. 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 are basically being pretty high above that stack. Now you're trying to in the future, you know, go deeper into the network with these network APIs. The question is, you know, most operators have more than just Ericsson equipment in the telco stack. They have a lot of other vendors as well.
To get that programmability and API file in the infrastructure of others, are you also? What thoughts do you have on that? Will-
Yeah. It will have to be multi-vendor.
Yeah.
I don't think it's easy, right? What I do think is that capability is needed in order to drive 5G use cases. We believe you need to have a deep network understanding in order to create those type of APIs.
Right. Okay. Thank you very much.
Thanks, Frank. We'll move to the next question, which is from Michael Rollins at Citi. Michael?
Thank you and good morning. Two questions if I could. You know, first, a question we're receiving is what percent of revenues of Vonage specifically come from China? 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? You know, how do you see that in terms of future opportunity and direction for Vonage?
Carl, you can start with the first one on China.
Yeah. The exact revenue by market is not published, but I can say that it's a limited footprint in China. That's as much as I can say today.
Thank you. Börje, the second question.
Yeah. 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 the customer segments. 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. That's an area where we believe we can invest more and actually grow that presence that they have already today.
Thank you.
Okay. You're fine with that, Michael? Great.
Yeah. Thank you. Yes, thank you.
Thank you, Michael. It doesn't seem that we have any further question. Maybe, Mark, you can check that once again.
Of course. If you'd like to ask a question, please dial zero one on your telephone keypads now to enter the queue. And if you find your question is answered before it's your turn to speak, you can dial zero two to cancel. There'll be a brief pause whilst we register any further questions.
Okay, I have a question here from Rick Smith at Smith Capital. Rick, please.
Good morning. Sorry if I missed this. I fell asleep. Besides HSR and CFIUS, what other regulatory is needed? Thanks. Sorry, say that again.
Yeah, we have.
Yeah, we have.
Yeah, it's a regulatory filing for CFIUS and Hart-Scott-Rodino.
Have a good day. Thanks.
There are a couple of other countries as well. I can't name them off the 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 in China?
As far as we know, no.
Thank you.
Thanks, Rick. We'll have the last question here from Amit Harchandani from Citigroup. Hi there, Amit.
Good afternoon. Can you hear me?
We hear you perfectly, Amit.
Thank you, Peter. Just really wanted to circle up on the synergies of the deal, if I may. You have 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 2024, 2025, 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. Secondly, if I may, also wanted to touch upon the fact that you're looking to make this sort of an open. If I understand, the open APIs are going to be multi-vendor. They're gonna 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? Thank you.
Maybe Carl, you can start with the first one on synergies.
Yes, certainly I can. As you saw and read in Harburg, we aim for revenue synergies of $0.4 billion by 2025, and we expect them to ramp over time. Realistically, I would say 2023 is when we will 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. Maybe, Börje, you can take the second part of the question.
Yeah. Can you repeat that? I could just not hear the second part.
Can you hear that, Amit?
I have a really bad echo, so I don't know.
Happy to. My second question was with regards to the APIs. My understanding is that 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 gonna also help competitors. We see that unless we have an open, call it open APIs, we are not gonna help the industry, right? There will not be created an industry. Nobody will create applications based only on our APIs. 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.
By the way, with our market share outside of China, you know, if that helps the overall industry, we are actually gonna generate quite a lot of business. We are not so concerned about that. That's actually gonna be helpful as well. On 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. 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.
Thanks for that.
Thank you very much.
By the way, I think it's fair to say it will always be created, these type of APIs, because they're gonna be needed somehow for the industry to develop use cases. 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? You know, with 4G, you could hand off all the economic value has gone to the over-the-top players. 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.
Great. Thanks, Börje. Thank you, Amit, for your question. Börje, before we end, maybe you could wrap this session up.
Yeah, you know, thank you very much everyone for listening in. We are very excited about this acquisition. I would say first of all is we have a very strong core business in mobile networks. We're gonna continue to grow that, both through share gains, but also through growth in the whole market. We are also going into enterprises. You know, 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. 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.
We know the Vonage business is strong as it is today, and very good, and we're gonna continue to invest in growing that. The second step is that we can see that we can create 5G APIs that are gonna be very substantial market size in a few years' time, and we can get a portion of that. We're very excited about the connection between our core business, which is again, the networks, and the wireless 5G APIs that we are gonna launch in the Vonage setup that will actually feed back to generate more ability to invest in the network and basically create the quality of service indicators in the network that are gonna be needed. That's gonna drive our core business, but it's also gonna support the creation of the whole new business.
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.