Vonage 3Q07 Update

• 3Q07 revenues $211 million, up 2% q-o-q. Over 2.5 million lines in service at end 3Q07. Added 78k new lines during 3Q07. ARPU: $28.24 down from $28.38 in 2Q07.

• Took $145 million charges for patent litigation settlements: $11 million 3Q07 royalty to Verizon, the rest $134 million splits into $70 million for Sprint, $33 million for Verizon, $29 million to AT&T, $2 million for other minor settlements.

• Marketing costs: $62m down from $68m in 2Q07. Subscriber acquisition cost reduced to $206 per subscriber. Customer acquisition cost has been around $280 average over last 4 quarters. Vonage is shutting down poor performing marketing channels. TV and online marketing will be the main areas of spending going forward. New TV ads are generating better results according to the company.

• According to the CEO, 70% of churn is due to poor voice quality. Vonage intends to address that and also make installation process easier. Customer service is set to improve. There will be skill based routing to agents. New senior management and external consultants to be brought in to improve customer service. Vonage experiences about 3% monthly churn.

• $356m cash balance at end 3Q07. Will be reduced to $194m after accounting for recent litigation charges

• Generated cash from operations for the first time.

• Expects to offer ‘advanced devices’ later this year