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Vonage expanding hotspot service

Citron's Vonage is increasing the number of wireless hotspots where U.K. users of WiFi telephones may place calls. Vonage's service expansion comes against the backdrop of news that Vonage's F1000 series has been plagued with service problems, with calls being cut off mid-conversation whenever a user exits wireless-enabled hotspots such as Internet cafés and Starbucks coffee shops. Rushing to fix the problem, Vonage has just signed a deal with U.K. national WiFi network operator The Cloud, which operates more than 7,000 hotspots across the U.K. in transportation hubs and restaurants. The Cloud also plans to blanket London's central financial district, dubbed the Square Mile, with WiFi.

Kerry Ritz, Vonage's managing director, told Forbes that the company's WiFi offering was not meant to replace the traditional cell phone, but rather to play a different role. "Small businesses who are moving around frequently but stay in city centers are a large part of our customer base. This is the first time that customers will be freed from being tethered at home from their fixed line and have the function of VoIP in a mobile environment," Ritz said. Ritz did not indicate the number of people who use the WiFi phones because Vonage is currently seeking an IPO, but he predicts that the low rates offered for service--$14.25 for unlimited calls within the U.K. and Ireland--will demand new pricing dynamics for the market. Vonage currently owns the home VoIP space in the U.S. with 3.9 million residences employing the service in January 2006.

For more on Vonage WiFi strategy:
- see Parmy Olson's Forbes report

ALSO: Vonage is readying its IPO at $16 to $18 per share, which would value the company at around $2.6 billion. The company has been in business since 2000 and has more than 1.6 million subscriber lines, about 95 percent of them in the U.S. Report

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