Ericsson has again slashed the value of its Vonage Holdings operations that has so far not produced the promised financial return despite the operations being touted as being in a prime position to take advantage of what is expected to be an explosive enterprise API market.

Ericsson said it was taking a nearly $1.1 billion impairment charge in its Enterprise operations for the recently completed second quarter, which the vendor tied to “lower anticipated market growth rates in Vonage’s current portfolio.”

“Given deterioration in the market environment and elective decisions we have made to refocus our investments in strategically prioritized areas, we have reassessed certain growth assumptions,” Niklas Heuveldop, head of Ericsson’s Business Area Global Communications Platform and CEO of Vonage, noted in a statement on the move.

The move comes less than a year after Ericsson slashed $3 billion from Vonage’s valuation, which was nearly 50% of $6.2 billion Ericsson paid to acquire Vonage in late 2021. Ericsson at the time of that devaluation attributed the move to the “significant drop in the market capitalization of Vonage’s publicly traded peers, increased interest rates and overall slowdown in Vonage’s core markets.” Despite the latest cut, Ericsson continues to tout Vonage’s potential.

“We continue to advance our strategy to build a global network platform for network APIs, which was the strategic impetus for the Vonage acquisition,” Heuveldop added. “We recently announced additional partnerships with leading mobile network operators and we see continued positive momentum across the industry. Through this strategy, we are making advanced 5G network capabilities available to the world’s developer community to accelerate the innovation of value-added applications for industry and society. This will open up new revenue streams for our operator customers and spur growth in the telecom industry.”

Analysts have backed that assumption, with Gartner recently touting Vonage’s position in the communications platform-as-a-service (PaaS) (CPaaS) market. However, the research firm did note that Vonage was struggling to hit financial performance targets and “is now being managed for profitability, which may negatively impact Vonage’s growth prospects.”

API market opportunities Gartner in that report forecasts that 90% of global enterprises will leverage CPaaS “to operationalize [customer experience] and engagement” by 2028.

IDC recently forecast that the worldwide telecommunication and network API market will generate $6.7 billion in revenues by 2028, which is a significant 57.1% compound annual growth rate based on the $700 million in revenues generated last year. The research firm notes that growth will take advantage of the growing shift of those networks toward supporting more digital- and platform-based capabilities that can serve high-value industry segments.

The IDC report noted that this opportunity has put additional pressure on telecommunication service providers to be more aggressive in positioning themselves against more technologically advanced and focused industry segments that have historically taken most of this revenue opportunity.

“While the telecom industry has a mixed history of API monetization, its latest focus on novel network APIs is being championed by all leading telecom service providers to include global support from key API aggregators, such as the hyperscale cloud providers and leading [communication platform-as-a-service] entities,” Patrick Filkins, research manager for IoT and telecom network infrastructure at IDC, noted in the report. “Even so, the long-term success of these efforts is expected to largely fall to the broader ecosystem consisting of API aggregators and systems integrators that can generate the value propositions required for market education and adoption to take place.”

Heuveldop in a previous interview with SDxCentral said Vonage was key for Ericsson to tap into this new market opportunity.

“In an ideal world we would not have had to buy Vonage for $6.2 billion to unlock some of the hang up in the system,” Heuveldop said. “The reality, however, is that when I talk to our partners, they get phone calls, and they talk to their developers, and they’re just wondering and scratching their head about what’s all this excitement about 5G? I don’t get it. Then they come to us and say, what’s all this excitement about 5G? What do I tell my developers? And then we look at each other and say, well, that’s strange because you have latency, you have network slicing, you have all these amazing capabilities. What part of that do developers not understand?”

Heuveldop said the Vonage deal has unlocked access to “millions of developers and 120,000-plus enterprise customers northbound, and southbound we have all the networking expertise we need.” This allows Ericsson to now accelerate the development process through this entire Ericsson-controlled stack to drive innovation and understanding.

“Vonage understands the language developers speak and how API‘s need to be packaged and tailored toward the gamer community and manufacturing community with the proper SDK wrapped around it,” Heuveldop said.

Despite the potential, some note ongoing challenges in educating the enterprise market.

“Enterprise still don’t know about it enough, and that’s what I need to do. I need to talk to the enterprises a lot more,” Henry Calvert, head of networks at GSMA, noted about the industry organization’s efforts around the API-focused Open Gateway initiative.

Calvert added that this could be a bottleneck for the progress the Open Gateway initiative is making on the supply side. “As that well-oiled machine on the supply side starts to deliver through, we really want to actually see the enterprises start to actually use these capabilities in earnest and start talking about the value that is being created in the marketplaces.”

Ericsson’s Vonage deal questioned from the beginning Ericsson’s Vonage acquisition immediately drew skeptics when it was announced, with many questioning how an enterprise-focused API company fit into the vendor’s telecommunications equipment operations.

“On paper it looks a little bit like square peg, round hole,” Zeus Kerravala, founder and principal analyst at ZK Research, told SDxCentral at the time.

Dell’Oro Group VP Stefan Pongratz also expressed some slight bewilderment about the deal due to a lack of clear synergies with 5G connectivity. “With carrier revenues now growing at the fastest pace in 10 years, and operators and suppliers slowly coming to terms with the fact that connectivity is a profitable business with upside potential if done right, it is somewhat surprising to see this pivot,” he wrote in response to questions.

“The enterprise Wi-Fi access point installed base is roughly one-thousand times the size of the private wireless LTE/5G small cell installed base, meaning we have a long way to go when it comes to LTE/5G connectivity in the enterprise,” Pongratz added.

Ericsson’s management initially attempted to counter that doubt with rosy growth expectations.

“We expect the Vonage acquisition to be highly accretive, and it complements our enterprise wireless solution offerings with Cradlepoint and dedicated networks,” Ericsson CEO Börje Ekholm said during an earnings call a year after the Vonage deal closed. “Overall, we expect our enterprise offering to have a growth potential north of 20% per year.”

Ericsson’s latest devaluation of those operations shows that those expectations remain more potential than reality.