Ongoing bribery investigations by the US mean that the deal may have hit a temporary bottleneck
Back in November 2021, Ericsson announced that it had agreed to purchase cloud specialist Vonage for $6.2 billion. At the time, Ericsson said that the purchase of US-based Vonage would help them broaden their 5G portfolio for enterprise customers and would build on an earlier purchase of networking equipment firm Cradlepoint in 2020.
Ericsson expected the deal to close in the first half of 2022.
However, February saw a dark cloud settle over Swedish telecoms equipment vendor, with a bribery scandal coming to light suggesting that the company may have paid off terrorist organisations in Iraq in 2018. Since then, the U.S. Department of Justice and the Securities and Exchange Commission (SEC) have both launched investigations into the organisation, both of which have yet to conclude.
Since these investigations were first announced, analysts have suggested that they could represent a significant obstacle for the acquisition of Vonage, with US regulators potentially tentative to approve the purchase while security probes were ongoing.
Now, the deal is currently under review from the Committee on Foreign Investment in the United States, one of many panels that reviews foreign investments on the grounds of national security.
“Ericsson continues to work closely with the Committee on Foreign Investment in the United States as it reviews its proposed acquisition of Vonage Holdings Corp. The merger has cleared all other requisite foreign and US regulatory approval requirements, and the parties are working to conclude the regulatory process as expeditiously as possible. Ericsson and Vonage remain fully committed to this transaction and are working towards closing before end of July, 2022,” explained Ericsson in a statement.
Exactly how the purchase of Vonage could represent a security threat to the US is unclear, but the US’s labyrinthine regulatory landscape towards foreign investment is certainly nothing new.