i believe. delivers feature-rich digital phone service that frees our customers to reach their...

2007 ANNUAL REPORT I BELIEVE.

I BELIEVE IN FREEDOM.

“I like calling my sister in Mexico City whenever I want. We can talk for hours and not worry about how much it costs. And when I visit her, I simply dial using her broadband connection and call my boyfriend back home like I’m just next door. I believe in not being tied down. Thanks to my Vonage—I’m not.”

flora corazón Loyal Customer since 2004

Vonage delivers feature-rich digital phone service that frees our customers to reach their friends, family and colleagues whenever they want, wherever they can plug into the Internet. The portability is liberating, the quality exceptional, the savings great. And there are no hidden fees. The price starts low, stays low, and with 25 powerful features at no additional cost, the experience is always rich.

BELIEVE.VONAGE BUILT ITS BUSINESS ON TRUE BELIEVERS ––

PASSIONATE EMPLOYEES AND AN AVID CUSTOMER BASE.

THAT’S WHAT SUPERIOR VALUE, GREAT TECHNOLOGY AND

ONE OF THE BEST FEATURE SETS IN THE BUSINESS CAN DO.

IN 2007, WE GAVE INVESTORS SOMETHING TO BELIEVE IN,

TOO. THE YEAR BEGAN IN GREAT UNCERTAINTY. IT ENDED

WITH A CLEAR PATH TO PROFITABILITY AND GROWTH.

HERE’S HOW.

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BELIEVE.VONAGE BUILT ITS BUSINESS ON TRUE BELIEVERS ––

PASSIONATE EMPLOYEES AND AN AVID CUSTOMER BASE.

THAT’S WHAT SUPERIOR VALUE, GREAT TECHNOLOGY AND

ONE OF THE BEST FEATURE SETS IN THE BUSINESS CAN DO.

IN 2007, WE GAVE INVESTORS SOMETHING TO BELIEVE IN,

TOO. THE YEAR BEGAN IN GREAT UNCERTAINTY. IT ENDED

WITH A CLEAR PATH TO PROFITABILITY AND GROWTH.

HERE’S HOW.

3VONAGE ANNUAL REPORT 2007

I BELIEVE IN GROWTH.

“Vonage entered 2007 with strong brand recogni-tion—people knew our name and spirit. But not enough knew exactly what Vonage could do for them. Consumers needed to know more about us, and we needed to know more about them. We realized, to truly grow this business we had to get more sophisticated, more targeted, more focused…and that’s what we’ve been working on ever since.”

jamie haenggiVonage Chief Marketing Offi cer

Vonage is growing as a business, and we’re getting smarter about marketing every day We have focused our marketing spend on acquisition, primarily through direct channels, while beginning to develop the ana-lytic tools to segment markets with greater precision and eff ectiveness The results so far? In 2007 our cost per customer acquisition went down while we added more than one million gross subscriber lines

Vonage delivers not just on price but on Value with a capital V We off er a robust feature set and great product innovation We also offer an honest, straightforward relationship with our customers — with no hidden fees and no tricks to pad or ramp up the billing And now we’re doing a much bett er job of gett ing that message out

4

I BELIEVE IN QUALITY.

“I’ve been a Vonage customer since the beginning. It really works for me. So I tell my friends about it. You never have to feel like the meter’s running, or that you will get ambushed by the bill. And so many features! I use any of my phones at home and it’s all right there when I want it, at my fingertips, under my control. Value and quality, that’s easy: that’s Vonage.”

michael ng Loyal Customer since 2002

Our business is built on giving people bett er ways to communicate—all at an extremely reasonable fi xed monthly rate Vonage customers are att racted to our price and savings, of course, but they love our features even more We offer reliable services, outstanding call quality, a robust suite of standard features, international calling plans, as well as fl exibility and portability telcos and cable companies simply can’t or won’t match With Vonage, you take your home phone number with you, wherever you go And any place you can fi nd a broadband Internet connection, you’re on

That’s why so many of our customers believe in us so strongly 48% of our customers actively promote the brand


I BELIEVE IN COMMUNICATION WITHOUT BOUNDARIES.

“Freedom, control and value are the basis of Vonage’s promise and purpose and our appeal in the marketplace. So what’s the logical next move? Fixed mobile convergence. Dual-mode handsets that grab available wi-fi when they can and switch seamlessly to mobile carriers when they must. It’s a freedom revolution in your pocket or purse.”

john erickson Vonage Soft ware Architect

During a challenging year for our company, our people kept pressing forward with the next generation of Vonage products and services Because innovation is at the heart of what we do

Vonage-branded mobile handsets and service are expected to hit the market in 2009 because of the groundwork and breakthroughs of our Vonage Mobility team As our customers take the leap from portability to true mobility, the implications for our business are profound

8

SOMETHINGFOR EVERYONE.

v-phonesm cordless phone system

wireless jackextension

features include

using is believingv-portal™The V-Portal is both an eminently portable router/connector (use any phone and any broadband connection) and a virtual customer care agent The sleek, simple design features an integrated LCD screen that provides real-time feedback that guides users through installation and troubleshooting, and can also display Caller ID, call logs, Vonage service numbers, and the date and time

vonage visual voicemailsm

Change the way you get voice-mail forever This automatically transcribes voicemails to text so that you can read them right from email or SMS on your cell phone Read, store, search and respond to your voicemail whenever, wherever and however you choose

international long distance calling plansCall your friends and family across the globe by taking advan-tage of Unlimited International Calling Plans to more than 75 locations You can still call France, Spain, Italy, Ireland and the UK free and other locations for 1 cent per minute

vonage contactbookThis innovative communications center allows you to have more control over how, when and where you communicate From simple contact management to group calling, ContactBook will transform the way you think about phone service It integrates all contacts from your home, desktop and mobile address books while providing desired features such as Group Calling, Voice Activated Dialing, Speed Dial and Call Blast

vonage pro™Vonage Pro is a comprehensive product off ering that delivers services and features that make customers’ lives easier This new off er combines Vonage Digital Voice Phone Service, Vonage Visual Voicemail, integration with ContactBook and an att ached soft ware client, called Companion, to deliver a portfolio of services that customers want most

Vonage’s voice and connection quality is superb, and virtually indistinguishable from traditional landline calls. Access calls, get voicemail and view your call history through the web—it’s all avail-able to you in real time through Vonage.

v-portal™

Caller ID with Name, Call Waiting, Voicemail Plus,® Call Transfer, Enhanced Call Forwarding, 3-Way Calling, Caller ID Block, Call Return, Do Not Disturb, Anonymous Call Block, Repeat Dialing, Vonage Fax, International & Directory Assistance Block, Call Hunt, Ring Lists, Vonage Access, Bandwidth Saver,® Vonage Me,SM Network Availability Number,® Click-2-Call,® Vonage Online Account, 211 Dialing, 311 Dialing, 411 Enhanced Dialing, 511 Traveler Information, 811 Dialing, 1-700-WEATHER, 1-700-GETNEWS, 1-700-GREETINGS. Other Add-On Features Include: Vonage Visual Voicemail,SM Add a Line, Fax Line, Virtual Number, Toll Free Plus,® Vonage SoftPhone®

10

I BELIEVE IN THE FUTURE.

“With Vonage, I’ve got the future of communi-cations in my hands. When I’m on the road or overseas, it’s just like home. Just access my Vonage service through the hotel’s broadband, I’m ready to go. It’s all really smart and intuitive. I can’t wait for what’s next.”

jg granderson Private Equity Consultant, Customer since 2006

Vonage is more than a phone service; it is a customer-driven communications technology that helps people simplify and enhance their lives We develop and refi ne our products in the real world, having customers invite us into their homes to observe how they actually use, or want to use, our technology In product development, the customer experience leads what we do

We are dedicated to delivering new solutions that empower the consumer, with innovative Vonage-branded products that keep pace with the way people communicate — when, where and how they choose In the background, invisible to the user, the technology used to deliver Vonage phone service is advanced, robust and infi nitely scalable Our technologists never stop working on improvements and enhancements to the Vonage experience


I BELIEVE IN EMPOWERMENT.

“I work for myself, and Vonage works for me and my boutique. When I travel to meet a client or see what trendsett ers in Miami or London or New York are wearing, Vonage goes with me. Wherever I plug in, it’s all there on my laptop and at my fi ngertips: voicemail, contact history, fax capability…It all comes together, my work, my life, my Vonage.”

christie aimée amadou Fashion Designer, Customer since 2005

The burgeoning numbers of people who work for them-selves out of their homes or small offi ces have a natural ally in Vonage These entrepreneurs put personal productivity at a premium, and they get it from Vonage’s rich array of features—all at an incredible price

Working at home or on the road, features like Visual Voicemail, ContactBook, Unlimited International Calling Plans, and 3-Way Calling are always at their fi ngertips For a nominal monthly fee, an enterprising businessperson can even add a secondary phone number in any area code that connects directly to their regular Vonage number This way a business based in Vero Beach or Tucson can have a virtual offi ce number that suggests NYC, DC, LA or wherever customers expect it to be And in direct response to customer requests, we are constantly working on new features to add to the Vonage array

14

I BELIEVE IN OUR RESULTS.

“How would we describe the year 2007? In a word, challenging. Despite the diffi culties we encoun-tered, for the fi rst time, in the fourth quarter, we generated positive adjusted operating income. Reaching this milestone ahead of plan, and in a turbulent year, is a signifi cant accomplishment and refl ects our ability to grow while eff ectively managing costs.”

john regoVonage Chief Financial Offi cer

2007 may well be remembered as the year when Vonage put its fi scal house in order Sett ling four major patent suits on manageable terms has freed us to concentrate on optimizing the business going forward, at a critical but very promising time We have built great momentum The business has begun to generate positive cash from operations, and in the last quarter of 2007 moved to the cusp of sustained profi tability in terms of adjusted operating income

Our fundamentals are on track, our results show great potential and our strong management team is energized and making the right things happen


THAT VONAGE HAS TURNED THE

CORNER, AS A BUSINESS AND AS AN INVESTMENT,

BECAUSE OF THE DECISIVE ACTIONS TAKEN IN EARLY

2007 AND LEADING INTO 2008. WE SET OUT A CLEAR

STRATEGY TO PUT THE COMPANY BACK ON TRACK AND

POSITION US FOR FUTURE GROWTH.

That strategy has three stages 1 fi x our fundamentals; 2 strengthen our core; then 3 grow from that core I am proud to say, we have made great progress along the way

Make no mistake, 2007 was a diffi cult year Litigation threatened our survival Costs had become untenable, and churn hit historic levels Some said we’d never recover They were wrong

Since we hit the ground running last April, we have been successfully executing against our strategy, dealing eff ectively with many of our challenges while generating strong and promising results

We have reasons to believe Major patent litigation sett led Costs reduced Double-digit year-over-year growth for

20 consecutive quarters Sequential revenue growth for

23 consecutive quarters Positive cash from operations generated for

two consecutive quarters Adjusted operating income crossed

breakeven threshold 2 6 million subscribers and growing A robust feature set with more to come

How did we do it? We att acked the issues holding us back, starting with our fundamentals We instituted cost reductions and effi ciencies in operations and mar-keting We focused our marketing spend on acquisition, and unleashed a set of initiatives to reduce churn and to transform customer care into a competitive advantage We launched a targeted set of international calling plans, and continued to innovate in both technology and marketing

In the meantime, we sett led four major patent suits, the last one at year end, and put them behind us

On many fronts, especially with churn and our debt obligations, we still have a long way to go, but the right things are being done to get there Overall, the results so far have been dramatic A stronger, surer company has emerged

year-end 2007 resultsThe year-end numbers are trending rapidly in the right direction Revenue for 2007 increased to $828 million, up 36 percent from the prior year In 2007, excluding certain charges, we dramatically narrowed our adjusted loss from operations and our net loss Signifi cantly, our adjusted operating income became positive in the last quarter, putt ing us at the threshold of sustained profi tability

We are also growing our customer base Vonage added 356,000 net subscriber lines in 2007, a 16 percent rise, and fi nished the year with 2 6 million lines in service

By the end of the year we began to shift our eff orts from fi xing fundamentals to strengthening our core And as we entered 2008, poised to bring exciting new products and features to market, we began working to restructure our debt As of this printing, Vonage still has $253 million in convertible debt, which can be put to the company in December 2008 We intend to resolve this issue so that Vonage will be able to meet its obligations in the long term Looking to the future, we are confi dent in our ability to grow the business profi tably

Our technologists continued to innovate while we remade the business, and our customers are ready to reap a whole new level of freedom and control V-Portal has hit the market, as have expanded features such as Vonage Visual Voicemail and Vonage Fax New options are coming soon, including the transformation of Vonage portability into true mobility A new era truly is at hand

So here we are, a growing leader in value-driven, feature-rich telephony Our brand and technology advantages remain robust From here on, the future is once again open to us and our abilities to give phone customers unprecedented freedom, quality and value

And that’s the Vonage we were born to be

jeffrey citron Chairman, Chief Strategist and Interim CEO

WE BELIEVE

$828 Million annual revenue in 2007dollars in millions

2003 2004 2005 2006 2007

$19

$80

$269

$607

$828

18

2.6 Million subscriber lines in 2007in millions

2003 2004 2005 2006 2007

0.1

0.4

1.3

2.2

2.6


20

board of directorsjeffrey a. citronChairman, Chief Strategist and Interim CEO

peter barrisDirector

morton davidDirector

michael krupkaDirector

j. sanford millerDirector

jeffrey j. misnerDirector

tom ridgeDirector

john j. robertsDirector

managementjeffrey a. citronChairman, Chief Strategist and Interim CEO

john s. regoExecutive Vice President, Chief Financial Offi cer and Treasurer

louis a. mamakosExecutive Vice President and Chief Technology Offi cer

jamie haenggiChief Marketing Offi cer

russell dauerSenior Vice President of Product Development

mike searsSenior Vice President of Global Service Delivery Operations

headquarters23 Main StreetHolmdel, NJ 07733

Phone (732) 528-2600Fax (732) 834-0189

Website www vonage com

Email info@vonage com

vonage investor relations23 Main StreetHolmdel, NJ 07733

Phone (732) 365-1328

Website htt p //ir vonage com

stock transfer agent informationAmerican Stock Transfer & Trust Companyc/o Vonage Holdings Corp59 Maiden Lane, Plaza LevelNew York, NY 10038

Phone (800) 937-5449 or (718) 921-8124 (International callers)

Website htt p //www amstock com

independent registered public accounting firmBDO Seidman, LLP90 Woodbridge Center Dr , 7th FloorWoodbridge, NJ 07095

form 10-kA copy of the Company’s Annual Report on Form 10-K, as fi led with the Securities and Exchange Commission, is also available to stockholders by calling the Investor Relations Hotline at (732) 365-1328 or online by accessing the Company’s Investor Relations website at htt p //ir vonage com

annual meetingThe Annual Meeting of Stockholders will be held at 10 00 a m ET on Friday, May 16, 2008 at Robert Meyner Reception CenterPNC Bank Arts CenterExit 116, Garden State ParkwayHolmdel, NJ 07733

note on forward-looking statementsWe have provided certain information which is deemed to be “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995 (the

“Litigation Reform Act”)

The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements Such statements refl ect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended or using other similar expressions We do not intend to update these forward-looking statements, except as required by law

In accordance with the provisions of the Litigation Reform Act, we are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to diff er materially from those contemplated by the forward-looking statements contained herein

Such factors are set forth in the “Risk Factors” section, the

“Legal Proceedings” section, the “Management’s Discussion and Analysis of Results of Operations and Financial Condition” section and other sections of our Annual Report on Form 10-K

VONAGE HOLDINGS CORP.

2007 ANNUAL REPORT I BELIEVE.23 Main Street

Holmdel, NJ 07733

www.vonage.com

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i believe. delivers feature-rich digital phone service that frees our customers to reach their...

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