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Vonage dials in $40 million in funding

The broadband phone provider's plan to expand into international markets gets a multimillion-dollar boost from venture capital investors 3i and Meritech Capital Partners.

Broadband phone provider Vonage's international expansion plans just got a $40 million boost.

The Edison, N.J.-based company announced on Friday that it picked up the multimillion-dollar funding in a round co-led by two new investors: London-based global venture firm 3i Group and Meritech Capital Partners in Palo Alto, Calif., which focuses on wireline and wireless communications equipment and services. The injection brings Vonage's total funding to $103 million.

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J. Sanford Miller, managing director of 3i, will join Vonage's board of directors, the company said. The new funding is 3i's only investment into a U.S.-based Net phone service provider, according to 3i partner Robin Murray.

Vonage sells what's known as voice over IP (VoIP), a technology for making phone calls using the Internet Protocol, a popular method for sending data from one computer to another. After years of overpromising and underdelivering, VoIP is generating significant interest among telecommunications carriers, businesses and consumers, thanks to significant improvements in quality of service.

The Net phone company said it will use the cash to speed up its expansion plans, which include serving all 50 states with local and long-distance service by the end of the year. "Nobody's done that since the breakup of AT&T," Vonage's Chief Financial Officer John Rego said at an analyst conference earlier this week. Vonage now offers its calling plans--which are about 30 percent cheaper than traditional phone services--in 40 states.

In addition, Vonage is planning to offer its services in Europe for the first time, also by year's end, the company said.

3i most recently played a role in a $15 million investment into SyChip, a maker of wireless modules. In November, Meritech Capital Partners lead a recent $20 million investment into Topspin Communications, which makes InfiniBand communication technology.

Existing Vonage investor New Enterprise Associates and the company's senior management also participated in the round.