VoIP company Vonage is readying its IPO at US$16 to $18 per share, which would value the company at around $2.6 billion.

The company, which offers phone service over its customers' own broadband connections in the U.S., Canada and the U.K., has been in business since 2000, and has more than 1.6 million subscriber lines, about 95 percent of them in the U.S.

It sells VoIP services that run over almost any broadband Internet connection. The company offers special features not available from conventional carriers, such as the ability for subscribers to choose an area code different from the one in their area, but it has less control over call quality because it uses other companies' networks.

The company, based in Holmdel, New Jersey, is one of the best-known names in VoIP. It offers local and domestic long-distance calls for a flat monthly rate as well as low-cost international long-distance. Established carriers including Verizon Communications followed Vonage with their own VOIP, which can lower the cost of delivering voice calls and is expected eventually to replace much of the conventional telecommunications infrastructure in the U.S.

Although its subscriber lines more than tripled during 2005 and revenue is rising, Vonage is losing money. In the first quarter of this year, it had almost $119 million in revenue but suffered a net loss of $72.8 million. A huge marketing campaign aimed at pulling in more customers was largely to blame, the company said. During 2005 and the first quarter of 2006, the company spent almost $332 million on marketing.

Vonage expects to bring in about $494 million from the initial public offering of 31,250,000 shares and use it to fund continued marketing as well as future operating losses, according to the filing. It may also use the money for acquisitions and other strategic investments. After the offering it will have about 156 million shares including current stock that will be converted to public shares.

Among the risk factors Vonage disclosed in the filing is its need to meet U.S. requirements for E-911 emergency calling services, which would automatically identify a caller's location to public safety operators. The federal government required it to provide E-911 to all its customers by November 28, 2005.

About 75 percent of its U.S. lines had the technology as of April 1, and the company has filed for a waiver to give it more time to comply. Vonage could face fines or other penalties if it doesn't comply.