UPDATE 2-Vonage 1st-qtr loss narrows; customer growth slows

(Updates with share fall, adds analyst comment)

By Ritsuko Ando

NEW YORK, May 8 (Reuters) - Internet-based phone company Vonage Holdings Corp (VG.N: Quote, Profile, Research, Stock Buzz) reported a narrower first-quarter loss on Thursday after cutting marketing spending, but customer growth slowed drastically as a result.

Shares of Vonage initially rose, but ended down 2.7 percent as investors looked beyond the slight quarterly improvement and focused on concerns about the company's outlook and debt refinancing prospects.

Chairman Jeffrey Citron said in an interview he expects a nonbinding letter of intent for a $215 million debt financing that Vonage obtained in April to turn into a formal commitment in the second quarter.

The debt is crucial for Vonage to refinance $253 million in convertible debt redeemable in mid-December. But Stanford Group analyst Clayton Moran said debt terms may not be good, given the troubles in the credit market.

"Given the soft operating results and the strained credit environment, we're afraid the terms will be onerous," Moran said. "It's possible that they won't work out terms with the current financier and turning to another alternative with less time probably won't be much better."

Vonage's net loss shrank to $9 million, or 6 cents a share, from $72 million, or 47 cents a share, in the same quarter a year earlier. Revenue rose 15 percent to $225 million, in line with Wall Street expectations.

But it added only 30,000 net subscriber lines in the quarter, a sharp decline from 56,000 additions in the previous quarter and 166,000 in the year-ago period.