NEW YORK (CNNMoney.com) – Woo hoo! Woo hoo hoo!

Turn on the TV these days and it's hard to miss commercials for Internet phone company Vonage, featuring that catchy (or annoying) "Woo Hoo" song.

More and more consumers are ditching traditional phone services in favor of cheaper Internet phone (or VoiP) plans from companies like Vonage.

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But can Vonage parlay its increased consumer exposure into a lucrative initial public offering? Or is the company, which is hemorrhaging money, actually trying to shop itself to a larger telecom firm?

Vonage filed to go public nearly two months ago but it has yet to file any amended registration statements with the Securities and Exchange Commission. That's an unusually long time between filings and has led some telecom industry observers to speculate about whether Vonage might be looking to sell out instead.

"I think they are looking for a buyer. Going public is something in their back pocket," said Greg Gorbatenko, an analyst with Jackson Securities, a research firm based in Chicago.

Vonage is one of the industry leaders in the nascent voice over Internet protocol (VoIP) business, with 1.4 million subscriber lines as of early February.

VoIP technology allows people to make phone calls with their computer. Voice signals are transmitted over the Web as opposed through the copper wires that have been the backbone of the telecom industry since the days of Alexander Graham Bell.

Companies like Vonage have undercut the big phone companies by offering cheaper monthly calling plans. And some VoIP companies, such as Skype, which eBay (Research) bought last year, even have free phone plans.

"The business model for telcos is changing and little firebrand companies like Vonage are leading the charge," said Ben Holmes, managing partner with Protégé Funds, a private investment firm based in Boulder, Col. that invests in IPOs. He said his firm has not decided yet whether it will invest in Vonage if it does go public.

Vonage is growing rapidly, with sales during the first three quarters of 2005 more than tripling from the same period in 2004. But expenses have also ballooned, leading the company to report a much bigger loss in the first three quarters of 2005 than it did for the first nine months of 2004.

Marketing costs in particular have skyrocketed. (Woo hoo! Woo hoo hoo!) The company spent $176.3 million on marketing during the first nine months of last year, up from $31.3 million in marketing expenses during the first three quarters of 2004.

Analysts say that if Vonage wants to keep growing, it's going to need a lot more cash. An IPO is one way to raise funds but a buyout might be a better strategic move, analysts say. The average investor may be scared off by the huge amount of money that Vonage has lost, which could mean that Vonage might not fare well as a public company.

"A sale of the company would be preferred to an IPO. But they need to raise capital to feed the beast," said Scott Cleland, president of Precursor, an independent research and consulting firm focusing on media and telecom. "As long as they gain access to capital, Vonage can stick around for a long time but the question is would that be wise?"

Vonage, despite its strong growth so far, faces many challenges. Competition in the VoIP market, like the rest of the telecom services sector, is fierce.

Cable companies such as Comcast (Research), Time Warner (Research) and Cox have all successfully launched digital phone services. There's also the threat of more competition from Internet firms like eBay, Google and Yahoo! (Time Warner also owns CNNMoney.com.)

"Subsidiaries of much better capitalized firms can come out there and squash them like a peanut," said David Menlow, president of IPOfiancial.com, an IPO research site.

And there are other pure-play VoIP companies as well, such as privately held SunRocket and 8X8 (Research), a public firm which offers the Packet8 service.

This all leads to more price pressure in the VoIP market. And that means Vonage will probably be forced to lower its monthly rates in order to hold on to existing subscribers and attract new ones. With that in mind, some think Vonage has a better future ahead of it as part of a bigger company.

"Vonage has a significant established customer base but as a standalone company it could be very difficult for them. As the price of VoIP continues to go down, it's important for Vonage to act as quickly as possible," said Al Boschulte, chairman of Probe Financial Associates, an independent research firm focusing on telecom.

Enter the traditional telecoms. After all, they have the most to lose if they don't offer customers a viable Internet phone service. For this reason that Gorbatenko thinks one of the major telecoms could make a run at Vonage.

He said AT&T, which is currently in the process of buying BellSouth, has its hands full. But Verizon (Research), Sprint or Qwest could be possible Vonage buyers.

Qwest, specifically is an intriguing candidate, Gorbatenko added, since it has been forced to the sidelines during the merger mania that's swept over the telecom sector during the past two years. Qwest (Research) did bid for long-distance firm MCI last year but MCI ultimately decided to sell out to Verizon instead.

"Qwest would make a lot of sense. They are looking to do more deals and feel kind of left out," he said.

Analysts said one other reason why Vonage might be better off selling out instead of going public is that investors may be wary of the firm due to the background of Jeffrey Citron, the company's founder and chairman.

Citron, prior to founding Vonage, was an executive with Datek Securities, a brokerage firm. According to Vonage's prospectus, the SEC alleged that while Citron was at Datek, he and other individuals "participated in an extensive fraudulent scheme involving improper use of the Nasdaq Stock Market's Small Order Execution System." Citron reached a settlement with the SEC in 2002 and 2003 by agreeing to pay fines. He is also banned from future association with securities brokers and dealers.

Vonage did hire Michael Snyder, formerly the president of Tyco's ADT Security Services, in February to take over the CEO role from Citron. Snyder will oversee the day-to-day management of Vonage. That may assuage some investor concerns about management. But Vonage noted in its prospectus that there is a risk that "some prospective investors will not purchase our securities... as a result of allegations against Mr. Citron."

So the longer that Vonage goes without filing another statement with the SEC, the less likely it is that the company will ever go public, Menlow said.

"It could be that Vonage's underwriters have tested the waters and may see that an IPO may not raise the necessary money for Vonage to continue deploying its marketing plan," Menlow said. "At this point, it's distinctly possible someone could come in and work out a deal."

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Analysts quoted in this story do not own shares of the companies mentioned and their firms have no investment banking relationships with the companies.

The reporter of this story owns shares of Time Warner through his company's 401(k) plan.