Two deals quietly announced in June illustrate the key role telcos are set to play in the fast-growing machine-to-machine (M2M) and Internet of things (IoT) markets.
Almost unnoticed amongst the furore of the World Cup, Vodafone signaled its intention to take a lead in the connected car market by acquiring Italian auto electronics maker Cobra Automotive Technologies for 145 million euros. According to Reuters, Vodafone says the deal will create “a new global provider of connected car services” offering a full range of telematics solutions. A few days later, Tele2’s M2M Global Solutions division signed a deal with one of Europe’s largest energy and utilities suppliers, Vattenfall Group, to provide connectivity management solutions and “centralize” all of the company’s M2M and IoT services throughout Europe.
US operators are already in the game. Verizon Communications struck a similar deal to Vodafone as long ago as 2012 when it paid $612 million for Hughes Telematics, which produces GPS tracking, communications and safety features for cars. AT&T and Sprint are among other operators also already providing telematics solutions.
Telematics and smart metering are at the forefront of early M2M/IoT services, but the opportunity to connect a multitude of other devices promises to open up substantial revenue streams that telcos are well placed to share. Other vertical sectors such as healthcare, retail, government and manufacturing are set for significant growth over the next five years.
Gartner forecasts that by 2020 IoT product and service suppliers will be generating incremental revenues exceeding $300 billion globally, and that more than 26 billion IoT units will have been installed by then. IDC, meanwhile, says the worldwide market for IoT solutions will grow from $1.9 trillion in 2013 to $7.1 trillion in 2020.
Many analysts say it is still unclear whether mobile operators ultimately will provide just the network capabilities for M2M solutions or compete with IT providers to manage the services themselves. But the Vodafone and Tele2 deals suggest they are keen to become more than providers of “dumb pipes”.
Partnerships will be key to enterprises implementing successful M2M/IoT solutions. Telcos are well placed to play a key role, bringing expertise—often through partnerships themselves with companies like Capgemini—in areas as diverse as cloud computing, Operational and Business Support Systems (OSS/BSS), Customer Relationship Management and billing. Effective real-time data analytics and mining, and tailored Business Information Management solutions, will also be crucial.
Those June deals might not have created too much noise, but one thing is certain: with the right partnerships, telcos have the chance to be star players in the M2M/IoT arena.