Another international operator dives into M2M market

Monday 15 February 2010 | 16:53 CET | Market Commentary
Vodafone, Verizon Wireless and nPhase have agreed a partnership for M2M communication. This follows similar plans in recent months from operators such as Orange Business Services, Telefonica and Deutsche Telekom. The services will use more than mobile networks, Telefonica's plans show - ADSL, satellite and NFC can also provide connectivity. And they won't be limited to the most common aplication to date, 'smart metering' of electricity, water or gas utilities. There are also plans for connecting coffee and vending machines, security systems, PIN machines, vehicles and packages in fleet management systems and other automated devices, such as the EU's eCall initiative for connecting cars. According to a report cited by Vodafone, the market will grow almost threefold by 2012 to a value of EUR 9 billion. Ericsson has predicted 50 billion connected devices, including M2M, by 2020 worldwide.

M2M is a new market for operators, that could provide a relatively easy way to boost growth and offset stagnating customer growth, falling prices and heavy network investments. Deploying a Sim card is about all it takes, although there is also underlying technology needed for management. The operators mentioned above are working with specialist partners to ensure a solid M2M portfolio.

Vodafone has already formed partnerships with local companies in the UK and Germany, but M2M is largely an international service, a point underlined by mainly multinational operators such as Vodafone active in the market. This has clearly to due with the fact that M2M is a real volume business. The data traffic will be relatively limited in most cases, and the ARPU per SIM as well, meaning large volumes are needed in order to make money. Cross-border deals can make this possible. Furthermore the business model is different enough from the traditional business or consumer markets that it's not surprising Vodafone and Verizon Wireless have agreed a separate cooperation. Telefonica has also chosen for a separate unit for the business.

Given the above, potential customers can choose from at least four different service providers. This means there will be pressure on prices, which could cancel out some of the volume effect. Whatever the case, the big operators have a lead on local operators. Even KPN, with a presence in three countries (plus MVNOs in two more) is a small player in this case with little to offer compared with companies such as Vodafone, Deutsche Telekom, Orange and Telefonica.

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