Nov 26, 2012

Finance as a Telco M2M offering

The role of telecommunications service providers in the M2M market is typically associated with the provision of wide-area data connectivity. This narrow perspective ignores the other capabilities - technical and non-technical - that service providers can bring to bear in new application scenarios.

In November 2012, Telefónica announced a cooperation agreement with Generali Seguros in Spain to pilot a new, automobile insurance service. The service will allow users to pay for their car insurance policy based on how they drive. The service will also provide information about how users can drive responsibly and tips to improve their driving habits. The overall service concept is not new; it has parallels with an offering such as 'In Drive' which is available in the USA from State Farm Insurance and Verizon's recently acquired subsidiary, Hughes Telematics.

However, what is interesting in the Spanish case is the three-party business model that Telefónica has put in place to capture a share of the wider commercial potential of this new service.

While the project is based on a 50-50 share between Generali and Telefónica, the role of the latter is fulfilled by two separate entities: 

  • Telefónica Digital contributes on the technological side. Its telematics product consists of a device that is installed in a vehicle, a totally anonymous and safe cloud management service for the data, and a mobile application and website which end customers can use to manage their insurance and the way they drive.
  • Telefónica Seguros, the Telefónica Group’s insurance company, is the second entity and it will act as a co-insurer to Generali.
The involvement of a finance entity allows Telefónica to share in the commercial up-side of the new service and not be solely dependent on M2M data connectivity revenues. 

This model is similar to one that SFR (the fixed and mobile operator in France) is using for a new mEducation service. As shown below, a Finance Company has been established to manage the contract and payments from a local education authority in exchange for connectivity and mEducation services that are delivered to students in local schools.

More details about SFR's strategy and target market opportunity can be found in a report entitled "New Business Models: Innovation in Practice" prepared for the GSM Association's mEducation market development campaign.

Yet another finance related announcement was made in November, this time by Deutsche Telekom and Maingate (Sweden). This initiative involves a Cap-Ex free roll-out of smart metering infrastructure. The CEO of Maingate, Baard Eilertsen, was quoted in M2M Now (January 2013) as saying that the partnership will make sure that the meter is installed in a CapEx-free manner. It will also ensure that the communication is up and running, that the in-home device and technology is in place, and we also make sure that this infrastructure is ‘future-proofed’. In essence, the aim is to move the investment from upfront CapEx to long-term OpEx which makes the business case more valid for the utility. Deutsche Telekom and Maingate actually share the risk of obsolete technology. 

It appears that a part of the value proposition stems from the incremental data that will become available for new, grid management services. This is based on the observation that utilities only need one data point. Maingate and Deutshe Telekom will pay for four more data points which can be supplied to the utilities to balance feed-in and generation activities.

Initiatives such as those from Deutsche Telekom/Maingate, SFR and Telefónica illustrate the promise of M2M beyond pure connectivity and data transmission offerings. They also highlight the importance of business model innovation that makes full use of all communications service provider capabilities - technical and non-technical.


  1. 10 Jan 2021 update

    Orange expands its banking empire with acquisition

    - Orange acquires digital banking services specialist Anytime
    - Move adds small business and professional customers to the growing Orange Bank empire
    - Banking services is a strategic growth area for Orange
    - Banking is one sector into which telcos can diversify their businesses

  2. 29 Sep 2021 update

    Interview with M-pesa CEO: “Mobile payment market is offering opportunities to enhance financial access”

    Launched by Safaricom in 2007, M-Pesa is an electronic mobile money service that allows users to deposit, withdraw and transfer money, pay for goods and services, and access loans and savings product.

    M-Pesa, however, was not originally created to be a fintech and digital ecosystem brand, rather a simple proposition to help people send money to each other via Short Message Service.