M2M Corporate Initiatives 2012

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2012 proved to be another strong year for the M2M/Connected Devices market with a significant rise in corporate business ventures. The nearly 100% increase in activity during 2012 – a total of 114 corporate events – easily surpasses the rate of market development in 2011 according to our database tracking M2M corporate ventures.

The two strategies showing the greatest amount of activity during 2012 were:

• The creation of commercial partnerships across the M2M value chain to supply integrated M2M offerings to the market

• Market entry and expansion initiatives by companies targeting new and different M2M segments.

Several of the corporate initiatives had more than one objective. Partnering, for example, was used as a means of entering new market verticals or geographies. In several cases, however, it simultaneously provided a means for companies to acquire new technical capabilities.

Of the total of 114 corporate events, 62% involved some element of partnering with other companies in the M2M eco-system. In 35% of all cases, market entry was a principal feature while 23% of the cases involved technology innovation. Access to markets through new distribution channels accounted for 11% of the cases while investment stakes and acquisitions featured in 9% of the cases.

Our analysis of corporate initiatives is based on a simplified industry value chain that progresses from: technology vendors, to MNOs (mobile network operators), to platform providers, to users of M2M solutions who then supply connected devices and services to enterprises and consumers. Across this value chain, the first two areas for corporate initiatives were as follows: 

• Vertical-integration initiatives spanning the MNO and platform provider segments of the value chain. In many cases, MNOs partnered with M2M connectivity platform providers notably Ericsson and Jasper Wireless. Verizon was notable in employing an acquisitions strategy. Early in 2012 it announced that it had taken control over a remaining 50% stake in nPhase, a platform provider. Later in 2012, Verizon also acquired Hughes Telematics for over $600m. 

• Initiatives concentrated within the MNO segment of the value chain – most of these initiatives involved the creation of dedicated business units to focus on M2M market opportunities. Several of these involved MNOs – e.g. Etisalat, Swisscom, Telkom Austria, Vodacom - following in the trail of larger MNOs that seized the initiative in 2010 and 2011. A second category of activity took the form of horizontal consolidation. These involved alliances amongst MNOs to extend their global footprints. Examples include Orange and Sprint as well as a group of seven operators comprising KPN, NTT DOCOMO, Rogers, SingTel, Telefónica Digital, Telstra and Vimpelcom.

Across the full set of corporate initiatives, the companies that ramped up their initiatives in 2012 compared to 2011 were Deutsche Telekom and Telefónica amongst the MNOs and Ericsson and Jasper Wireless among the platform providers.

Deutsche Telekom’s initiatives suggest that its International M2M Competence Centre and focus on ‘Digital Life’ opportunities are having an impact in terms of corporate venturing. For its part, Telefónica has been active on multiple fronts, building on its longstanding M2M expertise in O2, through its Group-level M2M efforts and through the prioritisation of M2M in the Telefónica Digital portfolio where it has set a revenue target of €0.5-0.8Bn to be achieved by 2015.

Ericsson and Jasper Wireless appear to be reaping the benefits of MNOs choosing to partner and in-source M2M platform expertise in areas such as scalable provisioning and remote management of M2M devices. While Jasper Wireless is building on MNO wins from prior years, it appears that Ericsson is now making inroads into this market thanks to its acquisition of the Telenor Connexion platform business in 2011.

For the coming year, even more MNOs will commit business unit resources to M2M as this market continues to expand. Formalised strategies will become a necessity to put in place commercial models and strategies that are different from the traditional ‘handset’ business.

One challenge these initiatives will have to address is the growing “consumerisation” of M2M through the rise of home-automation, health care and remotely managed applications, for example. An indication of how the market is developing can be seen from the following historical comparison. The table below highlights those segments of the M2M value chain that exhibited the highest levels of corporate activity during 2011 and 2012.

Top Areas for M2M Corporate Activity in 2011 and 2012

	2011	2012
#1	Platform Provider	MNO + Platform Provider
#2	MNO + Platform Provider	MNO
#3	MNO + Vendor	MNO + User

The top two items for 2012 have been discussed above. The third item indicates that MNOs are becoming more involved with users of M2M technologies i.e. the companies that are integrating M2M capabilities in the products and services they offer to enterprise and consumer users. What this means is new business model innovation where MNOs become more closely integrated, commercially and strategically, with non-mobile businesses as they seek to apply M2M solutions in delivering new services. In 2012, the two sectors where this was most apparent were consumer automotive and health care according to our data.

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