In mid-2014, when Analysys Mason reviewed more than 100 Internet of Things (IoT) investments and M&A deals, only 5 involved telecoms operators (and 4 of these were Vodafone investments). At the time, we discussed the gap between telecoms operators’ stated ambition to move up the value chain and their actions (or lack of them).
In 2015, however, the picture is changing. In the first half of 2015 alone, at least eight telecoms operators have made one or more investments in an IoT company.
Investments in SIGFOX by NTT DoCoMo, SK Telecom and Telefónica look like defensive moves to shore up future connectivity revenue. All other investments (and arguably even the SIGFOX deal) look like an attempt to branch out from commodity connectivity revenues.
The investments made by telecoms operators are hard to classify, with no obvious common theme emerging. Investments have been made in horizontal capabilities (e.g. investments in Actility by KPN, Orange and Swisscom and Springworks, by TeliaSonera are essentially about gaining capabilities that can be applied to multiple vertical markets). Investments by Telstra (in health), Orange (in fleet management) and before them by Vodafone and Verizon (in automotive) illustrate the diversity of opinion over what position to take in the value chain, or which verticals to focus on.
According to some estimates, over US$10 billion has been invested in IoT companies or acquisitions in 2015 (though some of these estimates include deals in which IoT was only a small part). Telecoms operator investment in IoT over the same period was well under US$100 million. Only Vodafone, Verizon and Telstra have made significant bets on IoT.
The extent of telecoms operators’ involvement in IoT cannot be judged purely on the basis of their M&A or investment activity: other activity, such as partnerships and internal developments, also need to be considered. However, with the exception of a handful of telecoms operators, the lack of investment activity indicates an unwillingness to commit to strategies that generate more than connectivity revenues. The recent investments by telecoms operators are encouraging indications, but more are needed for operators to make significant moves along the value chain.
By Tom Rebbeck
