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Vodacom, MTN quietly board M2M gravy train

VODACOM and MTN are quietly tapping into the fastest growing industry of telemetry broadband – known as machine-to-machine (M2M) communications – which enables devices to communicate with one another via built-in mobile SIM cards.

This development also allows both mobile operators to diversify their revenue streams.

M2M allows a variety of devices and machines – including utility meters, vehicle sensors, and point of sales terminals, security devices, consumer electronics and many more – to talk to each other.

It is also an area where cellular operators, who are faced with dwindling voice revenues, can profitably venture into. M2M owes its creation to the convergence of technologies.

As an alternative revenue stream for mobile operators, the size of the M2M market will increasingly come under scrutiny. However, it is prudent to enquire whether the market will be large enough to accommodate all the mobile phone operators?

Global communications research firm Pyramid Research says the number of cellular M2M subscriptions globally nearly doubled between 2010 and 2012 to reach 143.7 million.

It expects that between 2012 and 2017 a compound annual growth rate (CAGR) of 27.2%, with total subscriptions reaching 478.1 million. As a portion of total mobile subscriptions, the increase during this time will be from 2.2% to 5.6%.

Airtime revenue is expected to increase from $4.9bn to $13bn during this time, a CAGR of 21.5%.

Presently, it is not clear what the value of the South African M2M market is. However, looking at the financial reports of both Vodacom and MTN one can deduce that the M2M industry is growing fast and the companies are seeing value in being invested in this new sector.

Vodacom - South Africa’s biggest mobile phone operator - increased M2M subscription by 24.2% in 2014 to 1.5 million from 1.1 million the year before. In 2012 Vodacom had only 965 000.

MTN – the country’s second biggest mobile cellular firm – says it is continuously developing its M2M offering and recently implemented its first smart metering for utility service for the City of Johannesburg.

“This solution complements MTN’s existing enterprise and smart solutions, which include fleet and fuel monitoring, remote alarm monitoring, and air quality and water monitoring,” says the company.

MTN doesn’t disclose how many M2M subscriptions it has, but MTN Business has a number of offerings for telemetry services and is in partnership with various companies.

It seems as if Vodacom is leading in the telemetry broadband industry as it increases its focus on this opportunity.

The company, which is owned by British mobile phone giant Vodafone, owns an interest in XLINK Communications, a provider of credit card communication technology.

In 2007, Vodacom bought a 35% shareholding in XLINK and later upped its stake to 50.1% share to take opportunities in the M2M value chain.

To date, the company manages M2M solutions for more than 56 000 businesses in Africa, facilitating 35 million M2M connections.

XLINK says it can remotely provide, track, maintain and monitor more than 125 000 SIMS and 80 000 units in the field. It has also expanded its business to provide special M2M solutions for clients that include Spar, Mr Price, Monte Casino, Wimpy and petrol stations.

Vodacom is not taking a passive approach to the M2M industry. Instead it is spearheading it and is cleverly making a tidy sum.

It might well be that the next turf war for mobile operators will be in the M2M arena.

Telemetry offers a huge opportunity for cellular operators to provide services for businesses to realise operational benefits and efficiency savings through real-time data monitoring.

Vodacom and MTN are likely to continue making inroads into opportunities provided by telemetry. It would therefore not be too much to reveal the size of their market share.

- Fin24

*Gugu Lourie is a former correspondent for Thomson Reuters, Business Report, Finweek magazine and Fin24 (writing a blog titled 'Googled'). He is the editor of techfinancials.co.za. Views expressed are his own. Follow him on #twitter @LourieGugu.

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