Verizon Eyes Automotive Technology Market, Could Spur Other Deals

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Verizon Eyes Automotive Technology Market, Could Spur Other Deals
Image credit: Jonathan Weiss | Shutterstock
3 min read
This story originally appeared on Reuters

Verizon Communications Inc.'s recent purchases of two vehicle tracking firms could spark more deals as the No. 1 wireless provider and rival AT&T see fleet management as a source of growth, analysts said.

Faced with a saturated wireless market, several telecom companies are looking beyond their main phone business for ways to extract more value from existing networks. Just last month, Verizon bought Yahoo for $4.8 billion, diving into digital media and advertising.

But Verizon also recently acquired privately held connected-vehicle technology firm Telogis for an undisclosed sum and said it would buy GPS vehicle tracking company Fleetmatics Group Plc. for $2.4 billion.

Telecom providers are moving towards acquiring "eyeballs or a fleet of people" that can use applications built on top of the wireless network, said Richard McBee, chief executive officer of Canadian communications technology company Mitel Networks Corp.

The fleet and mobile workforce management business connects fleet vehicles to the wireless network and collects data, like driver behavior, to manage vehicles and workers. The business delivers a source of recurring subscription-based revenue from clients such as large logistics companies and local delivery services.

After buying Fleetmatics and Telogis, Verizon could be on the lookout for a security or software technology firm to pair with its data-heavy automotive technology business, Susan Beardslee, analyst at ABI Research, said. Potential targets could be Israel-based cyber security firm Argus and software management company Movimento, she added.

Rival AT&T has its own fleet management business and could look into buying fleet tracking firms such as Teletrac Navman, Omnitracs, Geotab and Zonar, analysts said.

Verizon, Argus, Movimento, AT&T, Omnitracs and Zonar Systems declined to comment. Teletrac Navman and Geotab could not be immediately reached for comment.

While Verzion's second-quarter revenue of $31 billion dwarfs that of Telogis and Fleetmatics, both firms are expected to grow quickly. Fleetmatics reported $285 million in sales last year and is seen growing at an annual revenue rate of 15 percent to 20 percent.

Fleet management businesses may also get a boost from a recent federal regulation that mandates that companies digitally record driver work hours with electronic devices, analysts said.

"It will be interesting to see how they leverage up here in coming years," said Angelo Zino, an analyst at S&P Capital IQ. "But I wouldn't expect (Fleetmatics) to be the last of their deals."

(Reporting by Malathi Nayak; Editing by Bernard Orr)

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