knowledge centre

Recent IoT investments show telecoms operators (gradually) moving up the value chain

Tom Rebbeck Research Director, Enterprise and IoT

Recent investments by telecoms operators are encouraging, but more are needed for operators to make significant moves along the value chain.

  1. Internet of things

In mid-2014, when Analysys Mason reviewed more than 100 Internet of Things (IoT) investments and M&A deals, only 5 of these 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 (with notable activity summarised in the table below). So, what do the latest investments tell us about telecoms operators' involvement in IoT?

  • Telecoms operators are cautiously exploring a different role in the value chain. Investments in SIGFOX look like defensive moves by telecoms operators trying 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.
  • There is still no standard approach for telecoms operators in IoT or digital economy initiatives. 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 and Springworks 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.
  • Telecoms operators are still marginal players in IoT investment and M&A. According to some estimates, over USD10 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 USD100 million. Only Vodafone, Verizon and Telstra have made significant bets on IoT.

Figure 1: Notable M2M and IoT investments by telecoms operators in 2015 [Source: Analysys Mason, 2015]

Telecoms operator investor(s) Target Investment details Notes

KPN, Orange, Swisscom

Actility

USD25 million funding round1

Actility is developing a platform of services around the LoRa low-power wide area networking technology2

Telstra

Anywhere Healthcare

Acquisition of unit by Telstra. No pricing information provided3

Videoconference platform for remote healthcare. Telstra has made at least seven investments in health companies, spending over USD100 million

Orange

Ocean

Acquisition by Orange4

Fleet management company with over 2000 clients

Telefónica, NTT DoCoMo, SK Telecom

SIGFOX

USD115 million funding round5

The telecoms operators invested alongside other industrial and pure financial investors

TeliaSonera

Springworks

Equity investment (with TeliaSonera reportedly taking a 30% stake). No pricing information provided6

Springworks has developed interfaces for IoT and has an IoT data analytics platform

The absence of more significant investment in IoT from telecoms operators is due to various reasons. For example:

  • Many telecoms operators lack a clear vision for their role in IoT. As we said in a recent paper, many telecoms operators still appear to be taking a tactical and ad-hoc approach to M2M and IoT.
  • In comparison to the core business of basic voice, data and messaging, IoT and M2M are still relatively small. Few operators earn more than 5% of their total revenue from IoT and M2M services. As a result, IoT and M2M teams may have little management attention and access to only limited resources.
  • As well as the obvious financial cost, M&A and investment activities are time consuming and can be a distraction from operators’ day-to-day business.
  • Operators have been unsuccessful at M&A in the past and want to avoid repeating their mistakes. Although successful M&A activity between telecoms operators is relatively common, many of them have a poor track record of purchasing or investing in non-network companies.

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.


Analysys Mason is active in IoT and in providing transaction support. As well as working on more than 20 IoT projects for clients in the past year, we also publish research as part of our IoT and M2M Solutions programme. During the past five years we have worked on more than 200 due diligence assignments across the telecoms, media and technology (TMT) sectors. Please contact Tom Rebbeck (tom.rebbeck@analysysmason.com) for further details.

  1. See http://www.thingpark.com/en/news/internet-things-specialist-actility-announces-25-million-funding-round-led-ginko-ventures-kpn-0
  2. See http://lora-alliance.org/What-Is-LoRa/Technology for more information on the LoRa Alliance and technology.
  3. See http://www.telstra.com.au/aboutus/media/media-releases/telstra-health-secures-operation-of-medibanks-anywhere-healthcare.xml
  4. See http://www.orange.com/en/press/Press-releases/press-releases-2015/Orange-Business-Services-acquires-Ocean-to-strengthen-its-vehicle-fleet-management-activities
  5. See http://www.businesswire.com/news/home/20150211005248/en/SIGFOX-Global-Leader-Internet-Connectivity-Secures-Record#.VYvZLvlViko
  6. See http://www.teliasonera.com/en/newsroom/news/2015/teliasonera-invests-in-renowned-swedish-iot-firm-springworks-/