Since 2009 U.S. wireless operators have been aggressively courting the machine-to-machine (M2M) and connected devices space by setting up divisions within their organizations devoted to this area. The logic behind this growing focus is that connected devices and M2M will provide new opportunities for operators at a time when traditional voice revenues are plateauing.
But after three years of pursuing this strategy, is it working? Is M2M the money-making opportunity that everyone believed it would be?
According to a recent report from analyst firm Current Analysis, it's unclear if revenues from M2M are accelerating as quickly as operators had hoped. Until now, many operators have been touting their network connectivity and global footprint as key differentiators to potential M2M clients. But Current Analysis says that isn't enough. Operators need to differentiate with vertical solutions, professional services and application developer platforms to attract and keep higher margin M2M clients.
The firm notes that AT&T (NYSE:T) and Vodafone are the current global leaders in this space, but says that others--such as Verizon Wireless (NYSE:VZ)--are quickly gaining ground.
Interestingly, during its first quarter earnings call, AT&T said it added 230,000 connected devices in the quarter, a dramatically lower number than in the fourth quarter when it added 1.03 million connected devices. The company explained that it sold more Wi-Fi-only devices in the first quarter and it also made some adjustments for inactive devices. The company ended the quarter with 103.9 million connections.
Meanwhile, Verizon Wireless touted the fact that it sold a lot of prepaid tablets outfitted with LTE. During its first quarter earnings call, the company said that it added 138,000 prepaid tablets in the quarter and that 60 percent of those were LTE. However, the company also said that it would no longer disclose total network connections, noting that M2M is more complicated in terms of how plans and device connections are formulated so the company doesn't think this metric is important. Of course, Verizon also has hinted that it will soon be offering a "family plan" for devices, meaning that a consumer will be able to connect multiple devices using one data plan and presumably one bucket of data. Perhaps the operator is just paving the way for this new plan by no longer disclosing the total connections metric.
Regardless of how U.S. operators report their connected devices and M2M numbers, the bigger question is whether these connections on the network are translating into revenue. It may still be too soon to say. But it's certainly something investors and the financial community will be watching closely.
I'll be asking several key players in the connected device space these questions and more during an event I'm hosting in New Orleans Wednesday, May 9, in conjunction with the CTIA Wireless 2012 conference. The breakfast panel, called "Building a Global M2M and Embedded Devices Ecosystem," will include panelists Glenn Lurie, president of emerging devices at AT&T; Niels Helkov,vice president of e-Health Americas at Orange Business Services; John Horn, president of RACO Wireless; and Ana Tavares Lattibeaudiere, head of Connected Living at the GSMA. We'll talk about the different operator strategies and about the importance of partnerships. In addition, we will discuss how operators in the U.S. are preparing for large-scale M2M deployments by strengthening their global footprint. The cost of the breakfast is $89. Click here to register. I hope to see you at the event. --Sue