European Telecoms Providers Gear Up for Connected Wireless Fight

By Simon Zekaria 

Europe's largest telecommunications providers are gearing up for a battle in the lucrative race to connect cars, homes, utilities and other everyday devices to smartphones and other wireless devices.

The 'Internet of Things' market is the catchall term for an electronic device which can be wirelessly connected to the Internet. For years, AT&T Inc. and rival Verizon Communications Inc.'s Verizon Wireless have lead the charge for U.S. telecom operators, and have seen niche IoT services such as parcel tracking expand into global businesses.

But after seeing their core telecom revenue growth being outstripped by "machine-to-machine" businesses, and with traditional revenue streams being stretched by tough market conditions, Europe's telecoms firms are seeing IoT as a prime source of new revenue.

"We are one of the few parts of the organization that grows," says Telefónica SA's global IoT chief Surya Mendonça.

According to network systems firm Cisco, the IoT market is expected to grow into a $19 trillion market over the next 10 years, as IoT networks for sectors such as traffic systems, shipping, rail freight and industrial manufacturing take shape. Meanwhile, the number of IoT-focused developers will leap to 4 million in 2020 from 300,000 this year, says telecom group Interoute.

And it's at this junction that the telecom companies are skirmishing with technology giants like ARM Holdings PLC, Samsung Electronics Co., Apple Inc. and Google Inc. Both telecom and technology are levering "hardware, the ubiquitous nature of connectivity, big data and analysis" in a face-off to grab IoT's expanding revenues, says Chris Gray, analyst at U.S. software firm Red Hat Inc.

Google, Apple and Samsung have made recent inroads into homes. This year, Google bought Nest Labs, Apple is launching HomeKit and Samsung acquired SmartThings to allow users to control home settings and sync devices.

For Telefónica, Vodafone Group PLC, Orange SA and Deutsche Telekom AG, the importance of not being left behind in the race for "machine-to-machine" business means deal-making for Internet-enabled connected services and devices is stepping up, analysts say.

Connected cars is one of the most active sectors for both intra-telco competition as well as competition with tech giants.

Telefónica has a partnership with electric car maker Tesla in major European markets and connects General Motors vehicles through the car group's communications unit OnStar. Orange also works with Tesla, in France, alongside other deals with Peugeot and Renault. Orange is also launching smartphone service Orange Drive next year, which gives users voice-activated radio controls and tips on efficient driving.

Vodafone has signed up with Germany's BMW and, in August, bought Italian car services firm Cobra Automotive. Deutsche Telekom also partners with BMW, and last Friday joined China Mobile, the world's largest mobile provider, in a connected cars venture.

Smart homes are another battleground. Last month, Telefónica launched a trial of AT&T's home security, automation and energy management platform in Europe. Deutsche Telekom has built on the 2011 launch of smart home platform Quivicon to control appliances through partners like Samsung and wireless speaker maker Sonos.

Orange--not to be left behind by the offerings of Google, Apple, and Samsung--will launch Homelive, incorporating applications with weather monitors, thermostats and movement detectors, later this month.

Telecoms are also eyeing utilities, hoping to capitalize on the market as energy regulation tightens. Last year, Telefónica struck a 15-year deal worth GBP1.5 billion to connect smart meters in the U.K., while Vodafone is working with energy supplier Npower to install smart meters in the country.

Orange is working with France's EDF to monitor electricity consumption, worked by a sensor inserted into the meter. The service will launch in France next year. And Deutsche Telekom also partners with energy and technology firms for meter reading services in Germany.

Write to Simon Zekaria at [e-mail]

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