Verizon’s $2.4bn (€2.14bn) acquisition of Dublin-based Fleetmatics represents not only a major win for the Irish software sector but a continued shift by telecom companies feeling the pinch in traditional business sectors.
The US communications giant agreed on Monday to part with $60 per Fleetmatics share - a significant premium of about 40% on Friday’s closing price - to buy the Irish GPS tracking company founded by Peter Mitchell in 2004.
Fleetmatics’ software-as-a-service (SaaS) offering tracks truck fleets’ location, fuel usage, speed and mileage to improve efficiency and safety.
While such a major deal is undoubtedly a feather in the cap of the Irish technology scene, the acquisition also offers an insight into the focus of telecom companies across the world as their traditional business begins to wane in importance.
Telcos are increasingly looking towards media, the internet-of-things (IoT) and enterprise service solutions to plug the gap beginning to emerge in text and voice revenue.
It’s the issue text messaging pioneer Joe Cunningham warned of earlier this year when he told this newspaper that the rise of free call and messaging services such as Whatsapp and Facebook Messenger was “stripping” traditional firms of their core revenue-generating services.
The decline in telco’s legacy business was seen in Verizon’s case just last week when it released Q2 results including total operating revenue of $30.5bn -which fell short of analysts’ expectations.
“If you look at messaging, five or six years ago one of the main carriers in the UK was doing maybe £2bn (€2.54bn) a year in revenue from messaging at a really high margin.
"Offerings like Whatsapp and Line and Facebook Messenger have hugely carved into that, and that business has now gone down to hundreds of millions of pounds,” Mr Cunningham said.
The logical step in fighting back was “a migration to the cloud”, he added.
And that’s what we’re seeing with the Fleetmatics deal as Verizon further bolsters its internet-of-things (IoT) business with one of the few profitable cloud software firms out there. The deal will see the Irish company become part of Verizon Telematics along with another recent acquisition in the area, Telogis.
While only accounting for a tiny percentage of Verizon’s overall revenue, the company’s $205m in Q2 IoT turnover represented a 25% increase on the same period a year ago.
Even in the domestic market, telcos appetite to expand their business - largely into media - has been evident over the past 18 months.
Eir’s takeover of Setanta Sports and the acquisitions of UPC Ireland, TV3 and UTV Ireland by Virgin Media all offer recent examples of telco’s desire - and need - to evolve beyond their traditional boundaries.
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