Kate Holton London

Vodafone is buying an Italian car electronics maker for e145 million (R2.1 billion), seeking to get ahead in the race to connect more products to the internet and offset slowing growth in its cellphone business.

Telecoms and technology firms are looking to tap an expected surge in demand for machine-to-machine (M2M) communications. M2M involves using the internet to get products – from cars and washing machines to turbines and medical equipment – to carry out more tasks, more efficiently.

Vehicles are at the forefront of the new industry as manufacturers strive to add new features such as navigation aids, security improvements, and music streaming.

Only about 10 percent of vehicles have built-in connectivity to the internet, but that number is expected to rise to more than 90 percent by 2020, according to British consulting firm Machina Research.

Vodafone said yesterday that it had agreed to buy Cobra Automotive Technologies, which provides products aimed at improving car security, telecommunications and vehicle tracking for the automotive and insurance industries.

Vodafone said it would offer e1.49 a share to buy out shareholders in the Italian group, about 50 percent higher than its previous closing price.

Cobra’s majority shareholder, Intek Group, said it had agreed to tender its 51.4 percent stake in Cobra for e74.3m.

Cobra shares were up 49 percent at e1.47 at 2pm in Milan, while Vodafone’s stock was down 0.44 percent at £1.9415 (R25.07) in London.

“The combination of Vodafone and Cobra will create a new global provider of connected car services,” said Erik Brenneis, the director of M2M at Vodafone.

Other cellular operators are also investing in the M2M industry, looking for new sources of income as stiff competition and regulation slow growth in their core market.

For example, in 2012 Verizon Communications, the largest US wireless carrier, spent $612m (about R5bn at the time) in cash to buy Hughes Telematics, which sells products including GPS tracking, communications and safety features in cars.

Technology companies are also deeply involved.

Earlier this year, Apple unveiled its CarPlay technology, which integrates its iPhone with a car and allows drivers to use certain apps on the dashboard with Siri, the voice-enabled assistant, to view maps, make calls, listen to music, and send and receive text messages.

In other industries, examples of M2M technology already in use include smart meters, which monitor energy usage at homes, or devices in offices that tell an owner when the coffee machine needs restocking.

James Barford, an analyst at Enders Analysis, said cellular operators were still undecided about whether they wanted to provide the network capabilities for M2M communications or to actually compete with information technology providers to manage the services themselves.

“Although there is scope to have a very large number of connected devices in due course, typically the volume of traffic that goes over them is pretty low because it’s just logistics data,” he said. “Increasingly more of the value is in the service wrapped around it. This is a small move towards owning more of the services.”

The GSMA, the trade body for cellular operators, estimates there were 195 million M2M connections last year, with the highest usage seen in the car and consumer electronics industries. – Reuters