Verizon Communications is buying Hughes Telematics for $612 million in a deal that will expand the operator's presence in the automotive and fleet telematics market.
The machine-to-machine (M2M) market is seen as an increasingly important segment for telecommunication providers seeking ways to growth beyond their traditional subscriber base, already at the saturation point for wireless customers.
"We expect M2M and telematics to drive significant growth for Verizon and we're taking an important step forward to accelerate solutions that will unlock more opportunities for existing and new HTI and Verizon customers," said John Stratton, president of Verizon Enterprise Solutions, in an announcement today.
The Hughes acquisition comes after the creation of a new Verizon division focused on telematics solutions that use the company's cloud and information technology, security, global IP network and communications, and wireless and M2M platforms.
The transaction has been approved by the boards of directors at Hughes and Verizon, and is expected to close some time in the third quarter. Verizon said it plans to retain Hughes' top management and will operate the business as a subsidiary in its enterprise unit.
"This combination represents an exciting opportunity to accelerate our innovation of new services and global growth and to bring these services to more customers and industries worldwide," Jeff Leddy, CEO of Hughes, said in a statement.
Steve Hilton with Analysys Mason said in a research note that the Hughes deal could be just one of a number of acquisitions in the M2M space over the summer.
“This acquisition is exactly what a carrier should be doing to better position itself in the M2M sector,” Hilton said.
Merger targets will have good technology products and sizeable channels to market, such as Hughes’ telematics offering and its relationships with enterprise clients, Hilton said.