Verizon, Like Sprint, Sees M2M as ‘Revenue Opportunity’

Nation’s No. 1 Wireless Carrier Reports Lower 3Q Profit

Verizon Communications Inc. (VZ) sees a big sales opportunity in machine-to-machine (M2M) technology, even as revenue from its wireless and FiOS businesses failed to dazzle analysts and investors.

Verizon executives didn’t speak too much of the M2M angle on Oct. 26 during the company’s third-quarter 2009 earnings call, but the brief discussion highlights how wireless rivalry is heating up among carriers – not just for consumers pocketbooks’ but also for the likes of smart grid companies, car makers, e-reader platforms, wastewater treatment plants and more.

Sprint Nextel Corp. (S) said recently it’s counting on M2M to fuel its sales numbers over the next few years. CEO Dan Hesse said Sprint even has forged a partnership with Ford Motor Co.; Ford has an online in-dashboard computer for which Sprint supplies the mobile broadband connectivity. The companies say this lets field workers do tasks such as track labor and material costs, update inventory and generate invoices and work orders.

For Verizon, as 4G availability spreads, the "data revenue opportunity will come in so many different places that we would want to make sure that our strategy has the breadth to capture a lot of things," Verizon CEO Ivan Seidenberg told analysts on Oct. 26. To that end, Verizon plans to maintain an array of mobile devices that at some point will lead to “the combination of integrated applications, video and also to sophisticated data applications” such as M2M, Seidenberg said.

Analysts say M2M competition among wireless providers will only grow. It’s already a $50 billion per-year business in the business-to-business world, according to a study earlier this year from Beecham Research. And consumers will become a more attractive market for M2M apps as items such as e-book readers gain popularity. Beecham Research predicts that more than $100 million worth of consumer M2M products will ship over the next five years, and most will be connected to mobile networks.

"M2M is all about creating new service opportunities, even when it comes to consumer products," said Robin Duke-Wooley, founder and CEO of Beecham Research. "What we are beginning to see is highly innovative, new ideas being translated into new product and service opportunities over the next few years that will change our lifestyles.”

Verizon Still Fighting iPhone Effect

But M2M isn’t Verizon’s only point of focus these days. The company is celebrating somewhat substantial mobile growth, with the FIOS, enterprise and wholesale portions of the wireline unit also contributing to its $1.18 billion profit, albeit to a lesser degree. And access lines? That’s a whole other story.

Verizon’s earnings, reported on Oct. 26, didn’t quite leave anyone in awe. The company’s net income reached $1.18 billion, down from $1.67 billion during the year-ago quarter. Revenue, on the other hand, did increase, by 10.2 percent, to $27.27 billion.

In the wireless division, 1.2 million net new subscribers signed on for Verizon’s service. However, that number paled when compared to rival AT&T Inc.'s (T) 2 million net adds, showcasing the intensity of competition Verizon faces from AT&T and its exclusive iPhone contract.

Still, Verizon watched its data revenue jump 30.5 percent, up from 25.1 percent during the third quarter of 2008. All told, Verizon’s post- and prepaid users made up nearly 97 percent of its entire customer base. The provider boasted 80.9 million subscribers by quarter-end, much of that thanks to the Alltel acquisition.

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