Why Fleet Management Could Be A Lucrative Business For Verizon

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Verizon (NYSE:VZ), the largest U.S. wireless carrier by revenues, has been doubling down on the fleet management market as part of its strategy to diversify away from the saturating wireless market. The company’s telematics division has emerged one of the carrier’s fastest-growing business segments this year, with sales growing by roughly 25% year-over-year during the first half to roughly $400 million, per Bloomberg Intelligence. Below we take a look at why the telematics market is important and what Verizon is doing in the space.

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Fleet Management Counts As One Of The Most Mature Subsets Of The IoT Market

While the Internet of Things has emerged as a hot trend in the technology industry, the market is still relatively nascent, with companies still figuring out specific applications and building standards. However, telematics counts as one of the most mature subsets of the Internet of Things market at the moment. Fleet management systems typically collect real-time location and related data from vehicles and other mobile assets, in order to  keep track of deliveries, optimize routes to avoid traffic and carry out preventative maintenance, among other applications. The technology broadly enables businesses and governments to improve operational efficiency while cutting costs. Installations of fleet management systems in North America are expected to grow at a 17% CAGR over the next 4 years, touching 16 million installations by 2020.

Verizon Is Focusing On End-To-End Solutions, Unlike Its Telecom Rivals

While the fleet management space is relatively fragmented, Verizon has been doubling down on the market via M&A. In June, Verizon acquired telematics developer Telogis, while announcing a deal to buy Irish fleet management firm Fleetmatics for about $2.4 billion in August. Verizon’s telematics operations are now largely broken down into three segments, namely Expressfleet, which provides basic fleet management services for fleets of upto five vehicles;  Fleetmatics, which provides more comprehensive tools to small and medium sized businesses; and Telogis, which offers integrated fleet and mobile resource management to enterprises. Unlike AT&T, which has been focusing primarily providing connectivity solutions for automobiles (a relatively low ARPU, high volume play) by signing up millions of vehicles via deals with automakers in the United States, Verizon has been focusing on marrying its nationwide wireless coverage with software platforms to provide end-to-end solutions. This should allow it to garner more revenue per device, while bolstering its margins and potentially developing deeper customer relationships.

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