Verizon Communications Inc. has set its sights on the automobile business. The telecommunications giant has announced plans to acquire Hughes Telematics Inc., in what is described as a “definitive merger,” for an eye-catching $612 million. It is also creating a new forum designed to aggressively promote in-vehicle technology.
Verizon has been an active proponent of the so-called “connected car,” and has actively pitched the potential of its high-speed LTE network to automakers that also see huge profit potential in giving motorists many of the same features and services available in home or office.
Along with the proposed purchase of Hughes Telematics, or HTI, Verizon has formed the new 4G Venture Forum for Connected Cars, a group that will work with a number of leading automakers in an effort to find even more telematics opportunities.
The Hughes transaction could give Verizon the capabilities it needs to power its rapid expansion into connected car technologies, everything from emerging machine-to-machine, or M2M, services to applications driven by consumer trends and increasingly connected lifestyles, Verizon said in a statement.
“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.
“Joining Hughes Telematics’ robust service-delivery platform and suite of applications with our existing assets will create a premier set of capabilities. In powerful combination with Verizon’s global IP network, cloud, mobility and security solutions, Hughes Telematics’ flexible service-delivery platform has the potential to reach beyond the automotive and transportation realm to create new opportunities in health, asset tracking and home automation,” Stratton said.
On the vehicle side of the equation, Verizon has signed up BMW, Honda, Hyundai, Kia and Toyota as founding partners with the 4G Venture Forum. Notably absent, however are two Detroit makers that have staked out big plans for connected car systems, Ford and General Motors. That’s all the more surprising since GM has worked with the telecommunications company before through its own OnStar subsidiary.
And HTI itself was once a part of General Motors — which purchased the telematics firm’s parent Hughes Aircraft, in the 1980s.
HTI now supplies a variety of telematics services, including in-vehicle connectivity, to Mercedes-Benz and Volkswagen. It is currently rolling out new services for the 2013 Mercedes-Benz line and is considered a leader in implementing the next generation of infotainment and related services, centered on a core platform of safety, security, convenience and entertainment offerings.
HTI also offers a portfolio of services through its commercial fleet, aftermarket and original equipment manufacturer.
The Board of Directors of HTI has already unanimously approved the transaction but the deal still has to pass through regulatory reviews.
Nonetheless, the merger is expected to close in the third quarter of 2012, and Verizon plans to retain the existing management team and operate the new unit as a subsidiary operated as part of its Verizon Enterprise Solutions group. The business will continue to be headquartered in Atlanta.
Paul A. Eisenstein contributed to this report.