Vodafone

Vodafone, best known for its mobile phone and data service, recently announced their decision to buy Cobra Automotive Technologies to facilitate their entry into the automotive connected electronics industry. It is estimated that by the year 2050, more than 50 billion devices, including in the health care, transportation, automotive and energy industries, will connect with users and other machines via the Internet, providing users a wider range of abilities and a streamlined service.

Vodafone has purchased the company as one part of a strategy to provide better connection for everyday objects and develop their services within the machine-to-machine industry, or the Internet of things.

Cobra Automotive Industries

Cobra provides a range of electronics for various components of the automotive industry, including the manufactures, dealerships, and aftermarket customers. These products and services include vehicle tracking, usage-based insurance, anti-theft systems, parking assistance and telematics. Cobra’s specialty is the telematics information that gathers and reports driving data, such as steering and braking, in cars that are computer-controlled.

Cobra already has several car manufacturers with which it works, including high end companies such as Audi, Lamborghini, Renault and Bentley, as well as Nissan, Toyota and Volkswagen. Although based in Italy, Cobra has operations throughout the world, including China, France, Brazil, Germany, Japan, Spain, South Korea, Switzerland and the U.K.

The Deal

The purchase comes to save the debt-laden Cobra, which is at the forefront of the machine-to-machine communications market. In 2013, Cobra had a pre-tax lost of 1.8 million Euros, and in 2012 they had a 14.3 million Euros loss. After struggling with debt, the company stood at 48 million Euros at the end of the March 2014. Vodafone is set to purchase the company for around 145 million Euros.

Part of the deal is to buy the shares from the major shareholders, who own about 74 percent of the equity. Shareholders have agreed to Vodafone’s offer of 1.49 euros per share, which is about 50 cents above the closing price at the time of the sale. After the initial deal is complete, Vodafone has also agreed to acquire a further 20 percent of the company by purchasing shares from smaller shareholders for a total cost of 20 million Euros.

The Future with Vodafone

The mobile telecommunications industry has a new market ahead of it as more and more people turn from telephones to wireless devices. The combination of Vodafone and Cobra provides the opportunity to create a global provider of connected automotive electronics.

Vodafone already has a department for machine-to-machine operations with 250 people on staff, and with the acquisition of Cobra can further develop their entries into this market. With the addition of Cobra, Vodafone can establish a more comprehensive range for the automotive industry. The company hopes to increase its machine-to-machine connection from 12 to 16.2 million by 2018.

The Lure of the Automotive Market

The machine-to-machine market is expected to grow 24 percent by the year 2018, while the growth of data and mobile voice markets is expected to remain fairly stagnant. Vehicles represent one of the most desirous locations for the machine-to-machine market.

Currently, only about 10 percent of vehicles have some kind of in-built Internet connectivity, but estimates say that percent will rise to 90 by 2020. Insurance companies want to have data on driving patterns to help with the assessment of premiums. Users use Internet music streaming service, navigation systems, and more.

For companies already in the mobile connectivity industry, moving into the machine-to-machine market provides a way to remain relevant. Vodafone’s purchase of Cobra provides the company with a strong entry into the growing automotive market for connected devices.

photo credit: cvrcak1