THE GLOBAL WIRELESS M2M MARKET

Machine to machine communications, commonly known as M2M or telemetry, connects

communications-enabled remote machine or devices, allowing key information to be
exchanged automaticallyM2M communications is the networking of intelligent,
communications-enabled remote assets. It allows key information to be exchanged
automatically without human intervention, and covers a broad range of technologies and
applications which connect the physical world – whether machines or monitored physical
conditions – to a back-end IT infrastructure. These remote assets, which can be fixed or
mobile, include cars and truck fleets, utility meters, copiers and printers, kiosks and wireless
displays, ventilation and air-conditioning sensors, home medical devices, fitness monitors
and CCTV cameras. The physical conditions they monitor can include temperature, location,
consumption, heart rate, stress levels, light, movement, altitude and speed.

The global wireless M2M market has felt the impact of the economic downturn in the past
year. Hardware manufacturers have suffered from shrinking margins as volume growth has
flattened out at the same time as prices have continued to fall. Falling demand in the
automotive sector caused by the sharp decline in vehicle sales has not been fully compensated
by resilience in other sectors. Network service providers have fared better and still enjoy high
growth for M2M connections even if the rate of increase has slowed down in several markets.

The steady increase in M2M subscriptions is starting to generate substantial revenue streams
for large mobile operators even if the typical monthly ARPU is just a few euros. Berg Insight
anticipates that 2010 will be a positive year for the global wireless M2M market with
hardware shipments returning to growth and a continued increase in the number of network
connections. New M2M initiatives launched by major mobile operator groups are expected to
have a positive influence on demand, stimulating more new large-scale projects. Regulatory
developments will have a major impact on the telematics industry.

The segment is projected to grow steadily over the next five years due to strong demand for
advanced metering solutions and low replacement rates. Other major vertical market
segments include PO Sterminals and security alarms. Over the past year, several important
initiatives related to M2M have been announced by the leading mobile operator groups in
Europeand North America. Telenor launched the global M2M operator Telenor Connexion in
October 2008. During the first half of 2009, Orange established an International M2M Centre
and Vodafone announced a new international M2M business unit as a part of its Vodafone
Global Enterprise organisation. In the second half of 2009, T-Mobile joined forces with
Sierra Wireless and Cinterion to develop joint offering. M2Mmarket. Telefónica has also
established group-level functions dedicated for M2M. Among the US operators, AT&T
started a trend in May 2009 by launching a new business and technology platform for M2M
and emerging wireless devices. Verizon Wireless followed by entering a joint-venture with
Qualcomm to address theM2M market and later Sprint launched a new business unit for
M2Mand mobile computing.

M2M communications can be used to gain immediate feedback on how a particular remote
asset is being used, which features are most popular and what problems such as errors or
breakdowns typically arise. This information is useful for shortening the lead time to an
improved or updated version, thereby providing a competitive edge. M2M communications
are made possible by the use of intelligent sensors or microprocessors that are embedded in
the remote asset.

Anytime, anywhere access to real-time intelligence from remote machines or devices is

changing the way that multinational businesses operate. Over the next five years we’re going
to see a dramatic breakthrough in new applications as organisations realise the unheralded
potential M2M represents – not just for increased efficiency and cost reduction, but also for
revenue generation and improved customer satisfaction. The widespread availability and
decreasing cost of wireless communications, economies of scale and improvements in
bandwidth have redefined what’s now cost effective to connect. As a result, multinational
businesses can consider M2M not just for their most important production assets, but for
almost every remote asset they own or service for customers

In 2010 M2M will have an even bigger impact on hundreds of organisations across a diverse
range of markets, helping to improve revenue, margins, market share and most importantly
customer satisfaction. It holds the key to energy efficiency, reduced greenhouse emissions
and improved quality of life.
 STRATEGIC ALLIANCE

"If you do not seek out allies and helpers,

then you will be isolated and weak."
Sun Tzu, "The Art of War"

A Strategic Alliance is a formal relationship between two or more parties to pursue a set of
agreed upon goals or to meet a critical business need while remaining independent
organizations.

Partners may provide the strategic alliance with resources such as products, distribution
channels, manufacturing capability, project funding, caital equipment, knowledge, expertise,
or intellectual property. The alliance is a co-operation or collaboration which aims for a
synergy where each partner hopes that the benefits from the alliance will be greater than
those from individual efforts. The alliance often involves technology transfer (access to
knowledge and expertise), economic specialization, shared expenses and shared risk.

The advantages of strategic alliance are:

1. Allowing each partner to concentrate on activities that best match their capabilities.
2. Learning from partners & developing competences that may be more widely exploited
elsewhere
3. Adequacy a suitability of the resources & competencies of an organization for it to
survive.

"Alliances have become an integral part of contemporary strategic thinking."

Fortune Magazine

TYPES OF STRATEGIC ALLIANCE

 Joint venture is a strategic alliance in which two or more firms create a legally
independent company to share some of their resources and capabilities to develop a
competitive advantage.
 Equity strategic alliance is an alliance in which two or more firms own different
percentages of the company they have formed by combining some of their resources
and capabilities to create a competitive advantage.
 Non-equity strategic alliance is an alliance in which two or more firms develop a
contractual-relationship to share some of their unique resources and capabilities to
create a competitive advantage.
 Global Strategic Alliances working partnerships between companies across national
boundaries and increasingly across industries. Sometimes formed between company
and a foreign government, or among companies and government.
Vodafone Group plc is a British multinational mobile network operator headquartered in
Newbury, England. Vodafone is the world's largest mobile telecommunication network
company, based on revenue, and has a market value of about £71.2 billion (November 2009)
It currently has operations in 31 countries and partner networks in a further 40
countries]Based on subscribers, it is the world's second largest mobile phone operator behind
China Mobile and over Telefónica, with over 427 million subscribers in 31 markets across 5
continents as of 2009. In the UK, its home ground, Vodafone has badly underperformed in
the last few years due to brisk change in administration.

Vodafone owns 45% of Verizon Wireless, the largest wireless telecommunications network
in the United States, based on number of subscribers. It is listed on the London Stock
Exchange, where it is a constituent of the FTSE 100 index. Previously Vodafone was listed
on New York Stock Exchange, but later it indented to transfer the listing of its American
Depositary Receipts, each representing ten ordinary shares of its company, from NYSE to
NASDAQ. However, it would keep listing its debt securities on NYSE.

Vodafone intensifies M2M activities

The term “machine-to-machine” (M2M) refers to automated data exchange between two or
more machines such as the automatic transmission of location data in navigation systems.
However, M2M communication is also used for the automatic transmission of stocks in
vending machines, data from electricity or water meters and status reports in complex
production systems. The new applications are manifold – M2M is a dynamic growth market.
Market experts expect a rapid increase of over 300% in the number of M2M connections by
2012. The Machine to Machine (M2M) applications provide a secure and reliable way for
customers to streamline their processes and manage their assets remotely – perfect for
applications like security and surveillance, stock control and fleet management.
Verizon Communications Inc.  is American broadband and telecommunications company
and a component of the Dow Jones Industrial Average. It was formed in 1983 as Bell
Atlantic as part of the 1984 AT&T breakup into seven Baby Bells. Prior to its transformation
into Verizon, Bell Atlantic had merged with another Regional Bell Operating Company, in
1997. The company's headquarters are located in the Verizon Building in Lower
Manhattan, New York City.

Verizon wireless wholesale m2m solutions support some of the largest tele matic OEMs in
the world. Today, Verizon wireless supports more than 7 million M2M devices on the
nation’s largest 3G network

It provides unparalleled nationwide coverage with our customized domestic and international
roaming agreements. With the high speed packet backbone and M2M technology, wireless
communications between remote machines can be a secure, cost effective and low
maintenance business model for companies.

VZW is pushing M2M devices aggressively into its portfolio of products. The data pipes are
preset they need devices to fill those data pipes and VZW needs to be aggressive in courting
these cellular M2M application providers
nPhase is an M@M technology company based in Chicago,Illinois. A recent spin-off from
IT consulting firm Professional Consulting Services, nPhase provides enterprise-level M2M
solutions that enable the monitoring and control of a company’s machine assets.

Its Offerings

nPhase provides end-to-end monitoring services for companies looking to remotely access
and control devices, often many miles apart. They offer an open and interoperable data
management solution that integrates with a variety of hardware and software and
communicates with customer systems, including SAP, Oracle, J.D. Edwards, and homegrown
applications.

nPhase has integrated a set of solutions which simplify the task of connecting machines to a
network( wired or wireless). nPhase’s customers are able to make a significant changes to
their business by:

 Developing new products

 Gaining precise and consistent data from their devices on an ongoing basis.
 Automating and enhancing sevice calls.
 Enabling higher-value services and solutions, leading to greater revenue generation.

nPhase Markets

nPhase can provide device networking and management solutions across numerous markets.
It currently has some key implementations with BioLab, a provider of swimming pool
chemical treatments; SpectraSite Communications, a cell tower owner and operator;
Checkers Drive-In Restaurants; and Cingular. In addition it can provide solutions for
equipment monitoring, environmental monitoring, building management, quick service
restaurants, convenience stores, data centres, freezers, and pretty much any other type of
asset

THE ALLIANCE
Vodafone, Verizon Wireless and nPhase, a Verizon Wireless/Qualcomm Joint Venture, on
15th Feb., 2010 announced they are forming a strategic alliance aimed at accelerating the
adoption of global machine-to-machine (M2M) deployments by simplifying the remote
management and monitoring of devices spread across both European and US networks.

The alliance is designed to deliver a simple and effective international management solution
for the growing number of companies looking to use M2M wireless communications to
enhance their customer service and create new service offerings in sectors including energy,
healthcare, automotive telemeters, consumer and commercial products. A good example of
M2M technology in action is the growing use of smart meters in the utility industry, enabling
firms to efficiently collect meter data and provide two-way data transmissions and tailored
offers for their customers.

The alliance members anticipate that this move will result in increased demand for M2M
services on mobile networks across Europe and North America over the coming years.
Globally, industry-wide operator revenues for wireless M2M were €3 billion ($4.3B USD) in
2008, and this is forecast to rise to €8.9 billion ($12.9B USD) in 2012, according to the
telecom analyst firm Berg Insight, based in Sweden.

The initiative will make it easier for Verizon Wireless and Vodafone customers to activate,
monitor and pay for devices that are deployed across both European (on GSM) and US (on
CDMA and GSM) networks. The alliance will also offer a single point of contact for
provisioning devices that are connected to both Verizon Wireless and Vodafone networks.

At the same time, it will enable firms to centrally manage and control the process of rolling
out M2M devices across many countries. This will increase implementation speeds and
reduce the cost, complexity and risk traditionally associated with deploying such projects.
The alliance members will also work toward providing customers with a single invoice and a
single point of contact for technical and other support.
The nPhase M2M services platform, which integrates with the Vodafone M2M global service
platform, will provide customers with a range of online management tools giving them a
single view of their international M2M estate with additional management capabilities in the
pipeline.

There were press statements made by the top management of all these companies and all of
them were of the same perspective that this alliance will be very useful for each one of them
and in a major way.

“M2M technology is playing an increasingly key role in helping firms to deliver more
customized services to their customers, but the difficulties of managing devices on a global
level was stopping the sector from realising its true potential,” said Erik Brenneis, Global
Head of M2M, Vodafone. “Through this alliance, we are making it even easier for firms to
roll out M2M technology to their customers, where ever they may be.”

“This alliance combines the strength of our recently announced nPhase joint venture with
Qualcomm with our long-standing global partner Vodafone,” said Tony Lewis, Vice
President of Open Development for Verizon Wireless. “For our customers and for the
marketplace, this means simplified management of devices globally across best-in-class
networks in both the United States and Europe.”

"The essence of this new alliance is to simplify the complex," said Steve Pazol, president of
nPhase. "This business alliance removes many of the complexities by building on the
tremendous capabilities and reach of Vodafone and Verizon Wireless to offer a single
standard interface, and provide pre-certified global devices that can support both CDMA and
GSM networks."
 KEY DRIVERS AND ENABLERS

Cellular network coverage is expanding worldwide

As digital cellular coverage has expanded, there has been a corresponding shift away from
satellite connectivity towards terrestrial cellular connectivity.

Cost savings

Cost saving remains one of the primary drivers for businesses to adopt M2M solutions. The
recovery of one misplaced diesel generator, for example, can cover the installation and
running costs of a tracking deployment.

Enabling new business models

Increasingly, M2M solutions are being used to enhance business operations, improve
functionality and environmental stewardship, and to connect the business with its end users.
At this point the M2M solution moves from simply being part of business processes, to a key
part of the overall business operation and customer experience. For example, a manufacturer
of commercial air conditioning systems sells its products through distributors and building
integrators, and may receive equipment fault information only second hand. It would be
unable to track usage and performance data, with no view of who is using its equipment or
where it is installed. By integrating an intelligent monitoring and control M2M system into
their air-conditioning assets, the manufacturer gains direct, ongoing access to field and
intelligence about its units. This information can be used to ensure that manufacturing faults
are promptly corrected and to gain valuable product usage statistics. If this M2M solution
were extended to provide a front end accessible to end-users, such as a web site, the
manufacturer could then gain direct access to the customer and have the opportunity to
enhance its product offering.

Legislation and regulatory compliance

Various governments and regulatory bodies around the world are enacting regulations that
mandate functionality of the type enabled by cellular M2M.
Speed and flexibility

M2M solutions can be used to help restructure and improve business relationships, for
example by replacing regular servicing with on-demand servicing. Rather than removing
equipment from service for scheduled monthly maintenance, built-in diagnostics can
schedule minor servicing to be done on an ad hoc basis and major servicing only when it’s
necessary. It can also record a full audit trail of defects, usage, maintenance activities and any
external inputs.

Health and safety

Many industries are now using specialised M2M-enabled badges or more generic ‘man
down’ solutions to ensure that employees away from the office are adequately protected.

Environmental stewardship

Some companies are leading the way in tackling energy wastage by using M2M technology
to monitor their property assets. Information collected from light and heat sensors throughout
buildings can be processed and monitored. Instructions can be transmitted back to individual
devices to re-calibrate their settings, thereby reducing energy consumption and costs.

Stronger service offering

M2M can be used to strengthen and differentiate service offerings and add greater value to
the end customer. Sensors built in to a vehicle for example can be used to add new
functionality such as ‘infotainment’ and navigation services and to enable the vehicle to self-
diagnose and warn the driver of potential difficulties before a long journey is undertaken.
When built into an end-to-end logistics system, more advanced M2M solutions can be
extended to provide additional benefits such as producing information for customs officers,
or providing confirmation that a shipment has satisfied environmental constraints and has not
been tampered with en route.

M2M solutions offer the ability to continuously monitor and assure compliance of remote
assets regardless of location. The automation of quality monitoring can reduce administrative
costs, improve visibility and deliver benefits beyond simple reductions in the cost of
monitoring compliance.

THE ALLIANCE ANALYSIS

Current Perspective: Positive on Vodafone joining the nPhase JV announced by Verizon

Wireless and Qualcomm’s nPhase group in August 2009, as the three companies in
partnership have a chance at providing what so far has been eluding other carriers offering
M2M solutions, namely global connectivity that spans both the U.S. and Europe. This is key
for the many potential M2M customers with distribution requirements or operations in both
regions, but has generally only been provided with the inherent disincentive of expensive
roaming fees; the alternative has been for the customer to have to strike separate contracts
with multiple carriers for connectivity.

Operational Perspective: When we look at the history of M2M industry we will find that
there have been a few companies who have been trying to get into this high potential market
for a long time. One of the biggest company that has been trying this is AT&T.

What AT&T tried was the vertical approach to provide M2M solutions. They had a team to
develop, market, and support M2M solutions for transportation, another team to develop,
market, and support M2M solutions in healthcare, yet another for the applications in
consumer electronics like the Kindle and its e-reader brethren.
There was certainly logic to it, as well as elegance. The sense of it stemmed from the
incredible diversity in M2M applications, so much diversity that the term itself is hardly
meaningful because it spans such a breadth of activities and technologies. Is reading an e-
book on a Sony Daily Reader an M2M application? Is tracking the location of a lost IV
pump across a multi-building hospital campus an M2M application? To be able to collect
such diversity under one organizational roof at a network, it stands to reason that you’d
quickly want to get some focus on the unique challenges in healthcare (including a thicket of
regulations, union rules, and extraordinarily sensitive and expensive devices to connect)
versus those in consumer electronics (unit scale in the millions, rapid product lifecycles, and
virtually zero attention span in end-consumers of those products for any complexity in their
connectivity).

And the elegance of the vertical approach to operator M2M strategy is in the very simplicity
of the org charts it induces. Want to add another vertical to your burgeoning M2M division?
Just add water, plus the requisite number of industry specialist salespeople, system engineers,
and third-party partnerships. Presto: the division’s business plan produces another line-item
of revenue from a whole new swath of customers.
So what’s the right wireless operator M2M strategy? That’s something that accretes
experiences, solutions, insight, relationships across its early customers before identifying
where the real need for specialization comes in their efforts.

The advantages of delaying the specialization of an M2M operation by vertical could

included more cross-fertilization by account teams of successful client applications, earlier
insights on the additional substrate that the network requires to be valuable across sectors,
and lower costs in sales and marketing stemming from a more leveraged investment in M2M
offers. This is something which this alliance has done.

Vendor Importance: There is a high importance to Vodafone not only as it the biggest
stakeholder in this venture but as it is hoping for major success in the M2M market. While it
already has a very large wireless footprint in Europe (as well as the Middle East, Africa and
Asia), if the U.S. can be added to its M2M footprint in a straightforward manner through the
JV, it can provide much better pricing than competitors that do not have the benefit of
ownership in a major U.S. mobile provider.

Vodafone has been trying to establish a very strong foothold in this industry from 2009 and
for this it has been trying all measures possible since then. Even the formation of nphase is
important as Vodafone has 22.5% stake in it. Vodafone is launching a global Machine to
Machine (M2M) service platform to help companies deploy and manage large, wireless M2M
projects. The new platform will also be supported by an expert team with world-wide
responsibility for growing Vodafone’s M2M business.

Vodafone is looking to bring its scale and expertise to this fast-growing market as more and
more corporates use wireless M2M to enhance customer service in areas including smart
metering, connected cars and the remote monitoring of equipment. This is expected to result
in significant demand for M2M services on mobile networks across Europe over the coming
years.

For this very reason it has made even more deals apart from this particular alliance.

On 1st Feb 2010 Numerex Corp., a provider of secure machine-to-machine (M2M) products
and services, has reportedly signed an agreement with Vodafone, one of the largest wireless
network operators in the world, giving Numerex (News - Alert) access to Vodafone's
extensive data networks in the UK. The deal means Numerex can now leverage Vodafone's
advanced network to help M2M technology companies, including dealers, distributors and
other businesses, in bringing M2M solutions to market.

On 20th April 2010 Vodafone and Phoenix Contact signed a collaboration contract to offer
complete solutions for industrial data communication in the mobile network. The two
companies say they are convinced that a high percentage of control systems in the future will
be connected via telecommunication networks.

Market Impact: It will be very high on the M2M segment of the enterprise mobility market,
as all carriers are very excited about the possibility of gaining significant revenues through
M2M applications. Both U.S. and global carriers will be affected by the addition of Vodafone
to the nPhase JV, as it makes the alliance a much stronger competitive threat due to its ability
to support multinational companies cost-effectively. Still there are other carriers with a strong
M2M story and the JV has a few major issues to resolve, such as the incompatible GSM and
CDMA networks of Vodafone and Verizon Wireless.

M2M Industry’s Impact: This industry is so big and is growing so rapidly that when the
deal of Vodafone was announced at World Mobile Congress. At the same meet there wer
numerous other deals announced too. These deals clearly show how important this market
can be keeping the future in mind.
The GSMA itself announced updates to its Embedded Mobile initiative, a program aimed at
vertical markets such as consumer electronics, healthcare, automotive and utilities.

The association, together with 25 telcos and other M2M players, published a set of industry
guidelines to reduce design complexity in what continues to be a hugely fragmented market.
It also announced its own partnership with the Continua Health Alliance, an alliance of
healthcare and technology organisations, to promote embedded mobile.

KPN announced that Konica Minolta is using its M2M Corporate service, enabled by Jasper
Wireless, to provide connectivity for CS Remote Care, a remote diagnostic system across 32
European countries.

Deutsche Telekom is to set up a new M2M ‘International Competence Centre’ in Bonn. T-

Mobile says it is making good progress with M2M deployments as part of its ‘Connected
Work’ strategy in Germany, and the new center will step up the pace of rollout. It provides
M2M solutions to customers in nine business sectors, but a particular interest at the moment
seems to be in automotive, where it is working with both BMW and Continental.

Telefonica announced its decision to invest in connected e-readers and stressed its
commitment to encourage growth of connected devices for e-learning in the education sector.

These deals have not been made on just vague assumptions but on basis of various calculated
researches such as the one on the segments which use wireless devices and the number of
consumers in it. The chart below clearly shows the huge number of the prospective customers
for the wireless M2M segment.
Future Perspective: If we try and analyse the companies carefully and their structure too we
can see that there are chances Verizon and Vodafone are considering a shift in ownership
might be possible and that it would shake up the cellphone industry. There have also been
reports claiming that while Vodafone already owns a stake in Verizon, the two are aiming to
change the financial relationship and may include anything from a dividend payout to either a
complete spinoff of Verizon or even a full acquisition of the American carrier by Vodafone.
A BusinessWeek article said a decision isn't yet close and may hinge on Verizon paying off its
debts from taking over Alltel last year.

We believe that a Vodafone buyout of Verizon is most likely and this JV is a step towards
that acquisition. This would help the company unify services and potentially eliminate the
debt sooner

Either of the changes in ownership levels would have a major impact on the cellular industry.
A fully independent Verizon would no longer necessarily need to synchronize its plans with a
European partner and could make world phones that more readily support other networks,
such as Orange or O2. Vodafone taking over Verizon in turn would put a second major
European carrier in the US and could lead to more harmonized device releases.
 CONCLUSION

The impact of the deal has already had a big impact and it has been a huge success specially
if we keep Vodafone the biggest party in this deal in our mind. Vodafone’s machine-to-
machine (M2M) business has taken 40 per cent of the market.

One of its most recent achievements of Vodafone was a partnership with British Gas to install
Vodafone SIM cards in smart meters for reading gas and electricity in homes. The deal is part
of the government scheme to roll out smart meters to 26 million UK homes.
The Vodafone M2M platform is patent-pending, providing businesses with managed
connectivity. , Businesses can manage and control the roll out of M2M devices in several
countries, increasing speed of deployment through this platform. Vodafone SIM cards are
also being embedded in smart meters for gas and electricity in Holland and New Zealand.
But, the UK is a bigger market and the Centrica (British Gas) partnership is the biggest M2M
contract.

The growth for Verizon Wireless and nPhase has also picked up and is looking positive with
great amount of prospects specially in the wireless M2M sector as had till then been available
largely only to large industrial customers and now is making a move to smaller businesses
and retail customer. .