World’s Biggest IoT Service Provider Becomes Independent MVNO: External Investment Is the Key to Unlock Vodafone IoT’s Potential

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By Jamie Moss | 2Q 2024 | IN-7359

Vodafone’s Internet of Things (IoT) connectivity business was established as an independent company in April 2024. This was the result of a years-in-the-making decision from the Vodafone Group. Independent operation and external funding is what is needed for Vodafone IoT to reach its full potential and to succeed on its own terms. Brand new opportunities will now exist for both parties.

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One Global Team, for One IoT


Vodafone IoT has been spun off as a standalone company. The new “Vodafone IoT Company” is centered around Vodafone’s famous Global Data Service Platform (GDSP). It brings together all Internet of Things (IoT) assets and personnel from across the Vodafone Group under one banner, with a single focus on providing managed connectivity services for the IoT. The non-geographic Mobile Network Code (MNC) allocated to the Vodafone Group by the International Telecommunications Union (ITU) will continue to power its “Global SIM” for IoT. Vodafone Automotive and the Mobile Private Network (MPN) side of Vodafone’s IoT business will remain with the parent Group, and will not become part of the Vodafone IoT Company. The Vodafone Group will retain 100% ownership of the Vodafone IoT Company, but up to 50% will be eligible for sale to third parties. It has been stated that “there is good interest” and Microsoft has been touted as a key potential investor. Erik Brenneis, previously the “Internet of Things Director, Vodafone Business” is now the Chief Executive Officer (CEO) of the Vodafone IoT Company, continuing his 13 years of IoT experience at Vodafone, heading up an IoT team that operates around the world.

The Largest MVNO in the World


The benefit to the Vodafone Group is the belief that this separation will allow Vodafone IoT to become more successful than it could have done otherwise. Establishing a separate company and selling half of it will bring in enough investment to fund the expansion of Vodafone IoT to such an extent that the Vodafone Group will end up with a 50% share of a far bigger and more profitable entity than it could have built by itself. The consequent benefit for the new Vodafone IoT Company is the ability to enjoy the best of two worlds: 1) the speed and nimbleness that comes with independence, and 2) all of the benefits it previously received from being part of the Vodafone organization. Vodafone is at pains to insist that everything remains “business as usual.” The Vodafone IoT company will retain access to all of Vodafone's national operating companies’ networks and roaming agreements, and the Vodafone sales channel. Those national operating companies will continue to sell the products and services of the new IoT company. This is in addition to the Vodafone IoT Company retaining its own, specialist direct sales channel, and Vodafone’s online IoT sales channels. No customer relationships will change, and no accounts will be moved from the Vodafone parent to the new IoT company. Instead, all IoT connectivity served, now and in the future, will be managed by the Vodafone IoT Company’s singular GDSP. Development and maintenance of the GDSP will now fall to the Vodafone IoT Company.

The Vodafone IoT Company is also expected to be able to engage in hitherto impossible relationships: notably to license capacity directly from non-Vodafone networks. This will improve pricing for local IoT connectivity, with less reliance on roaming agreements, thereby boosting the Vodafone IoT Company’s profitability. The opportunity may also exist for the Vodafone IoT Company to act as host for the virtual global IoT networks of other spectrum-owning wireless carriers—carriers that do not have the necessary connectivity relationships in place, and for whom the logistics of doing so would make it prohibitively difficult. This would allow smaller, national carriers to effectively resell the Vodafone IoT Company’s connectivity under their own brand, operated by and with the benefit of the Vodafone IoT Company’s specialist managed service support and guarantees; similar to disruptive new IoT service provider entrant Flo.Live. Becoming a Mobile Virtual Network Operator (MVNO) frees the Vodafone IoT Company from the competitive threat that MVNOs pose to Vodafone, with its very establishment instantly positioning itself as the largest cellular IoT MVNO in the world; and the largest MVNO, period.

Vodafone had installed 187 million IoT connections as of the end of its 2023-2024 financial year. This was up from 162 million connections the year before, an increase of 25 million units, for a Year-over-Year (YoY) growth rate of 15%, and a 5-year Compound Annual Growth Rate (CAGR) of 17%. This is a genuinely impressive sustained growth rate for a business unit formally established back in 2008, and which first reported serving just 5.3 million connections worldwide at the end of its 2010-2011 financial year. Revenue growth at Vodafone IoT has been admittedly slower, which is normal considering: 1) the decreasing cost for a gigabyte of data transported over a cellular network, and 2) the IoT’s natively low Average Revenue per Connection (ARPC). Vodafone claimed slightly lower IoT revenue at the end of its 2023-2024 financial year, stating the business unit had been worth €1 billion annually the year before. Vodafone IoT experienced a slightly larger than usual revenue growth of 9% in its 2022-2023 financial year, due to the renewal of key automotive OEM customers. Therefore, it stands to reason that Vodafone IoT should be a strong investment target, and a safe one considering its guaranteed continued financial backing by the world’s largest cellular service provider. The decision to carve out Vodafone IoT has been in the pipeline for some time and was first publicly hinted at nearly 2 years ago in Vodafone’s 2021-2022 interim report, where it was stated that Vodafone was primed to “evaluate [the] separation” of its IoT business unit.

Extensively Incubated, Absolute Powerhouse


Protecting an IoT business unit so that it may grow unfettered as a subsidiary has precedence: memorably with the establishment of Telenor’s IoT-specific international division Telenor Connexion in 2009. This was done by Telenor to prevent its nascent, vulnerable, and specialist IoT line of business from having to compete internally for budget at Telenor Sweden; and to stop Connexion from being drowned out by Telenor’s bread-and-butter consumer services division. Vodafone is doing the same, but in reverse, having stimulated its IoT business unit as much as possible from within, before rolling it out to ensure that it is not hamstrung by the operational limitations of being spread across the Vodafone Group; or so we are presently encouraged to believe. But it is demonstrably the case that Vodafone IoT has tremendous momentum behind it, which it has grown constantly, consistently, and organically throughout its lifetime; and there are no obvious signs it should not continue to do so. The IoT is a market of practical, results-driven growth that is immune to the effects of next-generation, “latest-and-greatest” technology hype. The IoT exists separately and parallel to the world of consumer Mobile Broadband (MBB), while being served by the self-same global network infrastructure, and there is no reason why Vodafone IoT can’t successfully operate independently. The scope of the IoT is famously limited only by the number of things you can think of to measure, and the number of places you can place a sensor.

It is important to remember that the Vodafone IoT Company is not being cut adrift by its parent. The Vodafone Group will own at least 50% of the new business, so it will always be either 1) a majority investor or 2) a joint-venture shareholder. Vodafone has everything to gain, and actively wants the Vodafone IoT Company to succeed, so that it, too, can recoup the resulting financial rewards. This separation does not represent the divestiture of a troublesome product line that stands at odds or that cannot be properly integrated with the rest of the business. Instead, the Vodafone IoT Company can be thought of as having been extensively incubated, and is now about stand on its own, fully-formed and legitimately dominant in market share from day one; its closest competitor is AT&T Incorporated, which reported 122.7 million cellular IoT connections at the end of 3Q 2023. With the Vodafone IoT Company being focused on managed service provision for the IoT, the Vodafone Group as its partner will concentrate on building out and maintaining its Radio Access Network (RAN) and Core Network infrastructure, and on managing the consumer MBB business.

Wireless carriers are often the whipping boys for the technology, media, and telecoms sector; being criticized as too slow, not agile enough, and not innovative enough. But the separation of its IoT business is an active and self-aware acknowledgement of Vodafone’s own practical limitations. Because for all that Vodafone IoT has accomplished, it remains a very small portion of its behemoth parent’s activities. Vodafone IoT is part of Vodafone’s “Service Revenue” business, the latter being typically worth an average of 84% of total “Group Revenue.” For the 2021-2022 financial year, Vodafone IoT was formally reported as 2% (rounding down) of all Service Revenue, with “Core Connectivity” at 87%. In 2023-2024, ABI Research calculates Vodafone IoT to have been worth 2.5% of Service Revenue, the slight increase being a combination of IoT revenue conclusively growing, and of total Service Revenue being marginally lower. But there is only so much investment any company can afford to put toward such a small and specialist, albeit strategic, business unit. Even within its own domain of the IoT, Vodafone IoT is considered an absolute powerhouse. The risk of the parent inadvertently, but unavoidably, stymying the child is real. And the Vodafone IoT Company’s potential is now such that it demands independent operation and external funding to be able to succeed on its own terms. The Vodafone IoT Company will continue to be connectivity-focused, with the simple mission statement from CEO Brenneis that, “Anybody in the world who wants to connect any kind of device should simply put a Vodafone SIM inside.”



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