Vodacom bets big on Internet of Things, increase its stake to 100% in XLink

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Vodacom, South Africa’s biggest mobile phone operator, announced on Thursday that it has increased its stake in Internet of Things (IoT) player XLink Communications for an undisclosed amount. By Gugu Lourie

The move provides Vodacom with an asset that is a big player in the most lucrative IoT space worth billions and growing fast in the rest of the African continent.

M2M services are also referred to as the Internet of Things (IoT) – a concept of connecting devices – ranging from refrigerators, geysers and smart electricity meters to coffee makers – to the internet.

The acquisition is notable for several reasons.

Vodacom is a first African telco to own 100% of an IoT firm.

Secondly, McKinsey Global Institute predicts that the technology of machines connected to each other through the internet will create an economic impact of $2.7 tillion to $6.2 tillionr (R32.67 trillion to R74.97 trillion) annually by 2025.

Vodacom is excited about its move to own XLink.

“ In June we increased our shareholding in X-Link to 100%. This will enable us to execute across the full IoT value chain by developing new IoT verticals, whilst using X-link as managed services provider,” Vodacom informed investors on Thursday.

In 2007, Vodacom acquired a 35% shareholding in XLink and later upped its stake to 50.1% as a means of benefitting from opportunities in the M2M value chain. Pan African Equity Fund 1, which is a BEE partner of XLink, holds 25.1% of the business. The remaining 24.8% is owned by XLink management led by CEO Anton Leal.

XLink is already making good returns. To date, XLink manages M2M solutions for more than 68 000 businesses in Africa, facilitating 35m M2M connections. M2M allows a variety of devices and machines – including utility meters, vehicle sensors, point of sales terminals, security devices, consumer electronics and many more gadgets – to talk to each other.

The acquisition of XLink is a big leap for Vodacom into IoT but its parent company Vodafone is already a big player in this space.

Organisations that have adopted the Internet of Things (IoT) are now spending 24 percent of their IT budget on IoT-related projects, a figure comparable to the amount spent on each of cloud and hosting, analytics, and mobility, according to Vodafone’s 2016 IoT Barometer.

XLink is likely to be housed in Vodacom Enterprise unit led by Vuyani Jarana.

The enterprise service revenue was up 11.6% and contributes 24.4% to South Africa service revenue in the quarter to end June 30.

Vodacom said  mobile customer revenue was up 9.5% and fixed-line and business managed services increased by 22.6%. “The growth in fixed-line and business managed services has primarily been driven by our IPVPN (Internet protocol virtual private network) and cloud and hosting services as enterprises begin to migrate to the cloud at an accelerated rate. Internet of Things (IoT) connections increased 30.6% to 2.5 million,” the company said.

With the indirect backing of Vodafone, XLink is set to be the biggest IoT player in Africa.

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