Unless you’ve been living under a rock for the past year, you’ll no doubt be aware of Ericsson’s forecast of 50 billion connected devices by 2020. That’s almost ten times today’s levels; but it doesn’t mean we’ll all be carrying around ten extra devices. Ericsson’s prediction is based on the premise that there will be many more connected ‘things’ than connected people. Its conclusion appears to be that, while the machine-to-machine (M2M) market is still very much a niche interest, it will be the industry’s main growth driver over the next decade or so. Precisely how operator business models will evolve to support this new market opportunity is a hot topic right now – but Ericsson’s acquisition last week of Telenor’s in-house M2M business gives an indication of which direction the industry is moving.

Financial terms were not disclosed, but there was plenty of other intriguing detail. Ericsson is to acquire the unit – known as Telenor Connexion – and merge it with its own recently-announced Device Connection Platform. Telenor will then become the first customer on the Ericsson platform, presumably bringing with it existing Telenor M2M clients such as Volvo, Daimler, Hitachi and Securitas Direct. Ericsson then plans to use the beefed-up platform to offer “tailored M2M services for enterprise customers” on a managed service basis.

Though a small acquisition by some measures – a mere 11 Telenor employees will transfer to Ericsson as a result – the deal reflects Ericsson’s desire to become a heavyweight M2M player and has major implications for the nascent M2M sector. “Ericsson’s acquisition provides service providers – and not only telecoms players – with an alternative way to achieve faster time to market with regards to deployment of M2M communication services,” said Frost & Sullivan analyst Yiru Zhong last week. “As such, we see a potential for Ericsson to disrupt traditional M2M players by opening up possibilities for new types of service providers.”

The disruptive influence of a major name such as Ericsson entering the market certainly seems to have rattled Jasper Wireless, currently one of the world’s largest M2M platforms. In a statement in direct response to the Ericsson/Telenor deal, Jasper argued that success in this space is not just about “operator technology” but about nurturing “a deep understanding of the enterprise OEM that is seeking to build and scale a connected device business across many operators and countries.” Ericsson has the scale and can shift some boxes, Jasper appears to be saying, but does it have the contacts and the heritage?

Whether operators opt for Jasper or Ericsson will be an interesting one to watch, but what’s becoming clear is that operators don’t want to go it alone. If providing proprietary M2M solutions to multinational companies is the big ticket play in this space, then it’s something even the largest multi-market operator will struggle to execute without resorting to complex roaming agreements. Plugging into a global platform therefore seems a far more attractive route to market. Indeed, this appears to have been Telenor’s thinking in selling to Ericsson. Telenor Connexion can boast some high-profile customer wins but could it scale the business beyond its Nordic base? Maybe it was the right time to sell.

There are plenty of other operators looking to tap into the M2M opportunity, and many may now decide to go down the ‘managed services’ route (an area traditionally dominated by Ericsson). If the Ericsson/Telenor deal does trigger a wave of consolidation within the nascent industry then it’s likely that those 50 billion connections by 2020 will be supported by just a handful of global infrastructure players.

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members.