Private-equity group Inverness Graham Investments (Newtown Square, USA) has taken a majority stake in RACO Wireless (Cincinnati, USA) as the M2M specialist reveals its acquisition intentions and predicts a “significant surge” in the growth of the market.
A long-standing partner of T-Mobile USA (Bellevue, USA), RACO Wireless has tripled its revenues annually over the last two years after T-Mobile effectively outsourced its entire M2M business to the company. Under that deal, most of the operator’s M2M management left to join RACO, including John Horn, the current president of RACO Wireless.
Speaking to M2M Zone at this week’s CTIA show in San Diego, Horn predicts an imminent wave of consolidation and says the injection of capital by Inverness Graham will allow RACO Wireless to play a major role in that process. “It’s going to take us to a whole new level because it gives us access to funds for multiple acquisitions to bring in more customers, more technology and services that we aren’t offering today,” he says.
The management structure of RACO Wireless and its relationship with T-Mobile will be unaffected by the recapitalization, but Horn says it could boost the company’s revenue growth rate above its current level of about 300%. “There will obviously come a point when we can’t keep that growth rate up but I bet we take a disproportionate share of the growth that’s going on in the market,” he says. “We’ll see what happens when we announce acquisitions in the not-too-distant future.”
RACO Wireless attributes its phenomenal success over the last few years to its efficiency and flexibility. Horn claims to have reduced the time it takes to make a client company’s M2M services operational from about a year, when he first started out in M2M at T-Mobile, to as little as a day.
The arrangement with T-Mobile is not an exclusive one, and RACO Wireless recently announced a tie-up with EE, the UK joint venture between France Telecom (Paris, France) and T-Mobile owner Deutsche Telekom (Bonn, Germany), to provide multi-IMSI SIMs. Horn sounds confident about forming partnerships with other operators soon. “We’re talking to a couple of global players that we’ll be bringing on board shortly,” he says.
Even so, while expansion outside the US is progressing well, T-Mobile remains the only big operator in the US to have formed such a close relationship with RACO Wireless.
Horn says the corporate culture at AT&T (Dallas, USA) and Verizon (New York, USA) is a barrier to such a dramatic move and reckons T-Mobile’s chief rivals will be unable to match the RACO Wireless proposition in future. “AT&T thinks it doesn’t have to change because of the strength of its brand, even though we’re being very effective against it,” he says. “No one can do what we do. No one can create new rate plans and new business models in just 24 hours.”
Discussing the mooted T-Mobile takeover of MetroPCS, Horn sounds ebullient. “We’re super-excited about it,” he says. “MetroPCS will give T-Mobile much more 2G spectrum, which helps given that T-Mobile has made a long-term commitment to 2G for M2M, and the deal will create a stronger competitor to AT&T, Verizon and Sprint, which is great for the market.”
Longer term, Horn believes the migration to LTE will lead to more standardization, without which many analysts think M2M will struggle to become a mass-market opportunity. But he does not believe LTE will have much M2M relevance for another five years. “The module pricing needs to fall and the overall footprint needs to grow,” he says. “Without those two things, LTE is not going to be a viable M2M alternative.”