Vodafone Group plc Goes Head To Head With Quindell PLC

AIM upstart Quindell (LSE: QPP) has been the subject of much media attention during the past few months. The company has come under attack from all sides and, as a result, Quindell’s shares have plummeted. 

Nevertheless, despite speculation, Quindell continues to dominate the telematics market. For me, the company remains a great play on the increasing use of technology within the insurance sector for this reason alone

However, the success of Quindell’s telematics technology has not gone unnoticed and now FTSE 100 behemoth Vodafone (LSE:VOD) (NASADQ: VOD.US) is wading into the market.

Second to none quindell

Telematics technology shows insurers how safe their customers are, using black boxes or even smartphone apps to track their driving habits. The Association of British Insurers predicts that 10 million drivers will have telematics installed in their cars, or on their phones within the next five years.

And Quindell is well placed to ride this trend. Indeed, the company’s telematics technology and experience are second to none.

To prove this point, Quindell is actually in the process of undertaking the world’s largest telematics roll-out: a joint venture with the RAC. The joint venture will allow the RAC and Quindell to distribute the two companies’ “combined connected car capabilities” within both the UK and Canada.

Further, this international roll-out should be somewhat of a boon for Quindell. The company and its management believes that paying telematics subscribers will pay $5 to $15 per month for Quindell’s services. With a potential market of 10m customers within the UK alone, Quindell could soon be racking up more than $100m per annum in recurring telematics revenue.

Unfortunately, Quindell’s dominance within the telematics industry is now under threat, as Vodafone enters the market.  

Making wavesvod

Last week Vodafone acquired Cobra Automotive Technologies, an Italian telematics group. For Vodafone this was a strategic acquisition. As the company’s revenue from traditional sources (like voice and text) declines, the group is having to branch out to find new avenues for growth.

Part of the company’s expansion strategy is to build a business within the machine-to-machine communications market, as well as ‘the internet of things’ market. Telematics technology achieves both of these goals. 

Indeed, according to Vodafone’s director of machine-to-machine communications:

“The combination of Vodafone and Cobra will create a new global provider of connected car services…We plan to invest in the business to offer our automotive and insurance customers a full range of telematics services.”

So, it would seem that Vodafone’s ambitions are going to bring it into direct competition with Quindell. What’s more, Vodafone is not the only international company looking to dominate the telematics market.

Not the only one

Multinational insurance groups such as Generali have begun to test telematics products for the insurance market. Additionally, Nokia is working on the development of real-time fleet management software and telematics devices for logistics companies. 

All in all, it would appear that while Quindell dominates the telematics market at present, the company is going to have to work hard to maintain its dominance over the sector. 

Other opportunities 

Quindell's days may be numbered but there are other opportunities out there. The key, when searching for growth stocks, is looking under the radar. You want to get on board while the company is still an unknown quantity.

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Rupert does not own any share mentioned within this article.