Verizon leaps into connected car biz with Hughes buy

The telecommunications provider will spend $612 million in cash to buy Hughes Telematics as it focuses on machine-to-machine connections in cars.

Verizon has agreed to buy Hughes Telematics for $612 million, bolstering its efforts to hook cars up with wireless service.

The New York telecommunications company said today that the all-cash deal would expand its ability to serve the fleet and automotive telematic industries. The deal is expected to close in the third quarter, and Verizon said it plans to retain the existing management team and its headquarters in Atlanta.

The connected devices -- or machine-to-machine -- business is increasingly seen as the next growth area for the wireless industry. The opportunity to connect cars with entertainment, safety, security, and maintenance services through the wireless network is an opportunity that the industry is eying particularly closely. Verizon Wireless already has a history of providing connected services via an agreement with OnStar and General Motors, but the Hughes deal allows the company to rev up that business.

The acquisition allows Verizon to expand its M2M presence not just in the automotive world, but in other areas as well, said John Stratton, president of Verizon's Enterprise Solutions group, in an interview with CNET. Hughes has a platform that allows for data and voice to be shared that can be applied to a number of other industries, including healthcare and energy management, he said.

The deal allows Verizon to get "deeper" into the M2M business, he said.

Hughes will operate as a separate unit under the newly created Enterprise Solutions group.

"We expect M2M and telematics to drive significant growth for Verizon and we're taking an important step forward to accelerate solutions that will unlock more opportunities for existing and new (Hughes) and Verizon customers," Stratton said.

The company earlier this year launched a group focused on developing telematics services that would better take advantage of Verizon's network and services.

Hughes already offers the ability to control certain features with a smartphone app, including locking and unlocking the car doors and turning on the headlights. Featured in Mercedes now is the ability to share the car's location with friends via the navigation system, making it easier to meet up. Hughes CEO Jeff Leddy said that feature would come to more cars, including Volkswagon.

Leddy hinted at even more features and controls to come from his company.

Updated at 8 a.m. PT: to include comments from Verizon and Hughes executives.