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ABC news posted an article today about mobile telecommunications provider Verizon (NYSE: VZ) announcing a deal to acquire Hughes Telematics for a price of $612 million. This price was more than double Hughes Telematics' over the counter closing price yesterday.

Hughes Telematics provides systems that integrate communications from different aspects of automobiles. An article from howstuffworks explains Hughes' system clearly. The system integrates features like roadside assistance, GPS systems and reminders for maintenance. One familiar example of a vehicle telematics system is General Motor's (NYSE: GM) OnStar system.

Verizon might be able to achieve some impressive innovations if it can further integrate its mobile services with Hughes' vehicle telematics system. Perhaps, Verizon could create a feature that starts users' cars automatically when their phones are close by. Verizon might also develop a feature that allows users to receive text message alerts about their oil status and tire pressure.

Overall, this acquisition opens a lot of doors for Verizon that could justify the premium paid. Verizon might be able to differentiate its service from competitors with new features, allowing the company to charge its customers a greater price. However, it could be only a matter of time before competitors follow with similar offerings.

Shares of Verizon traded around 1.1% or 46 cents lower for the day. Shares of Apollo Group (NASDAQ: APOL), an investor in Hughes Telematics', traded around 0.5% or 16 cents lower.

Disclosure: At the time of this writing, I did not own shares of any companies mentioned in this post.

Posted-In: News M&A Hot Tech Best of Benzinga


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