Vodafone has agreed to buy an Italian firm specialising in car security, telecommunications and vehicle tracking for the automotive and insurance industries.
The €145 (£116m) deal for Cobra Automotive Technologies is the latest evidence that telecoms and technology firms are looking to tap an expected surge in demand for machine-to-machine (M2M) communications.
Only about 10 per cent of vehicles currently have built-in connectivity to the internet, but that number is expected to rise to more than 90 per cent by 2020, according to British consulting firm Machina Research, as manufacturers strive to add new features such as streaming music, playing audio books, navigation aids and security improvements to their vehicles.
"The combination of Vodafone and Cobra will create a new global provider of connected car services," said Erik Brenneis, Director of M2M at Vodafone. "We plan to invest in the business to offer our automotive and insurance customers a full range of telematics services."
Other mobile operators are also investing in the Internet of Things technology as they look for new sources of income as stiff competition and regulation slow growth in their core market.
Verizon Communications, the largest US wireless carrier, spent $612m (£360m) in cash in 2012 to buy Hughes Telematics, which sells products including GPS tracking, communications and safety features in cars.
Technology companies are also increasingly turning their attention to connected cars, with Apple unveiling its CarPlay technology earlier this year, which integrates its iPhone with a car and allows drivers to use certain apps on the dashboard with Siri, the voice-enabled assistant, to view maps, make calls, listen to music and send and receive text messages.
Enders analyst James Barford said mobile operators were still undecided whether they wanted to provide just the network capabilities for M2M communications or actually compete with IT providers to manage the services themselves.
"Although there is scope to have a very large number of connected devices in due course, typically the volume of traffic that goes over them is pretty low because it's just logistics data," he said. "Increasingly more of the value is in the service wrapped around it. This is a small move towards owning more of the services."
The GSMA, the trade body for mobile operators, estimates there were 195 million M2M connections in 2013, with the highest usage seen in the car and consumer electronics industries.
Vodafone said it would offer €1.49 a share to buyout shareholders in Italian group, around 50 per cent higher than its previous closing price and Cobra's majority shareholder Intek Group said in a statement it had agreed to tender its 51.4 per cent stake in Cobra for €74.3m.