News Column

GM Should Get a Bump From Partnership With AT&T

May 3, 2013

General Motors CEO Dan Akerson said the automaker will receive $20 for every customer who activates an AT&T wifi account under a partnership between the two companies.

Akerson said on a conference call Thursday that the AT&T partnership is GM's next step to transform its OnStar unit "from a safety and security" service "to one that's much more feature-rich, where we get some real money from it."

The automaker in February signed a deal with AT&T to install the carrier's 4G LTE service in all GM vehicles, enabling drivers and passengers to access digital information more quickly. The deal would make GM the first automaker to offer 4G services in its vehicles.

In addition to the $20 GM will get for every vehicle owner who activates AT&T's 4G service, the company also gets a percentage of the wireless fees paid to AT&T. GM and AT&T haven't revealed the exact revenue split.

OnStar subscribers currently pay a monthly fee for access to navigation and safety services. The 6 million OnStar subscribers in the U.S. and Canada pay an average of $199 to $299 a year for the service, giving the unit estimated revenue of about $1.5 billion, according to Citi investment reseachers. Verizon provided OnStar connectivity at 2G speeds, but GM is shifting to AT&T for new models.

"We've never been properly compensated, in my opinion having come out of this industry, in terms of what we provide to the carriers," said Akerson, who was a telecommunications executive before joining GM. His predecessor as GM CEO was Ed Whitacre, who also retired as CEO of AT&T.

GM Vice Chairman Stephen Girsky has said the service will be available in most 2015 models in the U.S. and Canada. Eventually it plans to introduce wireless connectivity in other countries after signing deals with carriers in those markets.

Citi analyst Itay Michaeli estimated last month that the OnStar unit could be worth between $6 billion and $7 billion. He told investors that the 4G service is a catalyst for "not only improvements within current services but new concepts," including vehicle-to-vehicle communication.

"We're not in the wireless business, but we're facilitating the customer and we're facilitating content," Akerson said. "There's a whole new frontier for us that I think will have margins that will typically exceed what you see in the manufacturing business."

Akerson envisioned a day when the automaker's touch-screen infotainment systems could have sponsorships -- "brought to you by Allstate," he cited as an example -- to generate more cash.


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Source: Copyright Detroit Free Press (MI) 2013

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