With Google Inc.’s Aug. 15 announcement of an agreement to acquire Motorola Mobility Holdings, the search giant potentially has turbocharged its mobile-payment plans.
Where previously the Google Wallet was only set up to work with the Sprint Nexus S phone (most other telecommunication providers have joined the Isis mobile-payment consortium), Google now will be able to design, manufacture and distribute its own phones, presumably with Google Wallet software and mobile-payment technology preloaded
Google representatives were not immediately available for comment.
The company already has gotten Citigroup, MasterCard Worldwide, Sprint, First Data Corp. and 16 merchants to partner on its Google Wallet mobile-payment scheme, which is still in test mode but will support contactless payments from Near Field Communication-equipped phones.
Google says it will acquire Motorola Mobility for $12.5 billion, a premium of 63% from the closing price of Motorola shares on Aug. 12. The choice is logical for Google; all Motorola phones use the Google-designed Android operating system. Post acquisition, the Android operating system will remain open, and Google will run Motorola as a separate business, Google says.
Some150 million Android devices exist in the world today.
This acquisition gives Google a powerful platform with which to launch mobile software, but it could dampen enthusiasm for the Android operating system among other handset manufacturers and telcos.
In his blog about the purchase this morning, Google CEO Larry Page flashed a little paranoia. “We recently explained how companies, including Microsoft and Apple, are banding together in anticompetitive patent attacks on Android,” he wrote. “The U.S. Department of Justice had to intervene in the results of one recent patent auction to ‘protect competition and innovation in the open source software community,’ and it is currently looking into the results of the Nortel auction. Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anticompetitive threats from Microsoft, Apple and other companies.”
The Google Wallet app works with a Nexus S NFC-enabled phone–meaning a phone equipped with technology that can send and receive data wirelessly within a range of a few centimeters–and MasterCard PayPass terminals, which some 140,000 merchants use. When the Google Wallet publicly launches on the Sprint network later this summer, customers who have a Citi-issued MasterCard or a Google prepaid card that they link to the downloaded Google Wallet app will be able to tap their mobile phone to pay for something at a participating merchant’s terminal.
Although Google, because of its strong brand and merchant relationships, is a formidable player in the emerging mobile-payment market, the company says its business model is based not on payments or financial services but on advertising and coupons it sells to merchants.
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