Mobile operator revenues from the Internet of Things (IoT) reached €11 billion in 2016, according to analyst firm Berg Insight.
Some of the leading global telecom network operators have reported IoT revenues on a regular basis.
In Q3 2016, Vodafone and Verizon generated around €200 million each in direct sales from IoT connectivity, solutions and applications.
Next year, a handful of operator groups will generate more than €1 billion each from the Internet of Things.
The combined share of the installed base of cellular M2M devices at Verizon, Vodafone Group and Telefonica is 15–20 percent.
Verizon, Vodafone and Telefonica reported an aggregate sum of nearly €1.4 billion in M2M / IoT revenues for the first nine months of 2016.
The figure suggests that the total yearly revenue contribution from M2M/IoT to the world’s mobile operators was approximately €11 billion in 2016. The indirect value was higher as many telecom operators have sizable system integration businesses which are key partners in customer IoT projects.
IoT device growth
The number of Internet of Things devices, sensors and actuators will reach over 46 billion in 2021 with 200 percent increase from 2016. Growth driver will be the reduction in the unit costs of hardware. Juniper forecasts that it will average close to $1. Industrial and public services will post the highest growth over the forecast period, averaging over 24 percent annually.
“Wireless connectivity is now near ubiquitous and there will be half a billion cellular IoT connections in 2017, but revenues are still relatively small,” said Tobias Ryberg, senior analyst, Berg Insight and author of the report.
The global monthly ARPU for cellular IoT devices was €1.40 in 2016. There were significant variations between different regions, from less than €0.30 in some emerging economies to over €3 in less competitive developed markets, said Berg Insight.
Identifying and implementing strategies for moving up in the value-chain is the biggest challenge ahead for mobile operators in IoT. For large mobile operators in vehicle producing countries, the automotive market has been a natural starting point.
Leading players like AT&T, Vodafone, Verizon and Deutsche Telekom have established dedicated practices to support automotive OEMs in the development of connected car solutions for the global market.
Verizon and Vodafone made strategic acquisitions of telematics businesses to accelerate their strategies, while AT&T and Deutsche Telekom developed their platforms in close cooperation with customers.
An alternative strategy for smaller mobile operators is to develop a broad ecosystem and sell IoT solutions from preferred partners through existing B2B channels.
By partnering with IoT solution providers, telecom operators can make sure that they offer the best products available to their enterprise customers without much investment in product development.
Pre-packaged solutions from ecosystem partners fit well into a product portfolio that range from wholesale network connectivity for application developers to bespoke solutions that meet more complex and customer-specific application needs.
Cellular M2M subscribers
Berg Insight estimates that the number of cellular M2M subscribers increased 30 percent in 2016 to 398.1 million – corresponding to around 5 percent of all mobile subscribers. Until 2021, the number of cellular M2M subscribers is forecast to grow at a compound annual growth rate (CAGR) of 26.2 percent to 1,274.8 million at the end of the period.
During the same period, cellular M2M network revenues are forecasted to grow at a compound annual growth rate (CAGR) of 26 percent from €6.7 billion in 2015 to approximately €21.4 billion in 2021.
Meanwhile the monthly ARPU is expected to remain stable at around €1.4. Europe and North America are the most advanced regions in terms of adoption of cellular M2M. At the end of 2016, the number of M2M subscribers per 1,000 people was approaching 200.
Europe was the larger of the two with an estimated 95.5 million M2M subscribers in Q2-2016, compared to North America’s 62.5 million. Japan and South Korea are behind the Western countries in the adoption of cellular M2M with 103 and 85 connections per 1,000 people respectively.
5G growth
Meanwhile, the latest edition of the Ericsson Ericsson Mobility Report forecasts that there will be 550 million 5G subscriptions in 2022. A quarter of all mobile subscriptions in North America will be for 5G in 2022.
“Almost 90 percent of smartphone subscriptions are on 3G and 4G networks today and standardized 5G networks are expected to be available in 2020. 5G will accelerate the digital transformation in many industries, enabling new use cases in areas such as IoT, automation, transport and big data,” said Ulf Ewaldsson, chief strategy and technology officer of Ericsson.
Baburajan K
editor@telecomlead.com