Intelligence Brief: The operator opportunity in IoT – not lost yet - Mobile World Live

Intelligence Brief: The operator opportunity in IoT – not lost yet

30 MAY 2018

The IoT has captured the public attention for better or worse. Yet, while news headlines focus on the billions and billions of consumer devices which will be connected (robots, cars, fridges, drones and so on) this is just one part of the story.

Purely connecting devices isn’t really what IoT is all about. Rather, it is about the data these devices generate – the insights derived from them and acted upon in order to create value and benefit consumers, enterprises and a wider society.

So now to answer the billion dollar question: how big is IoT?

As you’d expect from any well-hyped market, there are many, wide-ranging predictions out there. Industry observers might remember claims there will be 50 billion connected devices by 2020 (that is in two years from now…just saying). More recent forecasts point to one trillion IoT devices being built between 2017 and 2035. Of course, we have our own numbers: building on the 7.6 billion IoT connections (cellular and non-cellular) in 2017, we see the market growing more than threefold to reach 25 billion in 2025. That’s a long way from a trillion, but it’s an impressive number nonetheless.

The vast majority of these IoT devices – typically in indoor environments – are connected by unlicensed radio technologies, designed for short-range connectivity (Wi-Fi, Z-Wave and Zigbee). Licensed cellular IoT connections, though a minority of connections, will see massive growth – from 600 million connections in 2017 to 3.1 billion in 2025. For those keeping score, this translates into 12 per cent of connections being served by cellular networks. The bulk of those licensed cellular connections (60 per cent) will come from Mobile IoT, as we like to call NB-IoT and LTE-M.

While 25 billion might be a big, flashy number, what’s bigger than a billion? A trillion! And, come 2025, we see the IoT market as worth just that – $1.1 trillion.

Where will this money come from? Two-thirds will come from platforms, applications and services. Professional services will grab another 27 per cent. This leaves 5 per cent for connectivity, declining from 10 per cent today.

Depressing, right?  Well, it is if you’re a connectivity provider.

However, it’s not all doom and gloom for operators. There’s nothing stopping them from moving further up the value chain and beyond a connectivity sweet spot. In fact there are plenty of strategies and recent examples to demonstrate just that.

Enterprise pull-through: Operators have existing relationships with enterprises through the provision of communication services. These can be leveraged. In fact, integrated operators with fixed and mobile assets have sought to expand on their traditional role within the enterprise, leveraging existing sales channels to supplement communication services with broader ICT services, including cloud, security, data analytics and now IoT services. A number of operators have already expanded their IoT capabilities beyond connectivity as well. Recent weeks featured some hard-to-come-by reported figures on operators’ IoT revenue, which although aren’t impressive, indicate operators have strategies in place on how to gain a foothold in this fast growing market.

End-to-end solutions: Strengthened relationships with enterprise clients allow operators to upsell and bundle in services to play an end-to-end role in IoT service provision. In Q1 2018, KPN noted its IoT service offering, based upon its KPN Things platform, drove a 40 per cent year-on-year revenue increase. KPN’s platform combines IoT connectivity with additional services such as data and analytics, consultancy services and hardware. By offering modular building blocks and reusable solutions, and moving towards plug and play to avoid bespoke solutions, operators can easily scale up.

Mergers and acquisitions: A tried and trusted route to market is M&A to build E2E solutions. For example, Verizon’s acquisition spree started in 2012 when it bought Hughes Telematics. Recently, it resulted in the creation of a dedicated telematics unit, Verizon Connect, which also integrates its most recent acquisitions (Fleetmatics and Telogis) and positions Verizon as one of the leading telematics providers. Verizon reported $1.1 billion in IoT (including telematics) revenue in 2017, a 40 per cent year-on-year increase, equivalent to 1.2 percent of revenue, up from 0.5 per cent in 2013.

Partnerships: Another way to diversify IoT revenue is to form partnerships across the IoT value chain. During MWC 2018 Vodafone announced V-Home by Vodafone, a suite of services which combine the V by Vodafone consumer IoT system with Samsung’s Smart Things open platform and includes services such as connected car, security cameras and pet tracking. Vodafone plans to expand its current country and products coverage, and launch an online marketplace for developers. This approach allows operators to address segments in which they lack a deep understanding of the market and sell services together with partners.

IoT is viewed as a key growth story for operators. However, the opportunity will not just fall into their laps. They need to chase it.

– Sylwia Kechiche, principal analyst – IoT, GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

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