eSIM in the Market
Embedded SIM technology has entered the mobile landscape at a time of significant change for the industry. As well as potentially opening up many new windows of opportunity, eSIM is also likely to accelerate trends that are already playing out across global mobile markets.
Telna’s Gregory Gundelfinger told us: “eSIM has opened doors to every player in the telco value chain. MNOs and MVNOs are going beyond connectivity. They are evolving to supply solutions in support of IoT deployments per vertical market.
“System integrators and OEMs are evolving as well, by integrating e-SIM technology in their devices and adding global connectivity to their offerings. All of them are leading the way in adoption of e-SIM.
“We have seen innovative changes in multiple industries such as broadcasting, maritime and automotive thanks to the benefits offered by eSIM. All IoT sensors are being simplified now as they no longer require removable SIM cards. Due to the better pricing and flexibility the eSIM offers, the cost per acquisition of customers is falling drastically. Consumers benefit from the freedom to access multiple cellular networks without SIM cards. They can add global or local cellular data plans instantly just by scanning a QR Code.”
In consumer markets at least, there has long been a school of thought that operators do not view eSIM as serving their best interests, as it loosens their grip on a valuable stake in the mobile ecosystem. Digital provisioning of network services will make it easier for other players, such as the OEMs and system integrators Gundelfinger alludes to, to offer connectivity directly, posing a new competitive challenge to operators.
Similarly, the option for customers to switch provider simply by scanning a QR code or choosing a new plan through a mobile service app store will erode customer loyalty, further intensifying competition and increasing churn.
But mobile operators have had to contend with new players from outside the telco industry muscling in on their territory for years, especially as the MVNO model has grown in significance. And customers have tired of the long contract lock-ins typical of traditional SIM + handset postpaid deals long before eSIM had taken effect.
According to one survey in the UK, just 5% of phone owners made use of short-term, SIM-only contracts in 2010. By 2017, this had risen to 27%, and is predicted to reach 54% by 2021.
Just 5% of phone owners made use of short-term, SIM-only contracts in 2010. By 2017, this had risen to 27%, and is predicted to reach 54% by 2021.
Consumers are already looking for greater flexibility and value from their mobile packages. Rather than posing a threat, eSIM can instead be viewed as an opportunity for operators to respond to this changing marking dynamic, to offer better plans and services, to reach users in new, more direct ways (i.e. through an app store or via phone settings) and to focus on differentiation.
It’s a similar story with roaming charges. eSIM will not trash operator revenues from international roaming by making it easier for phone owners to connect to a local service on arrival in a new country.
Roaming revenues have already been in sharp decline. On the back of the EU’s decision to ban roaming charges throughout its 28 member states in 2017, Juniper Research estimated that global earnings from roaming took an 11% hit. But a year later, the same analysts were pointing to another effect of the ban on roaming charges - a drastic reduction in ‘silent roaming’, the practice of people not using their phones abroad to avoid high charges.
The EU's ban on roaming charges saw a drastic reduction in 'silent roaming', Juniper Research reports.
Juniper suggested that the increase in data use as people traveled offset the direct fall in revenues from the loss of roaming charges. Again, in this context, eSIM can be seen as opening the door to lucrative new opportunities for operators who are prepared to develop the right kind of international plans for the consumer and business travel markets.
In terms of where the drive for eSIM adoption and innovation is coming from, Dialog’s Amila Saputhanthri says all eyes will be on the Android OEMs in the coming months.
“Apple is the leader in the consumer domain at the moment with their eSIM capable iPhone series,” he said. “Android smartphones are also expected to adopt the technology. But their delay is having a negative impact on consumer eSIM adoption.”
On the eSIM technology supply side, the main players can be divided into two camps - those developing the eUICC hardware chipsets, the likes of Gemalto, G&D, Workz and Infineon, and those delivering application-based solutions to support e-SIM deployment, including companies such as KORE, Telna, ARM and Amdocs.
According to Counterpoint Research, the key drivers of e-SIM adoption from IoT end users’ perspective will be the logistical benefits and lower maintenance costs involved in provisioning large numbers of devices over a dispersed geographic area.
It predicts the automotive industry will continue to be at the forefront of adoption due to the roaming benefits, especially for sectors such as fleet management. But it also anticipates all device OEMs will start to see the benefit of not having to install different chipsets for different countries, and also the fact that the e-SIM is much smaller than a removable SIM slot, allowing devices to shrink.
Overall, Counterpoint expects adoption rates from IoT / M2M to exceed consumer use. But Telus’s Andrei Ivanov does not believe this is the case at present:
