Presentation for Cambridge Wireless

Future of M2M
4 December 2013
Tom Rebbeck

RefNo | Commercial in confidence
2

Analysys Mason has been active in M2M, working for operators, vendors,
regulators and governments…

RefNo | Commercial ...
3

Capability and experience

… as well as regularly publishing reports as part of our IoT and M2M
solutions research prog...
4

RefNo | Commercial in confidence
5

M2M can reduce costs and make new ideas possible
The Social Bicycles bike hire scheme

RefNo | Commercial in confidence
6

M2M forecasts have been nothing if not bullish

Ericsson, February 2011; http://www.ericsson.com/res/docs/whitepapers/w...
0%

-20%

RefNo | Commercial in confidence

Average…

Italy (EC)

Denmark (TDC)

Denmark (EC)

Denmark (ITST)

USA (AT&T…
...
8

Most Western European countries have less than 1 million M2M
connections
M2M connections by country, million, Western E...
9

Per capita, this corresponds to one M2M connection for every 13 people
M2M connections per capita, 2012 (Source: Analys...
10

The drivers for M2M remain strong
▪

From a demand side:
– With low growth rates, economic actors are
looking to reduc...
11

We maintain our belief in the long term prospects for M2M
M2M cellular connections (million) Western Europe, 2011-2018...
12

The value of connections will grow by almost four times between 2012 and
2018…
M2M connectivity revenues, 2011-2018 (S...
13

But will remain a small portion of an operator’s overall connectivity
revenues…
M2M connectivity revenues, relative to...
14

Mainly due to low ARPUs relative to the handset business [1/2]
M2M connectivity revenues and monthly M2M ARPU, 2011-20...
15

Mainly due to low ARPUs relative to the handset business [2/2]
M2M connectivity revenues and monthly M2M and handset A...
16

Much of the value is concentrated in a small number of vertical markets
(and a small number of contracts in those mark...
17

Operators are looking at a number of vertical markets…
Vertical sectors

Operator
A

Operator
B

Operator
C

Operator
...
18

… but focus is on firmly on utilities and automotive & transport, at least
with the bigger operators
Vertical sectors
...
19

We believe that operators need five elements to make a successful M2M
business
Elements of a successful M2M business [...
20

MNOs and MVNOs can play multiple roles in the M2M value chain
M2M operator categories based on role
in the M2M value c...
21

Examples and characteristics of M2M operators, and a further description
of the relationship between operator and ente...
22

Case study: AT&T’s M2M connectivity could be embedded in millions of
General Electric’s industrial components
AT&T’s r...
23

Key messages

▪

Companies (and investors) interested in M2M need to take a long view

▪

The drivers for long term gr...
24

Contact details
Tom Rebbeck
Research Director
tom.rebbeck@analysysmason.com

Boston
Tel: +1 202 331 3080
Fax: +1 202 3...
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Analysys Mason M2M presentation for Cambridge Wireless event

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A presentation on the future prospects for machine to machine (M2M) services, including:
market sizing and forecasting of revenues and connections
a discussion of market drivers
forecasts by vertical market
a discussion of sales channels for M2M
case studies

Published in: Technology, Business
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Analysys Mason M2M presentation for Cambridge Wireless event

  1. 1. Presentation for Cambridge Wireless Future of M2M 4 December 2013 Tom Rebbeck RefNo | Commercial in confidence
  2. 2. 2 Analysys Mason has been active in M2M, working for operators, vendors, regulators and governments… RefNo | Commercial in confidence
  3. 3. 3 Capability and experience … as well as regularly publishing reports as part of our IoT and M2M solutions research programme RefNo | Commercial in confidence Source: Machine-to-machine traffic worldwide: forecasts and analysis 2011–2016, Analysys Mason, 2011
  4. 4. 4 RefNo | Commercial in confidence
  5. 5. 5 M2M can reduce costs and make new ideas possible The Social Bicycles bike hire scheme RefNo | Commercial in confidence
  6. 6. 6 M2M forecasts have been nothing if not bullish Ericsson, February 2011; http://www.ericsson.com/res/docs/whitepapers/wp-50-billions.pdf RefNo | Commercial in confidence Other forecasts for 2020 include: IDC 212 billion devices; ABI 30 billion; Cisco 50 billion; Gartner 26 billion
  7. 7. 0% -20% RefNo | Commercial in confidence Average… Italy (EC) Denmark (TDC) Denmark (EC) Denmark (ITST) USA (AT&T… Spain (CMT) Netherlands… Slovakia (EC) Spain (EC) Netherlands (EC) Lithuania (RRT) South Africa… Norway (NPT) Netherlands… Poland (EC) Germany (EC) Belgium (Mobistar… Sweden (EC) UK (EC) Sweden (PTS) Cyprus (EC) Belgium (EC) Ireland (EC) Lithuania (EC) France (EC) Malta (EC) France (Arcep) Estonia (EC) Latvia (EC) Bulgaria (EC) Czech Republic… Annual growth rate 7 Growth has been rapid, but not stellar Annual growth in M2M connections by country, most recent published data (2012/2013) 100% 217% 80% 60% 40% 20%
  8. 8. 8 Most Western European countries have less than 1 million M2M connections M2M connections by country, million, Western Europe, 2012 (Source: Analysys Mason, European Commission) 8 7 6 5 4 3 2 1 RefNo | Commercial in confidence Greece Austria Portugal Ireland Switzerland Finland Denmark Belgium Norway Netherlands Germany Spain Sweden UK France Italy -
  9. 9. 9 Per capita, this corresponds to one M2M connection for every 13 people M2M connections per capita, 2012 (Source: Analysys Mason, European Commission) 0.45 Cellular connections per capita 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 RefNo | Commercial in confidence Greece Austria Portugal Germany Switzerland Spain Netherlands UK France Western Europe Belgium Ireland Finland Italy Denmark Norway Sweden -
  10. 10. 10 The drivers for M2M remain strong ▪ From a demand side: – With low growth rates, economic actors are looking to reduce costs/increase efficiency Growth in world output, developed and emerging economies, 2011-2014 – Tyler Cowen in the “Great Stagnation” argues that the low hanging fruit of growth have been picked and new sources are needed ▪ From a supply side: – The cost elements are significantly lower ▪ of network ▪ of devices RefNo | Commercial in confidence Source: World Economic Outlook Update, IMF, 23 Jan, 2013
  11. 11. 11 We maintain our belief in the long term prospects for M2M M2M cellular connections (million) Western Europe, 2011-2018 (Source: Analysys Mason) 200 180 160 140 120 100 80 60 40 20 0 2011 RefNo | Commercial in confidence 2012 2013 2014 2015 2016 2017 2018
  12. 12. 12 The value of connections will grow by almost four times between 2012 and 2018… M2M connectivity revenues, 2011-2018 (Source: Analysys Mason 2013) 5.0 4.5 4.0 EUR (billion) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2011 RefNo | Commercial in confidence 2012 2013 2014 2015 2016 2017 2018
  13. 13. 13 But will remain a small portion of an operator’s overall connectivity revenues… M2M connectivity revenues, relative to handset revenues, 2011-2018 (Source: Analysys Mason 2013) 4.5% 4.0 4.0% 3.5 3.5% 3.0 3.0% 2.5 2.5% 2.0 2.0% 1.5 1.5% 1.0 1.0% 0.5 0.5% 0.0 0.0% 2011 RefNo | Commercial in confidence 2012 2013 2014 2015 2016 2017 2018 M2M as % of handset revenues 5.0% 4.5 EUR (billion) 5.0
  14. 14. 14 Mainly due to low ARPUs relative to the handset business [1/2] M2M connectivity revenues and monthly M2M ARPU, 2011-2018 (Source: Analysys Mason 2013) 5.0 25 4.5 4.0 20 3.0 15 2.5 2.0 10 1.5 1.0 5 0.5 0.0 0 2011 RefNo | Commercial in confidence 2012 2013 2014 2015 2016 2017 2018 EUR (monthly) EUR (billion) 3.5
  15. 15. 15 Mainly due to low ARPUs relative to the handset business [2/2] M2M connectivity revenues and monthly M2M and handset ARPU, 2011-2018 (Source: Analysys Mason 2013) 5.0 25 4.5 4.0 20 3.0 15 2.5 2.0 10 1.5 1.0 5 0.5 0.0 0 2011 RefNo | Commercial in confidence 2012 2013 2014 2015 2016 2017 2018 EUR (monthly) EUR (billion) 3.5
  16. 16. 16 Much of the value is concentrated in a small number of vertical markets (and a small number of contracts in those markets) M2M connections by vertical market (Source: Analysys Mason 2013) 100% 90% 80% Industrial 70% Financial services 60% Government Public sector 50% Retail Healthcare 40% Security 30% Automotive and transport Utilities 20% 10% 0% 2013 RefNo | Commercial in confidence 2014 2015 2016 2017 2018
  17. 17. 17 Operators are looking at a number of vertical markets… Vertical sectors Operator A Operator B Operator C Operator D Utilities Automotive and transport Healthcare Security Asset management Consumer electronics ePOS Track and trace Legend: RefNo | Commercial in confidence Vertical where the operators is currently focused on Operator E Operator F Operator G Operator H
  18. 18. 18 … but focus is on firmly on utilities and automotive & transport, at least with the bigger operators Vertical sectors Operator A Operator B Operator C Operator D Utilities Automotive and transport Healthcare Security Asset management Consumer electronics ePOS Track and trace Legend: RefNo | Commercial in confidence Vertical from where the operator expects stronger growth Operator E Operator F Operator G Operator H
  19. 19. 19 We believe that operators need five elements to make a successful M2M business Elements of a successful M2M business [Source: Analysys Mason, 2013] Solution based business model Dedicated M2M team and infrastructure Secure network with device certification processes Communication rich offering with value-added services Credible partnerships RefNo | Commercial in confidence
  20. 20. 20 MNOs and MVNOs can play multiple roles in the M2M value chain M2M operator categories based on role in the M2M value chain Components of the M2M value chain Categories MNO PMVNO AMVNO EMVNO Connectivity M2M platform Managed services System integration Customer support Application Equipment Key Value chain requirements for MNOs and MVNOs Sometimes Required Often provided provided RefNo | Commercial in confidence  P-MVNO: An M2M platform-MVNO’s (P-MVNO) main offer is a connectivity platform to facilitate the management of M2M connections on a network.  A-MVNO: An M2M application-MVNO’s (A-MVNO) main offer is an M2M application and a customer support solution for specific industry verticals or M2M applications.  E-MVNO: An M2M equipment-MVNO’s (E-MVNO) main offer is a piece of equipment (e.g., vending machine, smart meter or diabetes monitoring device) equipped with a connectivity module.
  21. 21. 21 Examples and characteristics of M2M operators, and a further description of the relationship between operator and enterprise customers Scenarios for the role of different types of player in the M2M value chain Categories MNO P-MVNO A-MVNO E-MVNO Examples of operators AT&T, France Telecom, Sprint, TeliaSonera, Vodafone Arkessa, Mobiquithings, SimService, Telenor Connexion, Transatel Solutions OnAsset, Digi International, Mobius Networks Number of SIMs per contract More than 10 000 Depends on type of PMVNO More than 100 and less than 10 000 More than 10 000 Verticalspecific? No Yes/No Yes Yes Description of relationship between operator and customer MNO owns relationship with the enterprise buyer P-MVNO owns relationship with enterprise buyer, or will assume a subcontractor or vendor partner role In most cases, the AMVNO owns the client relationship with the enterprise RefNo | Commercial in confidence Landis+Gyr, TomTom In many cases, EMVNOs own the relationship with the enterprise
  22. 22. 22 Case study: AT&T’s M2M connectivity could be embedded in millions of General Electric’s industrial components AT&T’s role in supporting GE’s Predix platform People Machines Network Server Predix Experience Predix Machine Predix Net Predix Server AT&T will help GE to source and certify M2M devices AT&T will provide multi-modal connectivity to include fixed, mobile and satellite, leveraging its US network and worldwide SIM. AT&T may provide some of the cloud and security capabilities (via NetBond if data is going back to a private cloud) AT&T is not involved in this aspect of the Predix platform Key Component of GE’s Predix platform AT&T’s supporting role RefNo | Commercial in confidence
  23. 23. 23 Key messages ▪ Companies (and investors) interested in M2M need to take a long view ▪ The drivers for long term growth in M2M remain strong ▪ Revenues from connectivity alone will be low and may not be enough for operators RefNo | Commercial in confidence
  24. 24. 24 Contact details Tom Rebbeck Research Director tom.rebbeck@analysysmason.com Boston Tel: +1 202 331 3080 Fax: +1 202 331 3083 boston@analysysmason.com Cambridge Tel: +44 (0)845 600 5244 Fax: +44 (0)1223 460866 cambridge@analysysmason.com Dubai Tel: +971 (0)4 446 7473 Fax: +971 (0)4 446 9827 dubai@analysysmason.com Dublin Tel: +353 (0)1 602 4755 Fax: +353 (0)1 602 4777 dublin@analysysmason.com Edinburgh Tel: +44 (0)845 600 5244 Fax: +44 (0)131 443 9944 edinburgh@analysysmason.com Johannesburg Tel: +27 11 666 4786 Fax: +27 11 666 4788 johannesburg@analysysmason.com 0)1223 460866 RefNo | Commercial in confidence London Tel: +44 (0)845 600 5244 Fax: +44 (0)20 7395 9001 london@analysysmason.com Madrid Tel: +34 91 399 5016 Fax: +34 91 451 8071 madrid@analysysmason.com Manchester Tel: +44 (0)845 600 5244 Fax: +44 (0)161 877 7810 manchester@analysysmason.com Milan Tel: +39 02 76 31 88 34 Fax: +39 02 36 50 45 50 milan@analysysmason.com New Delhi Tel: +91 124 4501860 newdelhi@analysysmason.com Paris Tel: +33 (0)1 72 71 96 96 Fax: +33 (0)1 72 71 96 97 paris@analysysmason.com Singapore Tel: +65 6493 6038 Fax: +65 6720 6038 singapore@analysysmason.com
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