This document discusses mobile carrier trends in the machine-to-machine (M2M) market. It notes that the M2M market is growing significantly and expanding into new verticals like consumer electronics and healthcare. Operators are offering various business models for M2M connectivity including traditional wholesale plans, bundled connectivity, and application-specific plans. The value of M2M connectivity is shifting from the cost of data to value-added services like quality of service guarantees and managed services. The M2M market is also becoming more international in scope.

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Marceli Passoni
Senior Analyst, Latin America
Informa Telecoms & Media
15/08/2012
11/09/2009

4. Agenda
1. Introduction
2. Market growth
3. M2M SIMs
4. M2M market drivers and business models for operators
5. Market trends
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5. 1.Introduction
It’s all about sensors - How many different things can you find to monitor?
Generic M2M application process:
Source: Informa Telecoms & Media
M2M communications enable:
1. The connection of remote or distributed endpoints to a centralized back office data
aggregation point.
2. The transformation of an automated process of data collection into an application with
a tangible dollar value.

6. 1. M2M value chain
The M2M value chain – is comprised of a number of roles organized into four key areas.
The activities of an individual company might cause them to occupy one or more.
The M2M value chain:
Source: Informa Telecoms & Media
A mobile operator may be providing: connectivity only (historical role); or connectivity and
application-specific managed M2M service provision (the emerging role); or it may act as
an end-to-end service integrator for an enterprise (less common).

7. 1. Defining M2M – an evolving definition
• Definitions:
1. Traditional: Fully-automated between
machines, no human interaction
2. Current: Includes initiation by human
when connectivity is invisible enabler
3. Future: Any XML data (i.e. non-voice
IP data)?
4. Jamie Moss: Who „owns‟ the
subscription? Who purchased,
manages and pays for it? Where it is
a manufacturer, it is M2M.
Source: Orange Business Services
• Orange Business Services - 3 tiers: „M2M‟,
„connected society‟, „virtual things‟

8. 2. Market growth trends
• Informa M2M survey 2011:
• 185 national carriers
• 80% of respondents are serving M2M
connection
• M2M is not only of niche market
interest to a handful of companies
Source: InformaTM

9. 2. Market growth trends - Consumer Electronics
• Significant growth from the ‘Kindle
carriers’ – AT&T and Vodafone:
• Q4 2010 - AT&T sold 1.5 million
connected devices to consumers - that
were not mobile phones
• March 2011 - Vodafone Group
announced EUR 150 million in M2M
revenue for financial year 2010/2011
Source: InformaTM

10. 2. The emergence of verticals
Distribution of publicly announced M2M contracts by vertical classification:
Source: InformaTM
Automotive & Fleet still dominates, but the highly anticipated Consumer Electronics and
Healthcare sectors are showing growth

11. 2. Mobile broadband network costs
Mobile carrier network revenue projections:
Source: InformaTM
How to justify funding next-generation networks…?
Network resources increasingly commoditised…
M2M:
• Is a new subscription market
• Brings efficiently monetised usage of network resources
• Plays to a carriers‟ core strengths – running a network
• A true catalyst for strong partnership and growth - due to cumulative, long-term
contracts.

12. 3. M2M SIMs
• May ‘09 - Global SIMs based on MCC 901, for
global coverage at a single price for data
• Apr ‘10 - M2M SIM (eSIM) Form factor
standardisation by ETSI – „ruggedised‟
• Feb ‘11 – Over-the-air (OTA) provisioning
standardised by GSMA, submitted to ETSI
MFF1 (‘socketed’) schematics)
• eSIMs simplify device design & manufacture, the
service of connectivity becomes a component
• The number of carriers supporting eSIMs will
improve with growth of M2M connections
Source: ETSI
Source: Google image search
3FF(Micro) 2FF(Mini) MFF2(M2M) MFF2 (SMD) schematics)

13. 3. M2M SIMs – Amazon Kindle 3G teardown
• Kindle 3 3G currently uses a traditional
„slotted‟ SIM card
• This approach has been useful for launch in
new markets, e.g. New Zealand
• CE devices face less extreme conditions &
Amazon Kindle components
shorter lifecycle - plastic SIM sufficient
• But now OTA provisioning standards makes
eSIMs likely to be used in future
Source: InformaTM
Amazon Kindle cellular module Amazon Kindle SIM

14. 4. M2M market drivers for operators
• Governmental mandates: Mandated requirements for crash notification/stolen vehicle
recovery, smart meters & Intelligent Transportation Systems create guaranteed
national markets for large-scale M2M deployments.
• Carpe diem: Taking the first-mover advantage in a brand new subscription market.
M2M contracts result in long-term relationships with growing networks of SIMs that are
active for a long time. Once established, providers are not frequently swapped out.
• Up-sell: Plus new business development opportunities from the enterprise sector.
Selling new M2M managed services to existing enterprise clients and augmenting the
portfolio of business services with M2M as well to attract brand new custom.
• The Internet: An increasing consumer dependence on – and the utility offered by – the
Internet. This presents an opportunity to create new consumer electronics products
where connectivity is a fundamental part of the device functionality/service proposition.
• Healthcare: Public and private opportunities for operational efficiency. GDP spent on
healthcare is increasing globally and, because one of main uses for M2M is to make
savings through greater efficiency, healthcare is a big and lucrative opportunity.

15. 4. M2M business models for operators
• Traditional wholesale: Wholesale provision of bulk quantities of SIMs with a set price
per MB for the transport of data over all of those SIMs.
• Bundled connectivity: The same as “traditional wholesale” but with a bundled data
allowance common to each SIM. Out-of-bundle usage charges also apply.
• Flexible connectivity: The same as “traditional wholesale” but with a pooled data
allowance that may be dynamically distributed across all SIMs deployed.
• Application-specific: Bespoke application-specific rate plans based on the data
usage criteria of respective application, as allowed by the new M2M SMPs.
• SLA-empowered: May be any of the previous four business models, but with a
premium charged for services availability guarantees. Penalties can apply if SLA fails.
• Revenue share: SIMs are provided for free, with no upfront connectivity payments.
Instead, the operator receives a revenue share from content downloaded to the device.

16. 4. Operators’ M2M plans in Latin America
Source: TIM Brasil’s and Vivo’s website – May 2012
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17. 4. Operators’ M2M plans in Latin America
• Chilean operator Entel expects the market to take off in the next three to five years. In
3Q11, Entel doubled its M2M-connection figure year-on-year, reaching 115,000
connections.
• In 2011, Entel M2M revenues increased 60% year-on-year.
• Entel‟s M2M SIM cards are used in 60% of the banking transactions carried out in
Chile using wireless devices.
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18. 5. Mobile operator M2M service trends
• The M2M market is defined by custom solutions. Maximum flexibility combined with
generic appeal equals more opportunity for boosting an operator‟s connection base.
• Coverage and availability are critical factors for M2M. “Anytime anywhere” connectivity is
necessary where connectivity is a fundamental part of a device‟s value proposition.
• The value of an MB of M2M data varies greatly – between both different M2M verticals as
well as between individual deployments within a given vertical.
• The value of an MB of M2M data is falling rapidly. Most of the value lies in value-added
connectivity-based functionality – QoS, SLAs, systems integration and managed
services.
• M2M has become an international concern thanks to the opportunity for M2M devices
with centralized manufacturing and localized distribution and activation. This is bringing
operators from different national markets into direct competition for the first time.

19. Thank you!
Marceli Passoni
Senior Analyst, Latin America
marceli.passoni@informa.com
Twitter: @mpassoni
15/08/2012