Analysys Mason M2M presentation for Cambridge Wireless event

RefNo | Commercial in confidence

Future of M2M

Presentation for Cambridge Wireless

Tom Rebbeck

4 December 2013


Analysys Mason has been active in M2M, working for operators, vendors,

regulators and governments…

2


… as well as regularly publishing reports as part of our IoT and M2M

solutions research programme

3

Source: Machine-to-machine traffic worldwide: forecasts and analysis 2011–2016, Analysys Mason, 2011

Capability and experience


4


M2M can reduce costs and make new ideas possible

5

The Social Bicycles bike hire scheme


M2M forecasts have been nothing if not bullish

6

Ericsson, February 2011; http://www.ericsson.com/res/docs/whitepapers/wp-50-billions.pdf

Other forecasts for 2020 include: IDC 212 billion devices; ABI 30 billion; Cisco 50 billion; Gartner 26

billion

http://www.ericsson.com/res/docs/whitepapers/wp-50-billions.pdf







Growth has been rapid, but not stellar

7

Annual growth in M2M connections by country, most recent published data (2012/2013)

-20%

0%

20%

40%

60%

80%

100%C

ze

ch

Re

pu

blic

…

Bu

lga

ria

(E

C)

La

tvia

(E

C)

Esto

nia

(E

C)

Fra

nce

(A

rce

p)

Ma

lta

(E

C)

Fra

nce

(E

C)

Lith

ua

nia

(E

C)

Ire

land

(E

C)

Belg

ium

(E

C)

Cyp

rus (

EC

)

Sw

ed

en

(P

TS

)

UK

(E

C)

Sw

ed

en

(E

C)

Be

lgiu

m (

Mo

bis

tar…

Ge

rma

ny (

EC

)

Po

lan

d (

EC

)

Ne

therl

and

s…

No

rwa

y (

NP

T)

So

uth

Afr

ica

…

Lithu

ania

(R

RT

)

Ne

therl

and

s (

EC

)

Sp

ain

(E

C)

Slo

va

kia

(E

C)

Ne

therl

and

s…

Sp

ain

(C

MT

)

US

A (

AT

&T

…

De

nm

ark

(IT

ST

)

De

nm

ark

(E

C)

De

nm

ark

(T

DC

)

Ita

ly (

EC

)

Ave

rage…

An

nu

al gro

wth

ra

te

217%


Most Western European countries have less than 1 million M2M

connections

8

M2M connections by country, million, Western Europe, 2012 (Source: Analysys Mason, European Commission)

-

1

2

3

4

5

6

7

8

Ita

ly

Fra

nce

UK

Sw

ed

en

Spain

Germ

an

y

Ne

the

rla

nd

s

No

rwa

y

Belg

ium

De

nm

ark

Fin

land

Sw

itzerl

an

d

Ire

lan

d

Port

uga

l

Austr

ia

Gre

ece


Per capita, this corresponds to one M2M connection for every 13 people

9

M2M connections per capita, 2012 (Source: Analysys Mason, European Commission)

-

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45 S

wed

en

No

rwa

y

De

nm

ark

Ita

ly

Fin

land

Ire

lan

d

Belg

ium

We

ste

rn E

uro

pe

Fra

nce

UK

Ne

the

rla

nd

s

Spa

in

Sw

itzerl

an

d

Germ

an

y

Port

uga

l

Austr

ia

Gre

ece

Ce

llula

r co

nn

ectio

ns p

er

ca

pita


The drivers for M2M remain strong

▪ From a demand side:

– With low growth rates, economic actors are

looking to reduce costs/increase efficiency

– 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

10

Growth in world output, developed and emerging

economies, 2011-2014

Source: World Economic Outlook Update, IMF, 23 Jan, 2013


We maintain our belief in the long term prospects for M2M

11

M2M cellular connections (million) Western Europe, 2011-2018 (Source: Analysys Mason)

0

20

40

60

80

100

120

140

160

180

200

2011 2012 2013 2014 2015 2016 2017 2018


The value of connections will grow by almost four times between 2012 and

2018…

12

M2M connectivity revenues, 2011-2018 (Source: Analysys Mason 2013)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2011 2012 2013 2014 2015 2016 2017 2018

EU

R (

bill

ion

)


But will remain a small portion of an operator’s overall connectivity

revenues…

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M2M connectivity revenues, relative to handset revenues, 2011-2018 (Source: Analysys Mason 2013)

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2011 2012 2013 2014 2015 2016 2017 2018

M2

M a

s %

of h

an

dse

t re

ve

nu

es

EU

R (

bill

ion

)


Mainly due to low ARPUs relative to the handset business [1/2]

14

M2M connectivity revenues and monthly M2M ARPU, 2011-2018 (Source: Analysys Mason 2013)

0

5

10

15

20

25

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2011 2012 2013 2014 2015 2016 2017 2018

EU

R (

mo

nth

ly)

EU

R (

bill

ion

)


Mainly due to low ARPUs relative to the handset business [2/2]

15

M2M connectivity revenues and monthly M2M and handset ARPU, 2011-2018 (Source: Analysys Mason 2013)

0

5

10

15

20

25

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2011 2012 2013 2014 2015 2016 2017 2018

EU

R (

mo

nth

ly)

EU

R (

bill

ion

)


Much of the value is concentrated in a small number of vertical markets

(and a small number of contracts in those markets)

16

M2M connections by vertical market (Source: Analysys Mason 2013)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016 2017 2018

Industrial

Financial services

Government

Public sector

Retail

Healthcare

Security

Automotive and transport

Utilities


Operators are looking at a number of vertical markets…

17

Legend:

Vertical where the operators is currently focused on

Vertical sectors Operator

A

Operator

B

Operator

C

Operator

D

Operator

E

Operator

F

Operator

G

Operator

H

Utilities


Healthcare

Security

Asset management

Consumer electronics

ePOS

Track and trace


… but focus is on firmly on utilities and automotive & transport, at least

with the bigger operators

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Vertical sectors Operator

A

Operator

B

Operator

C

Operator

D

Operator

E

Operator

F

Operator

G

Operator

H

Utilities


Healthcare

Security

Asset management

Consumer electronics

ePOS

Track and trace

Legend:

Vertical from where the operator expects stronger growth


We believe that operators need five elements to make a successful M2M

business

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Elements of a successful M2M business [Source: Analysys Mason, 2013]

Dedicated M2M team and

infrastructure

Communi-cation rich

offering with value-added

services

Credible partnerships

Secure network with

device certification processes

Solution based business

model


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MNOs and MVNOs can play multiple roles in the M2M value chain

M2M operator categories based on role

in the M2M value chain

Categories MNO P-

MVNO

A-

MVNO

E-

MVNO

Com

ponents

of the M

2M

valu

e c

hain

Connectivity

M2M platform

Managed services

System integration

Customer support

Application

Equipment

Key

Value chain requirements for MNOs and MVNOs

Required Often provided Sometimes

provided

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.


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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

Landis+Gyr, TomTom

Number of

SIMs per

contract

More than 10 000 Depends on type of P-

MVNO

More than 100 and

less than 10 000 More than 10 000

Vertical-

specific? 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 A-

MVNO owns the client

relationship with the

enterprise

In many cases, E-

MVNOs own the

relationship with the

enterprise


Case study: AT&T’s M2M connectivity could be embedded in millions of

General Electric’s industrial components

22

AT&T’s role in supporting GE’s Predix platform

AT&T is not

involved in this

aspect of the

Predix platform

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)

People Machines Network Server

Predix

Experience Predix Machine Predix Net Predix Server

Component of GE’s Predix platform

AT&T’s supporting role

Key


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

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Contact details

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Tom Rebbeck

Research Director

[email protected]

Cambridge

Tel: +44 (0)845 600 5244

Fax: +44 (0)1223 460866

[email protected]

Dubai

Tel: +971 (0)4 446 7473

Fax: +971 (0)4 446 9827

[email protected]

Dublin

Tel: +353 (0)1 602 4755

Fax: +353 (0)1 602 4777

[email protected]

Edinburgh

Tel: +44 (0)845 600 5244

Fax: +44 (0)131 443 9944

[email protected]

Johannesburg

Tel: +27 11 666 4786

Fax: +27 11 666 4788

[email protected]

Madrid

Tel: +34 91 399 5016

Fax: +34 91 451 8071

[email protected]

Milan

Tel: +39 02 76 31 88 34

Fax: +39 02 36 50 45 50

[email protected]

New Delhi

Tel: +91 124 4501860

[email protected]

Paris

Tel: +33 (0)1 72 71 96 96

Fax: +33 (0)1 72 71 96 97

[email protected]

Singapore

Tel: +65 6493 6038

Fax: +65 6720 6038

[email protected]

Boston

Tel: +1 202 331 3080

Fax: +1 202 331 3083

[email protected]

Manchester

Tel: +44 (0)845 600 5244

Fax: +44 (0)161 877 7810

[email protected]

London

Tel: +44 (0)845 600 5244

Fax: +44 (0)20 7395 9001

[email protected]

0)1223 460866

mailto:[email protected]

Analysys Mason M2M presentation for Cambridge Wireless event

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