Can Telcos Be Major IoT Service Providers?

Many telcos have long harbored hopes of being major players in the IoT services sector, making use of their distributed network assets, data collection capabilities and enterprise relationships. But do they have the right skills to meet the needs of the IoT market?

It seems the vast majority of folks in the telecom sector believe they do. As part of an industry survey conducted in late November ahead of Light Reading's annual 2020 Vision Executive Summit, where the results of the survey were first unveiled, we asked the question: Can telcos be major IoT service providers?

As the graphic below shows, the majority of the 189 respondents think they can.

(Source: Light Reading survey, 189 respondents)
(Source: Light Reading survey, 189 respondents)

That confidence is growing: We asked the same question a year earlier and the percentage of respondents answering "yes" went up slightly in the 2019 poll, as we can see below.

(Source: Light Reading survey, 189 respondents)
(Source: Light Reading survey, 189 respondents)

Operators such as Vodafone are showing it's possible to generate new revenues from the IoT sector, while also showing that it's hard work for relatively limited returns (at least up to now). In addition, the revenue per connection per year small, and, at least in Vodafone's case, that average return drops each year as its IoT business scales.

Table 1: Vodafone's IoT Business in Summary

Mar-16 Mar-17 Mar-18 Mar-19
IoT connections (millions) 38 54 68 85
—year-on-year increase N/A N/A 26% 25%
IoT revenues (€M) N/A 697 747 783
—year-on-year increase N/A N/A 7% 5%
IoT revenues per connection (€) N/A 12.91 10.99 9.21
Group revenues (€M) 40,973 47,631 46,571 43,666
IoT revenues as percentage of total N/A 1% 2% 2%
(Source: Vodafone)

You can read more about Vodafone's IoT efforts in this article.

In China, the three main operators have all developed IoT services businesses, with China Mobile leading the way not only in that country but in the world in terms of IoT connections -- it boasted more than 550 million at the end of 2018 and hit 693 million by the end of June last year. But despite that large volume of connections, the giant operator generated less than $1.2 billion in IoT revenues in 2018 and $747 million (1.48% of total service revenues) for the first six months of 2019: That's a lot of money, but the per-connection return is low.

The financials are more impressive in the US, where both AT&T and Verizon have developed IoT businesses generating more than $1.5 billion per year (based on 2018 numbers), and, like telcos around the world, they're hoping that a ramp in industrial IoT (IIoT) usage and, in the long term, the industry promise that 5G will help support massive Machine Type Communications (mMTC).

For a full list of mobile IoT networks, see this GSMA rollout report.

Of course, there are many challenges for, and competitors to, the telcos in the IoT market and, long term, the financials will need to stack up. Let's see if the industry's confidence remains as high in next year's survey.

— Ray Le Maistre, Editor-in-Chief, Light Reading

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