What's behind Truphone's $38M eSIMs funding haul

Truphone has tapped its existing investors for £30 million ($38 million) to support the expansion of its eSIMs business, targeting investments to grow its presence in North America and the Asia-Pacific region as the eSIM market finally gains significant traction.

Analyst firm ABI Research is predicting eSIM-enabled smartphone shipments of 225 million this year partly on the back of the recently launched Samsung S20 range of devices that join Apple, Google and Motorola phones in offering eSIM support.

"All the new funding goes onto eSIM," said Ralph Steffens, the chief executive of Truphone. "The money is going to our global market strategy in North America and APAC, we see huge pull from those regions."

Steffens reports the company has more than four million active eSIM profiles live and is adding almost 25,000 profiles each day. It wants to add to its sites in London and Amsterdam with new facilities outside Europe to serve expected demand.

eSIMs have not been warmly welcomed by mobile network operators because they sever the hardware link between them and their consumer customers' devices. With eSIMs, operators' plastic SIM cards become obsolete and device-makers can simply ship devices with a SIM profile embedded via an eSIM. Customers can then choose the networks they want to use.

This is good for organizations looking to deploy IoT devices across the globe without having to resort to installing nation-specific physical SIMs once devices arrive at their deployment location. eSIMs also simplify ensuring connection quality by enabling devices to switch operators to access the best available coverage in national markets. However, they're less attractive to operators which, even in these times of non-travel, jealously guard their COVID-19-diminished roaming revenues.

In addition, eSIMs are not the only means to circumvent the operator. "The investment strikes me as indicative of operators' reluctance to dramatically reduce roaming fees despite people's lives becoming increasingly digital," said Daniel Gleeson, a principal analyst at Omdia. "eSIM is a vehicle that makes Truphone's business model easier but it can also be done with physical SIM cards as HMD, the manufacturer of Nokia branded smartphones, is doing with HMD Connect."

Steffens is convinced the current uplift in eSIM profile volumes is down to consumer demand for the technology. "When Apple went first with an eSIM smartphone, the rest of the industry had no choice but to follow suit," he said. "Customers loved the service and the ability to subscribe right out of the box. They want a dual SIM phone with local and travel plans that give them a huge degree of flexibility."

Gleeson disagrees that consumers are driving demand: "For consumers there currently simply isn't a huge benefit or really anything different between using a smartphone with a physical SIM and an eSIM," he said. "This may change with more services, like Truphone's, becoming available but ultimately it will be more manufacturer and operator-led demands that push the adoption of eSIM in consumer smartphones."

The benefits of eSIM are clearer in IoT. "IoT devices far and away lead on demand which is much more established and there are vendors out there who have been doing this for years," said Sam Barker, lead analyst at Juniper Research. "If you split out the consumers and the IoT side, you're looking at two very different markets from development of devices right through to implementation even though the technology remains similar. There are much bigger benefits in the IoT market while consumers don't really care how their devices work."

Steffens wants to serve both markets. "We see bigger numbers today in consumer eSIM adoption but the machine-to-machine (M2M) world is waking up fast," he said. "The percentage growth is larger in M2M and, eventually, it will overtake the consumer market. There are a substantially larger number of things than phones."

Regardless of whether consumer or IoT eSIMs will dominate, uptake is being stimulated by the technology now being ready and more widely available. "The latest Qualcomm chipsets include the capabilities for eSIM built into the chipset so implementing eSIM for any device manufacturer is now much simpler and a lot cheaper," added Gleeson. "This is pushing a lot of eSIM-capable devices into consumers' hands and, while the eSIM component is not widely used yet, the option makes Truphone and similar services more appealing and easy to use for consumers."

Steffens added that even vendors who sell the majority of their devices through mobile operators were under sufficient pressure to provide eSIMs regardless of their direct customer – the mobile operator – not liking them. "Device makers have no choice because consumers vote with their feet," he said. "The physical SIM is one of the last bastions of hardware requirements that operators can influence."

Controlling the SIM is not quite over for operators. Many will provide eSIM profiles themselves as they target both consumers and the devices that make up the Internet of Things. Steffens recognizes this and sees three eSIM markets for Truphone – device makers, chipmakers and other mobile operators. "Every operator needs an eSIM platform and they won't build it themselves because they don't build things themselves anymore," he said.

With Juniper Research predicting that the adoption of eSIMs will grow 350% over the next five years to exceed one billion deployed eSIMs globally by 2024, eSIM awareness appears to have turned the corner. "There seems to have been a cat and mouse game between the stakeholders in the industry but any investment in eSIM technology is certainly indicative that the market is fairly well-established from the production of embedded units through to the roll-out of the service," said Barker.

— George Malim, Contributing Editor, Light Reading