European MNOs and the Rise of LPWANs

The European network operator M2M market is not only extremely fragmented but also highly competitive. In 2015, 12 network operators—Bouygues Telecom, Deutsche Telekom, EE, KPN, O2, Orange, SFR, Telecom Italia, Telefonica, Telenor, TeliaSonera, and Vodafone—had 98.6% of the cellular M2M connections in Europe. In 2016, those same 12 operators had a collective market share of 88.3% of European M2M connections. In 2017, that market share fell to 79%. ABI Research expects that the collective market share will fall to 72.4% by the end of 2018. Within Europe, network operators are split into two separate groups—each target international and domestic markets, with international markets comprised of larger corporations operating in multiple countries, whereas domestic markets are composed of national governments and utility or service providers.

In Europe, the fragmentation on a country-to-country basis leads to smaller players who have a much higher level of local knowledge and access, which in turn reduces the economies of scale for the region as a whole. Within France, the M2M market is dominated by players such as Orange, Bouygues Telecom, and SFR, while Italy is dominated by Telecom Italia. The UK market is covered by EE, Vodafone, and O2, while Germany is largely dominated by Deutsche Telekom. Providers such as Vodafone have a large international presence but are only dominant in a handful of individual markets. As a result of this competitive landscape, European network operators will have to turn to new business models and emerging Low-Power, Wide-Area (LPWA) technologies in order to secure a competitive edge within this market.

By the end of 2018, most of Europe, North America, and the Asia-Pacific region will be covered by at least one Low-Power Wide-Area Network (LPWAN). Europe has seen several Mobile Network Operators (MNOs) turning to LPWA technologies in an effort to increase their M2M market share in both domestic and international markets. In 2023, cellular LPWA connections will make up the largest portion of M2M connections in Europe, due largely to demand from end users looking to implement optimized Internet of Thing (IoT) solutions for applications that transmit small amounts of data infrequently. Examples of these applications include logistics, consumer vehicle telematics, and smart meter deployments.

In 2017, Orange announced the availability of nationwide Narrowband IoT (NB-IoT) and Long-Term Evolution for Machines (LTE-M) networks across Belgium with plans for further rollouts in Spain and France by the end of 2018. Deutsche Telekom achieved nationwide rollout of its NB-IoT network in the Netherlands in May 2017 and has deployed NB-IoT networks in Germany, Austria, Poland, Slovakia, the Czech Republic, Hungary, and Greece. Vodafone is also launching an NB-IoT network in Germany to take on Deutsche Telekom.

While the number of connections each operator manages is important, when moving forward, operators need to understand that connectivity is the lowest common denominator. While the number of connections is critical, what truly matters to any operator is the long-term value these connections generate. Network operators should identify their core competencies and provide value-added solutions for a set of core vertical segments in order to maximize the value their M2M solutions generate. By going beyond connectivity to provide specialized, value-added solutions, operators can not only increase domestic market share but also increase their international market presence. Deutsche Telekom has established a European Smart Solutions Center in Budapest and launched its Telekom Open IoT Labs, while Orange opened its LTE-M Open IoT Lab in Paris.

Additionally, operators should focus on defending and expanding existing domestic market shares while also adding international capabilities. Network operators should leverage their existing enterprise users to expand their footprint within their respective domestic markets. While M2M connections makes it easier to deploy connections internationally, operators need to realize that it also makes it easier for their competitors to do so as well. The same market opportunities that enabled Deutsche Telekom to launch NB-IoT networks in eight European countries also enabled Vodafone to launch its own NB-IoT market in Germany. Any international expansion should not result in losing existing domestic market share. By focusing on these new technologies and market opportunities, European network operators can maximize the benefits that M2M and IoT provide.