Why Operators Should Reposition as “eSIM Companies”

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By Phil Sealy | 2Q 2018 | IN-5165

Operators largely remain in the preparation phase as it pertains to the eSIM and are still fleshing out and making the required changes to infrastructure, backend systems, and business processes, in order to fully support eSIM devices. In terms of device types, operators are beginning to lower their resistance. It is fair to say that the majority of operators are keen to support eSIM in devices, which they have failed to monetize to a high level or in devices that were previously unconnected. This is viewed as a greenfield opportunity, but resistance by some operators remains at the handset level where SIM peddling continues as a business strategy, particularly those who operate in pre-paid dominant markets. In addition, the established nature of the handset market, business processes, and systems present another market barrier.

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A Mixed Bag of Operator eSIM Readiness

NEWS


Operators largely remain in the preparation phase as it pertains to the eSIM and are still fleshing out and making the required changes to infrastructure, backend systems, and business processes, in order to fully support eSIM devices. In terms of device types, operators are beginning to lower their resistance. It is fair to say that the majority of operators are keen to support eSIM in devices, which they have failed to monetize to a high level or in devices that were previously unconnected. This is viewed as a greenfield opportunity, but resistance by some operators remains at the handset level where SIM peddling continues as a business strategy, particularly those who operate in pre-paid dominant markets. In addition, the established nature of the handset market, business processes, and systems present another market barrier.

What Operators Need to Do

IMPACT


Overall, the eSIM market, as it pertains to the consumer piece, could be considered a chicken-and-egg scenario. It is true to say that many MNOs have invested into the required eSIM technology, but it is also fair to say that many have not, with the number of devices with eSIM capabilities arguably too low to justify an investment.

From an MNO perspective, the investment and time required to develop the required business processes are extensive. It is an investment that needs careful consideration because operators will not want to commit and invest too early, but equally will not want to invest too late.

The required operator investment can be categorized into three overriding buckets as follows:

  • Creation of an eSIM Ecosystem: This involves partnering with a provider such as Gemalto, IDEMIA, G&D, or Valid to set up the required profile generation infrastructure. Like traditional SIM card sourcing, operators will likely source, support, and invest in two or three competing systems.

 

  • IT Business Systems: This pertains to the review of all business processes and the development of ways to handle new subscribers, existing subscribers, and sales channels, to name but a few, and how best to support from an eSIM angle.

 

  • Company Training: Including marketing, retail staff, and customer support.

 

eSIMs will have a transformative effect on any operator’s business, and, as with any transformation, a significant amount of time and investment will be required.

Repositioning as eSIM Connectivity Vendors

RECOMMENDATIONS


For MNOs, the eSIM opportunity is one that should not be dismissed or one in which only a limited number of devices types are supported or where support for eSIM handsets is excluded. ABI Research believes that the eSIM is the acceleration platform that will place MNOs at the center of the IoT, as the IoT gatekeepers, opening not only new subscription opportunity, but the ability to collect new data points and launch new innovative and unique experience-based services.

Shaping a future strategy around service enablement that evolves around newly connected devices could mean that MNOs have access to new service-related revenue opportunities through big data analytics and other cross-device services, for example, identity as a service. The eSIM presents a significant opportunity to differentiate from an operator perspective, allowing them to re-position as “eSIM” connectivity companies, moving away from single subscription connections towards connectivity device packages across a variety of different consumer devices, which in turn will likely create new levels of brand stickiness and loyalty.

On top of this is the ability to utilize different devices to improve and expand channels to market, while also opening up a significant opportunity to move towards device management services, via solutions including lifecycle management, OTA updates, IDoT, etc. Once the eSIM becomes more commonplace, across a variety of different device types, the ability to offer exclusive device bundles increases. The device itself plays a major role in the consumer decision of which MNO to subscribe to. Extending connectivity and packages to include other desirable devices could further improve net new subscriber rates, while also being a platform to target and improve customer loyalty rates and retention. Any MNO that has the ability to support the eSIM today is better positioned to negotiate device exclusivity rights with OEMs, in turn placing themselves in a position of strength.

It is an obvious statement, but the eSIM is much more than a handset technology, supported by the continued and growing success from an M2M perspective, and also from a consumer standpoint, where devices including smartwatches and tablets have been targeted. The eSIM presents a significant opportunity to extend connectivity beyond the handset and shift a proportion of subscription and data revenues towards new device types, in turn pivoting a proportion of revenue risk tied to the largely established and saturated handset market. In summary, operators now need to embrace the eSIM revolution across the board, using it as a technology to extend connectivity into different device types and end markets, while at the same time using it as a platform to shift away from a singular subscription revenue model, towards device connectivity packages to extend sales channels and improve brand stickiness and loyalty.

More information on this topic is available in the recent ABI Research report eSIM in the Consumer Market(AN-4914).

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