RESEARCH STRATEGY REPORT M2M IN ASIA PACIFIC: MARKET OPPORTUNITIES AND CHALLENGES FOR CSPs MORGAN MULLOOLY analysysmason.com
About this report The Asia Pacific (APAC) market represents a significant opportunity for service providers in the Internet of Things (IoT) and M2M service space. This report examines the size of the M2M opportunity in APAC, provides regional insight into the vertical use cases that are driving M2M adoption, and outlines strategies taken by communications service providers (CSPs) to access the region's markets and capture the M2M opportunity. The report is based on several sources, including Analysys Mason s internal research 1 and interviews with stakeholders in the APAC market. GEOGRAPHICAL COVERAGE AND CASE STUDIES Developed Asia Pacific (DVAP) Including CSP profiles in the following countries: Australia (Singtel Optus, Telstra, Vodafone Hutchison Australia) Japan (KDDI, NTT DoCoMo, SoftBank) Singapore (M1, StarHub, Singtel) South Korea (KT Corp, LG Uplus Corp, SK Telecom) Emerging Asia Pacific (EMAP) Including CSP profiles in the following countries: China (China Mobile, China Telecom, China Unicom) Indonesia (Indosat, Telekomunikasi Selular, XL Axiata) Thailand (Advanced Info Service (AIS), Total Access Communications (DTAC), True Corporation (True Move)) KEY QUESTIONS ANSWERED IN THIS REPORT What is the growth outlook for M2M connectivity and revenue in APAC over the next decade? What are the vertical M2M opportunities for regional and global operators in the APAC region? What are the regional drivers and enablers of the growth of M2M adoption for firms in APAC? What challenges will CSPs face when building an M2M business in APAC? WHO NEEDS TO READ THIS REPORT Executives of APAC telecoms operators that are faced with stagnating opportunities for traditional service offerings, and will be interested in the growth opportunity for M2M in their region. Management executives of APAC mobile network operators who want to compare their M2M strategies with those of their industry peers. Marketing executives working for M2M hardware and middleware vendors who want to understand the potential impact of M2M adoption in the APAC region. 1 For further details, see Analysys Mason s M2M device connections and revenue: worldwide forecast 2014 2024. Available at www.analysysmason.com/m2m-forecast-2014. 2
CONTENTS EXECUTIVE SUMMARY CURRENT SITUATION AND MARKET OUTLOOK DRIVERS, ENABLERS AND CHALLENGES VERTICAL OPPORTUNITIES APPENDIX ABOUT THE AUTHOR AND ANALYSYS MASON 3
Mobile handset data Fixed broadband and IPTV Mobile broadband Business network services Mobile M2M Mobile voice Mobile messaging Fixed voice and narrowband Total retail Revenue growth (USD billion) M2M in Asia Pacific: market opportunities and challenges for CSPs Executive summary We estimate that between 2013 and 2019, the M2M opportunity will add USD8 billion in cumulative service revenue to the value of the Asia Pacific (APAC) telecoms market, which provides a rich opportunity for CSPs that are aiming to develop new revenue streams from the digital economy. Several factors make it a suitable time for CSPs to develop an M2M line of business in APAC. Pursuit of a competitive edge by the private sector: Enterprises in the APAC region are aiming to add connectivity in their products and business processes in order to remain competitive in the worldwide economy. Government policy: Many governmental agencies in the APAC region are promoting the adoption of M2M. Consumer demand: Consumer demand for digital lifestyle goods and services (such as connected cars and smart homes) is increasing as mobile broadband connectivity becomes more ubiquitous in the region. Revenue from mobile M2M will grow by an estimated USD8.0 billion during 2013 2019 in APAC, which will help to compensate for a decline in the revenue generated by mobile voice, mobile messaging, and fixed voice and narrowband services, which will contract by USD17.4 billion during the same period. Figure 1: Telecoms retail revenue growth by service type, Asia Pacific, 2013 2019 140 1.8 3.6 8.0 9.0 12.0 122.0 120 20.1 100 21.7 80 60 40 76.5 20 0 Source: Analysys Mason 4
CSPs are faced with a dynamic and diverse M2M market in APAC CSPs in APAC can pursue IoT and M2M opportunities in a variety of vertical markets. Figure 2: Key vertical opportunities for M2M CSPs in APAC CSPs can play a key role in the adoption of M2M technology by delivering network connectivity and services. This report explores the outlook for M2M services in APAC in five verticals. Automotive: The automotive vertical will be a key opportunity in APAC. Although fleet management is a mature M2M application, it still has growth potential in the region, particularly in EMAP. The region will account for 17% of the world s connected cars by 2019. Smart grid: The smart electricity metering opportunity is driven by high energy prices in DVAP, as well as rising energy demand in China although interest is muted elsewhere in EMAP. Smart city: Smart city initiatives will help address many of the challenges that are emerging as a result of massive urbanisation in many APAC countries. Smart home: The nascent smart home opportunity is being pursued vigorously in DVAP, but the opportunity has generally been given less attention by CSPs in EMAP. Industrial Internet: Industrial Internet opportunities appeal to export-orientated firms in APAC, but mobile network operators (MNOs) must be able to meet cost and coverage requirements of export-orientated original equipment manufacturers (OEMs). Industrial Internet Smart home Connected car Fleet management Smart city Smart grid 5
CSPs will need to develop a flexible approach to M2M to sensitively cater to local market dynamics across the region CSPs need to appreciate that there are many challenges associated with providing M2M services in APAC. In many APAC countries, regulations around M2M including roaming, taxation and data usage are unclear: Regulatory uncertainty may discourage CSPs from investing in innovative technology that can both generate new revenue for the CSP and support growth in the local economy. Figure 3: Challenges faced by CSPs building M2M businesses in APAC Local regulation is often unclear or undefined CSPs must be members of an M2M alliance in order to capture lucrative region-wide deals: Most business activity for large firms takes place in regional blocks. Multinational companies will require a single regional connectivity agreement for M2M across multiple countries in EMAP and DVAP. CSPs will also need a flexible approach to partnering with global and local players: CSPs will need to find suitable vertical opportunities to succeed in domestic markets. However, identifying partners with the right expertise and experience to pursue vertical opportunities will be challenging. To illustrate this challenge, we examine the strengths and weaknesses of Indosat s approach to partnering with global and local partners. The APAC market is not homogenous, so a successful go-to-market approach will rely on sensitivity to local market dynamics. For example, our profile of Vodafone s strategy in various APAC countries provides insight into how CSPs can take a different approach to developing their M2M business in each market. Local M2M ecosystems are still immature KEY ISSUES AND CHALLENGES No CSP has a region-wide network 6
Recommendations 1 CSPs both inside and outside the region should focus on developing M2M services in APAC. M2M is becoming increasingly important to organisations such as businesses and city authorities in the APAC region to help them stay competitive in the global economy. However, many CSPs in the region have not yet formalised their approach to M2M and risk losing market share to more established M2M service providers. Elements of a successful M2M business include dedicated M2M team and infrastructure, communication-rich offerings with value-added services, solution-based business models, and credible partnerships. 2 CSPs need to engage the regulators on the special requirements of M2M and IoT services. CSPs must persuade regulators in APAC to provide better guidance on the permissibility around certain practices such as the use of permanent roaming techniques, cloud-based M2M and core network infrastructure. CSPs should try to influence regulation of M2M and IoT by lobbying either directly or through groups such as the Bridge Alliance or the GSMA. They can also engage with government to develop policies and initiatives that will help promote M2M adoption in sectors including smart metering and smart cities. 3 CSPs must adapt their M2M strategy for different markets in APAC. CSPs must build strong alliances in order to win multinational contracts to deliver M2M solutions. These alliances need to negotiate deals on their members behalf, and, therefore, operators need to transfer some authority to them. At the domestic level, CSPs must respond sensitively to the requirements of individual opportunities. This may require them to invest in different networks and solutions to win contracts trying to sell cellular connectivity for all solutions won t work because of the unsuitability of existing networks for M2M requirements. 7
CONTENTS EXECUTIVE SUMMARY CURRENT SITUATION AND MARKET OUTLOOK DRIVERS, ENABLERS AND CHALLENGES VERTICAL OPPORTUNITIES APPENDIX ABOUT THE AUTHOR AND ANALYSYS MASON 35
About the author Morgan Mullooly (Analyst) is part of Analysys Mason's Enterprise team. His primary area of focus is on the M2M, or Internet of Things (IoT) sector. This includes analysis on a variety of topics including IoT enterprise requirements, forecasting, vendor profiles and service provider scorecards. Morgan was previously the lead analyst for Analysys Mason s Spectrum research programme, focusing on spectrum valuation, LTE strategies and white space technologies. Morgan has a Master s degree in Philosophy and Public Policy from the London School of Economics. 36
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