M2M expected to be 5% of service provider revenues by 2015, but profits will be erratic
Service providers must focus on margin not machines for a sustainable role in the M2M market, according to a new white paper from Informa Telecoms & Media and SAP.
The white paper, ‘M2M Communications: Turn Potential into Profit,’ draws from a global survey and interviews with more than 250 M2M industry stakeholders across 50 countries, including telecom operators, MVNOs, satellite providers, integrators, and software, hardware and module vendors.
Key research findings include:
• Supply-chain fragmentation, low ARPU and low margins are the top market challenges.
• Data connectivity currently represents almost 90% of M2M revenues.
• Fewer than a fifth of M2M service providers offer value-based M2M services and pricing.
The report identifies seven actions that can help boost M2M service provider profitability, highlighting that M2M profitability often hinges on the use of depreciated 2G networks and roaming agreements, plus the ability to monetize partner relationships and sell M2M services with a horizontal application across various industries.
Market sentiment is bullish according to the research:
Three quarters of M2M service providers expect to generate 5% or more of their revenues from M2M by 2015. But 60% of telecom operators involved in M2M are worried that they will be relegated to a low-margin bit-pipe role.
“M2M service providers are at a fork in the road: Either be excellent at delivering M2M data, or interpreting what the data means,” said Camille Mendler, principal analyst at Informa Telecoms & Media.
”We believe that long-term profitability lies in offering more than data transport.”