#3 – Operators will overcome the fear of eSIM, it’s time to get excited about the potential!
For long operators have been concerned with how eSIM will impact their businesses; would they lose the direct relationship with the end-user, or will they face increased competition from other connectivity providers. At the same time, with the introduction of GSMA based eSIM standard, eSIM has started to gain considerable traction among OEMs that offer connected products. What is more and more realized is that the eSIM brings considerable benefits for the operators, such as simpler SIM provisioning, reduced SIM logistic costs and lowered barriers for new use cases which will contribute to a greater number of connections. As a result, with the already increasing number of use cases for eSIM, and introduction of major handsets equipped with GSMA-based eSIMs, 2019 will be the year that a large number of operators in Europe and North America will start embracing eSIM for both handsets and IoT use cases.
The adoption of eSIM has up until today been low. In 2018, around 200m devices with eSIM were sold, of which smartphones constituted only a small percentage. However, up until 2021, just the number of new smartphones equipped with eSIM each year is expected to grow with a substantial CAGR of almost 500%. This will correspond to approximately 400m smartphones being sold with eSIM in 2021.
eSIM eliminates the physical provisioning of the SIM cards and lowers the operators’ associated costs of logistics related to ordering, handling and delivering the SIM cards. As an example, eSIM can lower the time of the SIM card activation and delivery process from an approximately 24h-96h to just few minutes for mobile handsets and generate savings up to EUR 150 per SIM in case it is needed to change IoT SIM cards. In addition, eSIM allows operator to be more attractive to those OEMs that implement eSIMs in their connected products (e.g. connected cars, wearables, etc.), leading to increased number of connections and revenue for the operator.
The introduction of eSIM is however not only an upside for operators. By adopting eSIM, operators will have customers (e.g. OEMs) and end-users who can more easily switch to a competitor. Roaming revenues can also be affected when eSIM allows end users to simply pick a new operator over the border. Last but not least, eSIMs and their capability of over-the-air-provisioning makes the process of customer acquisition simpler, therefore the barriers of entering the market for MVNOs will be lowered, which can cause greater degrees of competition for MNOs specifically in niche segments of the market.
But, even though operators have long been concerned about how eSIM will impact their business, it turns out that when it comes to non-IoT eSIMs, what we have seen in the market so far is that none of the “scary scenarios” have really happened. Apple, Google and Samsung have equipped some of their products with eSIM in recent years but have not taken over the customer relationship fully. The same goes for some car OEMs such as BMW and Audi who provide eSIM in their connected cars. This is mainly driven by the fact that the GSMA standard keeps operators in control of the end user relationship by keeping the SIM provisioning (i.e. Remote SIM Provisioning – RSP) in the operators’ domain. This happens at the same time that some OEMs have shown interests in taking over this role; either to stay most relevant in the ecosystem compared to their competitors, or to have more control in order to push for lower connectivity prices. This has meant that such OEMs should have acquired mobile licences and become MVNOs, or even spectrum and become MNOs
The introduction of eSIM standard from GSMA has also played a major role in attracting non-smartphone OEMs. This standard, supported by operators, gives those OEMs the possibility to scale in various markets. As a consequence, the operators have considered supporting eSIM in order to stay relevant as the connectivity provider for these OEMs. As part of the adoption, operators needed to provide platforms for RSP, together with other corresponding systems. Not surprisingly, the same systems can largely support non-IoT eSIMs for handsets as well.
All in all, the fear of the negative aspects eSIM could possibly bring seems to be fading among operators. Many operators have already implemented IoT eSIM platforms within their systems and are thus well prepared to a wider adoption of eSIM. At the same time, the positive effects of eSIMs have become clearer for operators and we expect a full embracement soon to come. Meanwhile, among tier-one handset manufacturers, Apple has introduced handsets equipped with GSMA eSIM in 2018, with the rest of tier-ones most likely to do so in 2019. As a result, in order to benefit from the positive effects of eSIM, 2019 will be the year that majority of the operators in Europe and North America will offer eSIM subscriptions.