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The Global M2M/IoT Communications Market M2M Research Series 2015 www.berginsight.com

The Global M2M/IoT Communications Market First Edition, IoT Research Series 2015

by Tobias Ryberg

BERG INSIGHT RESEARCH TEAM ABOUT THE AUTHOR Tobias Ryberg, Senior Analyst Tobias Ryberg is co-founder of Berg Insight ([email protected]) and principal analyst responsible for the M2M research series. He is an experienced analyst Johan Fagerberg, Senior Analyst and author of numerous articles and reports ([email protected]) about IT and telecom for leading Swedish and international publishers. OFFICE Viktoriagatan 3 ACKNOWLEDGEMENTS S-411 25 Gothenburg Aeris, AT&T, Bridge Alliance, Belgacom, Sweden Cubic Telecom, , Etisalat, Giesecke & Devrient, KORE Telematics, KPN, CUSTOMER SERVICE Ooredoo, Communications, Sierra Phone: (46) 31 711 30 91 , Sigfox, Sprint, , , E-mail: [email protected] Telekom Austria, Telefónica, , Web: www.berginsight.com TeliaSonera, , Verizon, , Wireless Logic

Published in Sweden in December 2015 The author wishes to thank everyone who has assisted him with the report.

© Copyright 2015 Berg Insight, All rights reserved THE GLOBAL M2M/IOT COMMUNICATIONS MARKET INDEX

Index Table of Contents

Table of Contents ...... i List of Figures ...... vi Executive summary ...... 1 1 M2M/IoT networking and technologies ...... 3 1.1 Cellular M2M/IoT from to 4G and beyond ...... 3 1.1.1 2G/3G mobile networks ...... 3 1.1.2 4G mobile networks ...... 4 1.1.3 LTE-M and NB-IOT ...... 6 1.1.4 LPWA and satellite networks ...... 7 1.1.5 Cellular and LPWA technologies and the IoT market ...... 8 1.2 IoT devices in cellular networks ...... 10 1.2.1 Cellular IoT modules and hardware ...... 11 1.2.2 SIM solutions and embedded UICC ...... 14 1.2.3 IoT connectivity management platforms ...... 16 1.2.4 IoT application enablement platforms ...... 19 1.3 International coverage and alliances ...... 22 1.3.1 Roaming and international coverage ...... 22 1.3.2 Mobile operator alliances ...... 23 2 Europe ...... 29 2.1 Regional market trends ...... 29 2.1.1 Western Europe ...... 30 2.1.2 Regional market trends in Western Europe ...... 32 2.1.3 Central Eastern Europe and Russia & CIS ...... 39 2.2 Mobile operators ...... 40 2.2.1 Vodafone ...... 41 2.2.2 Deutsche Telekom ...... 44 2.2.3 Telefónica ...... 46 2.2.4 Orange ...... 49

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2.2.5 Telenor ...... 51 2.2.6 3 Group Europe ...... 53 2.2.7 Belgacom ...... 54 2.2.8 EE ...... 55 2.2.9 KPN ...... 55 2.2.10 MTS ...... 56 2.2.11 SFR ...... 57 2.2.12 Telecom Italia ...... 58 2.2.13 Swisscom ...... 58 2.2.14 Telekom Austria ...... 59 2.2.15 TeliaSonera ...... 61 2.2.16 Tele2 ...... 62 2.2.17 CDMA/LTE networks for the 450 MHz band ...... 63 2.3 M2M managed service providers ...... 64 2.3.1 Wireless Logic ...... 64 2.3.2 Sierra Wireless – Wireless Maingate and MobiquiThings ...... 65 2.3.3 Telit ...... 66 2.3.4 Cubic Telecom ...... 66 2.3.5 Stream Technologies ...... 67 2.4 LPWA networks ...... 68 2.4.1 Sigfox and network partners ...... 68 2.4.2 LoRa networks ...... 69 3 The Americas ...... 71 3.1 Regional market trends ...... 71 3.1.1 United States and ...... 73 3.1.2 ...... 75 3.1.3 Rest of Latin America ...... 76 3.2 Mobile operators ...... 77 3.2.1 AT&T ...... 78 3.2.2 Verizon ...... 80 3.2.3 Sprint ...... 82 3.2.4 T-Mobile USA ...... 84

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3.2.5 Rogers Communications ...... 85 3.2.6 ...... 85 3.2.7 América Móvil ...... 86 3.2.8 Vivo and Telefónica Latin America ...... 87 3.2.9 Other mobile operators in Latin America ...... 88 3.3 M2M managed service providers ...... 89 3.3.1 Aeris Communications ...... 90 3.3.2 KORE Telematics ...... 90 3.3.3 Numerex ...... 92 3.3.4 Wyless ...... 92 3.4 LPWA networks...... 93 3.5 Satellite networks ...... 94 3.5.1 Orbcomm ...... 95 3.5.2 Iridium ...... 96 3.5.3 Inmarsat ...... 97 3.5.4 Globalstar ...... 97 4 Asia-Pacific ...... 99 4.1 Regional market trends ...... 99 4.1.1 ...... 101 4.1.2 and ...... 103 4.1.3 Australia and New Zealand ...... 104 4.1.4 Southeast Asia ...... 105 4.1.5 India and South Asia ...... 105 4.2 Mobile operators ...... 106 4.2.1 ...... 106 4.2.2 ...... 107 4.2.3 ...... 109 4.2.4 Softbank ...... 109 4.2.5 NTT Docomo ...... 111 4.2.6 KDDI ...... 112 4.2.7 SK Telecom ...... 112 4.2.8 ...... 114

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4.2.9 ...... 115 4.2.10 Telstra ...... 116 5 Middle East & Africa ...... 117 5.1 Regional market trends ...... 117 5.1.1 Middle East ...... 117 5.1.2 Africa ...... 118 5.2 Mobile operators ...... 118 5.2.1 Etisalat ...... 119 5.2.2 FastNet ...... 120 5.2.3 Ooredoo ...... 120 5.2.4 MTN ...... 121 5.2.5 Turkcell ...... 121 5.2.6 ...... 122 6 Market forecasts and trends ...... 123 6.1 Geographic markets ...... 123 6.1.1 Global market summary ...... 124 6.1.2 Europe ...... 127 6.1.3 North America ...... 129 6.1.4 Latin America ...... 131 6.1.5 Asia-Pacific ...... 133 6.1.6 Middle East & Africa ...... 135 6.2 Vertical markets ...... 137 6.2.1 Connected cars is becoming a global phenomenon ...... 139 6.2.2 International consolidation and growth in the fleet management industry ...... 141 6.2.3 Insurance and finance drive demand for consumer aftermarket telematics .... 143 6.2.4 Nationwide smart metering rollouts behind growth in the utilities sector ...... 144 6.2.5 POS-terminals is a key application category in emerging markets ...... 145 6.3 Technology trends ...... 146 6.3.1 LTE set to become the future network platform for cellular M2M ...... 146 6.3.2 Massive interest in emerging LPWA technologies… ...... 147 6.3.3 …but will NB-IOT kill the market? ...... 148 6.4 Industry trends ...... 148

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6.4.1 M2M/IoT finally becomes a substantial business for mobile operators ...... 149 6.4.2 M2M managed service providers continue to grow and consolidate ...... 151 6.4.3 Operators in search for an optimal business model for M2M/IoT ...... 152 6.4.4 Market co-opetition requires carefully balanced strategies ...... 153 6.4.5 International cellular M2M connectivity remains a challenge ...... 153 Glossary ...... 155

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Index List of Figures

Figure 1.1: Comparison of LTE-family cellular technologies ...... 5 Figure 1.2: Comparison of LPWA and satellite technologies ...... 7 Figure 1.3: Cost comparison for IoT technologies (2015) ...... 9 Figure 1.4: Examples of cellular IoT modules ...... 11 Figure 1.5: Top wireless module vendors, by revenues and shipments (World 2014) ...... 12 Figure 1.6: Comparison of SIM form factors...... 13 Figure 1.7: Mobile operators supporting GSMA Embedded SIM, by region (Q3-2015) ...... 15 Figure 1.8: IoT connectivity platform selection by mobile operator (Q3-2015) ...... 18 Figure 1.9: Application platform and mobile operator (Q3-2015) ...... 20 Figure 1.10: Mobile operator M2M alliances (Q3-2015) ...... 24 Figure 2.1: Mobile operators in Western Europe by M2M subscriber base (Q4-2014) ...... 31 Figure 2.2: Europe M2M connectivity market data (Q4-2014) ...... 33 Figure 2.3: cellular M2M market connectivity data (2013–2015) ...... 34 Figure 2.4: UK cellular M2M market connectivity data (2013–2014) ...... 35 Figure 2.5: cellular M2M market connectivity data (2014–2015) ...... 36 Figure 2.6: & Portugal cellular M2M market connectivity data (2013–2015) ...... 37 Figure 2.7: Benelux cellular M2M market connectivity data (2013–2015) ...... 38 Figure 2.8: Nordics cellular M2M market connectivity data (2013–2015) ...... 39 Figure 2.9: Telefónica M2M subscribers by country (2014–2015) ...... 49 Figure 2.10: Financial data for Telenor Connexion (2010–2014) ...... 52 Figure 2.11: Sigfox network partners in Europe (Q3-2015) ...... 69 Figure 2.12: Planned LoRa network rollouts in Europe (Q3-2015) ...... 70 Figure 3.1: The Americas M2M connectivity market data (Q3-2015) ...... 72 Figure 3.2: US cellular M2M market connectivity data (2012–2015) ...... 75 Figure 3.3: Brazil cellular M2M market connectivity data (2013–2015) ...... 76 Figure 3.4: Estimated number of M2M subscribers in Latin America ex. Brazil (H1-2015) ...... 77 Figure 3.5: Telefónica M2M subscribers in Latin America by country (2013–2015) ...... 88 Figure 3.6: Satellite network operators by M2M subscriber base (Q3-2015) ...... 95

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Figure 4.1: Asia-Pacific M2M connectivity market data (2014/2015) ...... 100 Figure 4.2: Japan cellular M2M market connectivity data (2012–2015) ...... 103 Figure 4.3: M2M subscribers by application category (South Korea, August 2015) ...... 104 Figure 5.1: Turkey cellular M2M market connectivity data (2013–2015) ...... 118 Figure 6.1: Key regional markets for cellular M2M (Q1-2015) ...... 123 Figure 6.2: Cellular M2M subscriber forecast, by region (World 2014–2020) ...... 125 Figure 6.3: Cellular M2M network revenue forecast, by region (World 2014–2020) ...... 126 Figure 6.4: Cellular M2M communication market forecast (Europe 2014–2020) ...... 128 Figure 6.5: Cellular M2M communication market forecast (North America 2014–2020) ...... 130 Figure 6.6: Cellular M2M communication market forecast (Latin America 2014–2020) ...... 132 Figure 6.7: Cellular M2M communication market forecast (Asia-Pacific 2014–2020) ...... 134 Figure 6.8: Cellular M2M communication market forecast (MEA 2014–2020) ...... 136 Figure 6.9: Cellular M2M communication market forecast, by vertical (World 2014–2020) ... 138 Figure 6.10: OEM telematics attach rates in new vehicles, by region (2015/2020) ...... 139 Figure 6.11: Top 25 international providers of fleet management solutions (2015) ...... 142 Figure 6.12: POS-terminal installed base in key emerging markets (World 2014) ...... 145 Figure 6.13: Cellular IoT device shipments, by network technology (World 2014–2020) ...... 147 Figure 6.14: Top 10 mobile operators by M2M subscriber base (World Q1-2015) ...... 149 Figure 6.15: Quarterly M2M/IoT revenue estimates for major operators (Q3-2015) ...... 150 Figure 6.16: Top 5 M2M managed service providers by subscriber base (Q4-2015) ...... 151

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viii M2MSTRATEGIC RESEARCH RESEARCH SERIES SERIES THE GLOBAL M2M/IOT COMMUNICATIONS MARKET SUMMARY

Summary Executive summary

Berg Insight estimates that the global number of cellular M2M subscribers increased by 23 percent during 2015 to reach 265.2 million at the end of the year – corresponding to around 3 percent of all mobile subscribers. Until 2020, the number of cellular M2M subscribers is forecasted to grow at a compound annual growth rate (CAGR) of 22.9 percent to reach 744.2 million at the end of the period. During the same period, cellular M2M network revenues are forecasted to grow at a CAGR of 23.3 percent from € 8.0 billion in 2015 to approximately €_22.8 billion in 2020. Meanwhile the monthly ARPU is expected to remain stable at around €_2.50.

East Asia was the largest region, closely followed by Western Europe and North America. Altogether they accounted for around 76 percent of the global cellular M2M subscriber base at the end of 2015. Until 2020, the relative share of the regions is expected to decrease slightly as adoption takes off in other parts of the world. At the end of 2015, East Asia was the largest regional market with 90.4 million cellular M2M subscribers, growing 25 percent year- on-year. Western Europe came second with 59.0 million M2M subscribers and 21 percent year-on-year growth. North America ranked third with 52.5 million cellular M2M subscribers, and a year-on-year growth rate of 24 percent. Among individual countries, China was clearly number one with around 70 million M2M subscribers, ahead of the US with approximately 50 million M2M subscribers. The combined size of the EU+EFTA market was around 64 million M2M subscribers.

Berg Insight believes that M2M/IoT has reached a stage of early maturity where a number of players have capitalised on envisioned opportunities to develop substantial new businesses. At the beginning of 2015, the ten largest mobile operators in the M2M market had an estimated combined subscriber base of 164.3 million and year-on-year growth rates of 15–35 percent. China Mobile has an exceptional market position, as the dominant player in the domestic mobile industry. At the end of Q1-2015, the M2M subscriber base was an estimated

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46.2 million. Vodafone and AT&T are the top international market players with their respective main bases in Europe and North America. The groups were head-to-head in terms of volume with over 21 million M2M subscribers each. China Unicom and Verizon Wireless were other top five players with 13–14 million connections each. Telefónica, Softbank/Sprint, Deutsche Telekom, Telenor and America Móvil were other top ten players with 8–12 million M2M subscribers each. A common characteristic for them all is that they are multi-regional operations across Europe, the Americas or Asia-Pacific.

Another sign of maturity in the M2M/IoT industry is the release of revenue figures from some telecom operator groups. Verizon and Vodafone reported quarterly M2M/IoT revenues in the range of € 150–200 million each in the first half of 2015 and could be on track to reach € 1 billion on an annual basis within a few years’ time. Both groups have substantial telematics businesses, originally established through acquisitions. Besides traditional connectivity and professional services, they generate a considerable share of their sales from automotive products, driver assistance services and connected automotive applications.

The wireless M2M/IoT technology landscape is rapidly changing. 2G networks are gradually taken out of service to be replaced by more efficient 4G technology. At the same time, new enhancements are being added to the LTE standard to better accommodate typical M2M use-cases with large numbers of devices and very low data requirements. In a few years, LTE- M wireless modules will be available for the same price as today’s GPRS modules, delivering superior performance using less network resources. A new generation of LPWA technologies hit the market during 2015, offering an alternative roadmap to low cost IoT connectivity outside of the traditional mobile network environment. At the end of the year, the established players in the telecom industry however took back the initiative. In December 2015, the 3GPP accepted the new NB-IoT standard for lightweight M2M communication based on mobile network infrastructure. The NB-IoT and LTE-M standards will be included in 3GPP Release 13, due for publication in January 2016. Berg Insight believes that the initiative will become successful in establishing a global standard for lightweight IoT communication on public networks in the next 3–5 years. NB-IOT has good prospects of becoming the dominant technology for LPWA, although other standards will most likely also remain strong in niche segments.

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Chapter 1 M2M/IoT networking and technologies

1 M2M/IoT networking and technologies

1.1 Cellular M2M/IoT from 2G to 4G and beyond Cellular networks are the leading platforms for wireless communication worldwide, providing nearly ubiquitous voice and data connectivity for billions of people and devices worldwide. This makes cellular technologies essential for machine-to-machine (M2M) communication and the of Things (IoT). GSM/GPRS/EDGE is the largest global second generation (2G) standard for mobile communication, available in almost every part of the world. The lesser CDMA standard is primarily confined to Asia-Pacific and North America. WCDMA/HSPA that builds on GSM/GPRS/EDGE has become the leading standard for third generation (3G) mobile communication, covering the greater part of the world’s population. Alternative technologies are EVDO that builds on CDMA and TD-SCDMA – a domestic 3G standard developed in China. For the fourth generation (4G) of mobile networks, LTE is emerging as the leading global standard, adopted by all leading players in markets that were previously divided between GSM/HSPA and CDMA/EVDO operators such as the US and Japan.

1.1.1 2G/3G mobile networks 2G/3G networks provide almost complete coverage of all densely populated parts of the world’s landmass. GSM-family technologies are the dominant platform with a combined market share of almost 90 percent. Conventional GSM remains the largest technology in terms of volume, around 4 billion active subscribers in 220 countries and a market share of 60 percent at the end of 2014. Around 600 out of 700 live networks have been upgraded with HSPA, enabling 3G/3.5G mobile broadband access at peak data rates of 7.2 Mbps or higher in combination with considerably reduced network latency. Widespread adoption of and the use of USB-dongles for broadband Internet access are the main drivers for migration of subscribers from GSM/GPRS/EDGE to HSPA, which is taking place in developed, as well as emerging markets. At the end of 2014, HSPA was the world’s second largest mobile technology with 1.8 billion subscribers and a market share of 25 percent.

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CDMA is the main alternative 2G/3G technology platform for cellular communication. At the end of 2014, it ranked as the world’s third largest mobile technology with 0.5 billion subscribers and a market share of 7 percent. At present, CDMA has significant market positions in North America and parts of Asia-Pacific, but the future prospects are bleak as most major mobile operators previously supporting the technology have opted for LTE as their future platform. In North America, CDMA services are however being maintained to provide a fall-back and extended coverage in sparsely populated areas. CDMA is also gaining traction as a dedicated platform for mobile in the 450 MHz frequency band. TD-SCDMA is an alternative 3G technology platform, developed in China and only deployed in the Chinese market. A key differentiating feature of the technology is the use of TDD (Time-Division Duplexing) signalling to more easily accommodate asymmetric traffic with different data requirements in the uplink and the downlink. TD-SCDMA has been deployed as the 3G network platform of the world’s largest mobile operator China Mobile. At the end of 2014, the subscriber base was 0.2 billion, corresponding to a global market share of 3 percent.

While 2G networks are taken out of service in some world regions, there are at the same time also plans for improving the technology and extending lifetime. EC-GSM (Extended Coverage GSM) is an initiative aiming to improve the device reachability by up to 20 dB and create a seven-fold improvement in the signal range of low-rate applications. This would extend reach into deep indoor basements and remote rural areas. During 2016, Ericsson and Orange will perform one of the first trials of the technology in France.

1.1.2 4G mobile networks The first 4G networks based on LTE technology were launched in 2011. At the end of 2015, 4G networks covered around 35 percent of the world’s population and the LTE subscriber base was 875 million. LTE is the next step in the evolution of mobile communication technologies. Designed to be backwards-compatible with GSM and HSPA, LTE incorporates MIMO technology in combination with OFDM modulation in the downlink and Single Carrier FDMA in the uplink to provide high levels of spectral efficiency and end user data rates exceeding 100 Mbps, coupled with major improvements in capacity and reductions in latency. LTE supports channel bandwidths from 1.25 MHz to 20 MHz and both FDD and TDD

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operation. Future releases of LTE are planned to incorporate new enhancements such as higher order MIMO (4x4 and beyond) enabling data rates of up to 1 Gbps, use of non- contiguous spectrum to alleviate frequency range issues and full incorporation of femtocells using self-organising network techniques. Adopting LTE is the natural choice for GSM/HSPA operators as they start introducing fourth generation mobile communications technology. In addition, many CDMA operators have chosen LTE as their future networking platform. By the end of 2015 it is projected that there will be around 450 commercial networks in all world regions.

From the onset, LTE has primarily been focused on high data-rate broadband services. A number of enhancements can be made to the , the core network and the subscription database to better comply with the specific requirements of M2M/IoT applications. The radio network needs to be optimised to enable simple, low cost devices. The transmission and higher layer protocols need to be designed to draw minimum power to enable a more than 10-year battery life and enhanced coverage is required to reach deep indoors and into rural areas. The network elements need to handle charging and subscription without physical Universal Integrated Circuit Card (UICC) cards, as well as admission control and overload in the network, including massive support for small packages. Various enhancements in these areas are included on the technical roadmap for LTE and several have been introduced in the latest version LTE Rel-12 from the end of 2014. These include LTE Cat-0 low cost M2M devices optimised for reduced data rates (300 kbps) with material costs comparable to GPRS. With the power saving mode (PSM) feature included in the release, chipset vendors claim they could reach battery life-times of up to 10 years.

Figure 1.1: Comparison of LTE-family cellular technologies

Technology LTE-Advanced LTE Cat-0 LTE-M NB-IOT Data >10 Mbps <1 Mbps 0.1–1 Mbps <0.1 Mbps Bandwidth n x 20 MHz 20 MHz 1 MHz 200 KHz Availability Existing LTE Rel 12 LTE Rel 13 LTE Rel 13

Source: Qualcomm

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1.1.3 LTE-M and NB-IOT Several new enhancements relevant for IoT have been included among the projects approved for the next major release LTE Rel-13 that should be finalised in January 2016. The first set of enhancements are referred to as LTE-M, which defines a new low complexity device category type that supports reduced , reduced transmit power, reduced support for downlink transmission modes, ultra-long battery life via power consumption reduction techniques and extended coverage operation. During the first half of 2015, mobile operators such as Vodafone and KT announced trials and demonstration projects of pre- standard LTE-M networking solutions with major telecom vendors and additional projects are planned for 2016. In September 2015, the members of 3GPP reached an agreement to jointly define a new narrowband radio technology called NB-IOT to complement LTE-M. NB-IOT will provide improved indoor coverage, support of massive number of low-throughput Things, low-delay sensitivity, ultra-low device cost, lower device power consumption, and optimized network architecture. The technology can be deployed in-band, utilizing resource blocks within the normal LTE carrier, or in the unused resource blocks within a LTE carrier’s guard- band, or standalone for deployments in dedicated spectrum. The technology is also particularly suitable for the re-farming of GSM channels.

In November 2015, China Mobile, China Unicom, Ericsson, Etisalat, the GSMA, GTI, Huawei, Intel, LG Uplus, Nokia, Qualcomm, Telecom Italia, Telefonica and Vodafone established a new organisation called NB-IoT Forum to accelerate the development and adoption of the standard. The following month, the organisation announced that an agreement had been reached about the technical specifications for the NB-IOT standard. Previously there had been two rival concepts – NB-CIoT developed by Huawei and Vodafone and NB-LTE backed by Ericsson, Nokia and Intel. As part of the agreed specification, the downlink will use 180 kHz OFDM modulation with twelve 15 kHz sub-carriers. The uplink will have single tone for power optimisation or multi tone transmission for higher data rates. Early pilots of pre- standard NB-IOT technology were launched by Deutsche Telekom and Vodafone during 2015. The official standard is expected to be published with 3GPP’s Release 13 in early 2016 and commercial rollouts may start at the end of the year.

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1.1.4 LPWA and satellite networks Low power wide area (LPWA) networking is based on the utilisation of unlicensed ISM-band radio frequencies and low power radio transmitters to create networking solutions optimised for low hardware cost, long battery life and ubiquitous coverage. There is always a trade-off between cost and power consumption on the one hand and network performance on the other, which needs to be balanced according to the needs of a specific application. LPWA networking was first developed for the earliest telemetry applications and has later evolved into progressively more advanced technologies using the latest wireless networking techniques.

Figure 1.2: Comparison of LPWA and satellite technologies

Technology Data capabilities LoRa 0.3–50 kbps Wi-SUN 50–400 kbps NB-IOT <100 kbps Weightless-P 0.2–100 kbps

Ingenu 10 kilobytes per device and day Sigfox 12 bytes messages, 140 times per day Satellite IoT 0.01–10 kilobytes data messages, long latency

Source: Berg Insight

Today there are two main forms of LPWA technologies. The first is proprietary or semi- proprietary technology platforms created for specific application areas such as smart metering or SCADA (supervising control and data acquisition). The largest deployments connect millions of nodes through point-to-multipoint or mesh configuration. In recent years, there have also been initiatives to create open standard LPWA networking platforms, optimised for wireless IoT communication. So far LoRa and Sigfox have gained most support, with rollouts planned or underway in multiple countries. Sigfox has signed

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network partners across most of Western Europe and will start a rollout in North America during 2016. LoRa is supported by leading mobile operators in Benelux, France and , which all plan nationwide network rollouts. Ingenu, formerly known as On-Ramp Wireless, has announced plans to roll out a nationwide network in the US, starting in major metropolitan areas. Wi-SUN and Weightless are significant standards for general purpose LPWA and smart grid communications respectively. In December 2015, Silver Spring Networks announced its new Starfish public wireless IoT network service based on the Wi- SUN standard. Starfish will feature up to 1.2 Mbps in speed, 10 millisecond latency and up to 50 miles in point-to-point range. The first Starfish metropolitan area networks will be launched in the US cities of Chicago, San Antonio and San José, the European cities of Bristol, Copenhagen and Glasgow and Kolkata, India.

As described above, the leading established players in the mobile industry are launching the NB-IOT standard to cover the need for LPWA networking. The GSMA supports the efforts through the Mobile IoT Initiative, supported by AT&T, Alcatel-Lucent, Bell Canada, China Mobile, China Telecom, China Unicom, Deutsche Telekom, Ericsson, Etisalat, Huawei, Gemalto, Intel, KDDI, Nokia, NTT Docomo, Ooredoo, Orange, Qualcomm, Sierra Wireless, Singtel, Telecom Italia, Telefonica, Telenor, Telstra, u-blox and Vodafone.

A complicating factor in the standardisation of LPWA is the broad scope of technologies. LoRa, Wi-SUN and other technologies based on the 802.15.4 standard have complete networking stacks and support data rates of up to 50–100 kbps. Sigfox and Ingenu, as well as satellite based technologies, are optimised for sending and receiving very short data messages. This implies that the LPWA market will either remain divided into two distinct segments, served by separate technologies, or a converged technology platform supporting disparate use-cases. NB-IOT could potentially become a platform for achieving some level of interoperability between different technologies in the LPWA space.

1.1.5 Cellular and LPWA technologies and the IoT market The market for IoT networking technologies is fragmented. While the diversity of competing standards is one of the causes for the fragmentation, Berg Insight believes that the main reason is the broad variety of application environments, communication needs and cost constraints. IoT comprises everything from premium cars with the computing power of

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hundreds of microprocessors powered by an engine to low-cost sensors based on basic microcontrollers running on coin-cell batteries. One size does not fit all and therefore fragmentation will remain. Nevertheless, a degree of convergence can be expected within the main technology segments. In wide area networking, IoT-optimised versions of LTE are expected to converge with emerging LPWA standards. When it comes to home and personal area networking (HAN/PAN), there is a probability that competing protocols based on the 802.15.4 standard will become interoperable and converge.

Figure 1.3: Cost comparison for IoT technologies (2015)

Technology Cost per device LTE US$ 35–50 HSPA US$ 25–35 GPRS US$ 10–15 Proprietary RF/LPWA US$ 2–5 Wi-Fi/Bluetooth Classic US$ 1.0 802.15.4/Bluetooth Smart US$ 0.5

Cost targets for new technologies LTE CAT-1/0 US$ 15–20 LTE-M US$ 10–15 NB-IOT US$ 5–10

Source: Berg Insight

There are significant differences in hardware cost for IoT communication devices. Cellular is the most expensive technology. During 2015, the average cost for modules in Western markets were in the span US$ 10–15 for 2G, US$ 25–35 for 3G and up to US$ 50 for 4G. Domestic pricing in China was even lower with 2G modules sold for as little as US$ 3. LTE Cat-0 and LTE-M are designed to reduce the cost of 4G modules to the current levels of 3G and 2G respectively over the coming years. LPWA and WLAN/WPAN chipsets are

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considerably less expensive, although the cost of industrial-grade communication modules can be in the same range as 2G/3G modules due to small volumes. Proprietary RF-chipsets may cost in the range US$ 2–4, while standard Wi-Fi and Bluetooth chipsets cost around US$_1. Bluetooth Smart and 802.15.4 chipsets cost around US$ 0.50 in high volumes.

Cellular has a strong overall market position for automotive, industrial, smart grid, security and other enterprise/government applications. Mobile networks offer wide area coverage and high performance in populated areas. HSPA/LTE meets the most demanding requirements, enabling IP-based broadband speed communication at almost any location. For less demanding applications, 2G remains a solid low-cost platform in most world regions. Over the coming years, IoT optimised versions of LTE promise to offer a sound migration path from 2G to 4G with maintained hardware cost. In the longer term, the new NB-IOT technology may overcome the limitations in terms of cost and power consumption that limit the adoption of cellular technologies in constrained and cost sensitive high volume applications.

LPWA is a leading family of technologies for smart grid and smart cities applications. The family can be divided in two main categories – conventional networking technologies based on the 802.15.4 standard and ultra-narrowband (UnB) technologies optimised for highly constrained application environments with very minimal data requirements. Various implementations of 802.15.4 are widely used for private IoT networking solutions for applications such as smart metering and streetlight management. LoRa is positioned as a general-purpose networking standard in this field, enabling the deployment of public networks for a broader range of applications. Wi-SUN is a standard specifically optimised for smart grid applications. UnB technologies are positioned to serve the mentioned segments, as well as to enable connectivity for a wider set of objects that are not currently being networks. Through extensive area coverage, UnB also serves as a low-cost alternative to satellite technologies in vertical markets such as transport and oil & gas.

1.2 IoT devices in cellular networks IoT communication is a separate category in the mobile communications market with a number of distinct characteristics. On the device side, the core component is embedded wireless modules based on 2G/3G/4G chipsets that increasingly use ruggedized or

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embedded SIM solutions. At the network level, IoT communication is generally supported by dedicated connectivity management platforms, managing devices, subscriptions and billing. These platforms can be integrated with various application enablement platforms to facilitate communication between IoT devices and cloud applications.

Figure 1.4: Examples of cellular IoT modules

Source: Sierra Wireless, Telit and u-blox

1.2.1 Cellular IoT modules and hardware Cellular chipset technology is at the core of all cellular IoT devices. Thus they share the same technology platform as other cellular devices such as handsets and USB-modems. Product development at the chipset level is however very complex and time consuming. For this reason, most developers use ready cellular IoT modules in standard form factors that can easily be embedded on existing circuit board designs. In many cases the module is first packaged as part of a purpose-built M2M terminal which in turn is integrated with the final solution. The diversity of development approaches is reflected in the variations in the design of wireless M2M devices for different applications. POS-terminals with built-in cellular connectivity are available as off-the-shelf products, while most remote product management solutions rely on purpose-built plug-in M2M terminals. The automotive industry has the widest possible spectrum of solutions, ranging from M2M modules deeply integrated with the on- board electronics to standalone tracking boxes that are simply attached to the vehicle. This environment fosters a diverse value chain comprising a multitude of players in the telecom, IT and manufacturing industries.

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Figure 1.5: Top wireless module vendors, by revenues and shipments (World 2014)

Company Sales (US$m) Market share Shipments Sierra Wireless 477 35 % 16,000,000 Gemalto 264 19 % 13,500,000 Telit 253 18 % 13,000,000 u-blox 81 6 % 4,500,000 SIMCom 71 5 % 12,400,000 Quectel 50 4 % 5,500,000 Other 163 12 % 14,500,000 Total 1,379 100 % 80,400,000

Source: Berg Insight

Cellular M2M/IoT module vendors play a key role in the ecosystem as the principal suppliers of hardware components that connect IoT devices to mobile networks. IoT modules constitute the main subcategory of the embedded wireless module product group, which also includes mobile broadband modules for the computing industry. Over the past years there has been much consolidation in the segment and a trend towards broader IoT offerings. Sierra Wireless is firmly established as the number one by revenues through the combination of a favourable product mix focused on high-end 3G/4G products and a series of acquisitions of smaller competitors. The company is focused on expansion into adjacent markets such as intelligent wireless gateways and M2M connectivity services. The industry veteran Cinterion, with its roots in the Siemens group, was renamed Gemalto M2M in May 2013, marking the parent group’s increasing commitment to the M2M industry. Gemalto takes a broad approach to M2M/IoT, seeking synergies between the group’s MNO and security solutions and traditional hardware products. Telit has made a series of complementary acquisitions over the past years, extending its product portfolio with GNSS chipsets, automotive chipsets, mobile connectivity services and the ILS application enablement platform. In the longer term, the company seeks a transformation to a more services-oriented business model. u-blox is the main market challenger in Europe and North America, leveraging on its leading position in

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GNSS to provide complementary communication solutions. In China, SIMCom has managed to defend its leading market position in an environment characterised by dramatic volume growth and price reductions. Quectel, Fibocom and the telecom giants Huawei and ZTE are other significant Chinese cellular M2M/IoT module vendors.

Berg Insight estimates that global shipments of embedded cellular modems increased by 16 percent in 2014 to reach 80.4 million. Annual module revenues for the three largest market players Sierra Wireless, Gemalto and Telit increased by 23 percent to US$ 994 million, with the total market value reaching approximately US$ 1.4 billion. Sierra Wireless was the number one supplier of wireless M2M modules by revenues and volume, supported by the acquisition of Sagemcom M2M. Including products for the PC and networking markets, Sierra Wireless sales of embedded modules reached US$ 477 million. Gemalto M2M and Telit were almost head to head with estimated module sales of US$ 264 million and US$ 253 million respectively. Sierra Wireless was also in the lead in terms of volume, shipping an estimated 16.0 million devices, compared to 13.0–13.5 million units for Gemalto and Telit. SIMCom ranked fourth in shipments with 12.4 million units, far ahead of Quectel in fifth place with 5.5 million units. u-blox ranked fourth in terms of revenues but its shipments were only 4.5 million units.

Figure 1.6: Comparison of SIM form factors

Form factor Length Width Thickness Full-size (2FF) 86 mm 54 mm 0.76 mm Mini-SIM 25 mm 15 mm 0.76 mm Micro-SIM 15 mm 12 mm 0.76 mm Nano-SIM 12 mm 9 mm 0.76 mm SMD SIM (MFF2) 5 mm 6 mm 0.5–0.6 mm

Source: Berg Insight

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1.2.2 SIM solutions and embedded UICC M2M has special requirements on SIM solutions and is one of the main drivers behind the development of new technologies and standards in this area. Traditional SIM-cards are sensitive to a wide range of conditions common for industrial application environments including high temperature, shocks, vibration and humidity. A new generation of enhanced SIM solutions, developed by leading vendors such as Gemalto, G&D and Oberthur Technologies is however addressing these issues. The solutions are either to make more robust SIM-cards in the traditional form factor or to use SMD packaging. Enhanced M2M SIM- cards have extended lifespan and reinforced resistance to environmental factors. SMD SIMs have the same robust qualities and in addition they are highly compact and can be handled just like any other electronic component during manufacturing. There are also embedded SIM solutions that can be integrated into wireless M2M modules. One of the advantages with SMD SIMs is that they simplify the logistics process. Delivery and activation of SIM-cards are a complex but critical part of all M2M deployments.

Parallel to the development of ruggedized and embedded SIM-cards, there is a trend of miniaturization of conventional SIM-cards. The Micro-SIM form factor has been popularised by Apple that uses it in the iPhone and iPad. The even smaller Nano-SIMs are 60 percent smaller than conventional SIM cards, measuring only 12 x 9 millimetres. One major application area for the Micro-SIM and Nano-SIM form factors is tablets and connected consumer electronics devices.

Next generation embedded UICC solutions The evolution of wireless M2M communication and connected devices is driving a paradigm shift in mobile network subscription management. Traditional SIM solutions have several limitations that hold back the development of new areas of cellular communication. Device design and miniaturisation is limited to the need for physical connectors. The physical provisioning of SIMs creates logistical challenges in distribution and the lock-in effect to one MNO from the point of manufacturing puts limitations on distribution models, subscription management and commercial relationships. The biggest challenges are faced by OEMs and device manufacturers shipping products to international markets, where the final destination for a product may not be known at the time of production.

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eUICC and remote provisioning is designed to address these issues. Instead of delivering a pre-configured smartcard, owned by one particular MNO, the eUICC is produced with a set of standard features to enable personalisation at a later stage. MNO data can be securely remotely loaded at any time during the device’s lifespan and potentially owned by an alternative party. The concept establishes a new order in the supply chain where a connected device can be configured for an MNO of choice in its final destination country and where eUICC owners (e.g. device manufacturers, solution providers or end-customers) can remotely switch MNOs for connected devices several times during their lifespan. One of the main challenges is to maintain the same level of security as provided today in the new subscription management infrastructure.

Figure 1.7: Mobile operators supporting GSMA Embedded SIM, by region (Q3-2015)

Operator Region Operator Region AT&T North America Tele2 Europe Bell Canada North America Telefónica Europe Etisalat Middle East TeliaSonera Europe Indosat Asia-Pacific Vivo Latin America NTT Docomo Asia-Pacific Vodafone Europe, Asia-Pacific Orange Europe

Source: GSMA

The GSMA began developing an industry standard for eUICC in 2010 and the first specifications were released at the end of 2013. The standard accommodates for four defined use-cases: over-the-air subscription download, remote swapping of networks from one MNO to another, transfer of subscription from one device to another and remote subscription termination. The latest release of the GSMA Embedded SIM Specification from July 2015 includes a feature called Profile Interoperability, which enables an operator to create a SIM Profile, which can then be downloaded to any compliant eUICC regardless of the manufacturer. This feature will allow operators to easily connect a greater number of M2M

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devices, opening up the market, reducing fragmentation and providing additional commercial flexibility for OEMs and M2M service providers. In October 2015, the GSMA reported that 23 mobile operators worldwide supported the standard. Commercial solutions were available from 11 of them – AT&T, Bell Canada, Etisalat, Indosat, NTT Docomo, Orange, Tele2, Telefónica, TeliaSonera, Vodafone and Vivo. América Móvil, China Mobile and KDDI are also expected to launch solutions in a near future.

1.2.3 IoT connectivity management platforms The first generation of M2M connectivity management platforms introduced by mobile operators were essentially modified versions of existing billing and subscription management systems, originally designed to manage voice traffic. Some mobile operators went further and developed complete proprietary service delivery platforms for IoT. Several leading industry players including Vodafone, Deutsche Telekom, Telefónica, Orange and Verizon are holding on to proprietary IoT connectivity platforms to serve all or parts of their customer bases. Jasper introduced the first third party IoT connectivity platform in 2009 and was followed by Ericsson in 2011. Both vendors have achieved broad international coverage with their respective platforms and established themselves as the unrivalled leaders within the segment, holding a combined market share of an estimated 80 percent in terms of number of connections. Ericsson has partnered with two of the main international mobile operator alliances for IoT – the Global M2M Association and the Bridge Alliance. A group of mobile operators using the Jasper platform have established the M2M World Alliance.

Market challengers include traditional OSS/BSS vendors, such as Amdocs, Comarch, nTels and Telenity and IoT managed service providers like Aeris Communications, KORE Telematics and Stream Technologies. Sprint has a close collaboration with Aeris around the Command Centre M2M connectivity platform, which is based on Aeris GSP. During 2015, Softbank announced plans to support Sprint’s platform for deployments in Japan.

One notable market trend recently is that a growing number of mobile operators adopt a multi-platform strategy. Orange and Telefónica use both proprietary and third party M2M platforms, whereas Telenor Connexion became the first player to support both Ericsson and Jasper in 2014 and was later followed by Softbank. Most of the largest international mobile operator groups either develop or have in the past developed their own proprietary M2M

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connectivity management platform. Vodafone launched its GDSP platform in 2010 and remains dedicated to using an in-house solution. Vodafone GDSP is the largest among the proprietary M2M platforms, used by the global telecoms group as well as some of its partner networks, such as SFR in France. Telefónica was early to partner with Jasper, but decided eventually to create an in-house platform as a complement for certain categories of customers and projects. The group’s Smart M2M platform is now available in its main market territories.

The M2M connectivity platform category is evolving in the direction of greater sophistication and more diversity to accommodate for a wide range of customer needs. Jasper and Ericsson have established themselves as the undisputed leaders for cloud-based billing and management platforms, providing the essential functionalities for M2M connectivity service providers. Highly complex applications such as multi-national automotive telematics solutions supporting advanced use cases like split billing do however still require bespoke solutions. These needs can still justify the development of proprietary M2M platforms among the largest international mobile operators. On the other end of the scale, there is a demand for low-cost M2M platforms to ensure profitability for M2M applications generating monthly APRUs of just a few euros at most.

Berg Insight believes that the M2M connectivity platform market will divide into three main segments, reflecting the needs of different mobile operators. Top international mobile operators will deploy bespoke as well as third party platforms, incorporating components from multiple vendors and tailored to meet the requirements of specific vertical segments. There is already a clear trend of platform diversification, with operators such as AT&T and Telefónica leading the way with dedicated solutions for the automotive and metering segments respectively. Regional telecom groups and national Tier 1/2 operators in major markets will find the best value in more advanced third party platforms from the likes of Ericsson and Jasper, whereas Tier 2/3/4 in larger markets and all players in smaller markets will need to consider low cost alternatives. Managed service providers like KORE Telematics, Stream Technologies and emerging markets oriented OSS/BSS vendors like Telenity have started to address these opportunities and may be joined by others. Local platform hosting capabilities is a key success factor as many countries outside of Europe and North America have regulatory requirements that prohibit cloud-based M2M platforms.

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Figure 1.8: IoT connectivity platform selection by mobile operator (Q3-2015)

Operator Platform Operator Platform América Móvil Jasper Personal Telecom Jasper AT&T Jasper Portugal Telecom SmartM2M PT Axiata Ericsson POST Luxembourg Jasper Ericsson Jasper Celcom nTels Rogers Jasper China Mobile Huawei/ZTE SFR GDSP China Telecom ZTE SK Telecom Proprietary/nTels China Unicom Jasper SingTel Jasper CSL Jasper Softbank Jasper/Ericsson/Spr. Deutsche Telekom Proprietary Sprint Aeris DiGi Ericsson Swisscom Ericsson Dialog Ericsson Tele2 Jasper Dtac Ericsson Telecom Italia Proprietary/Jasper EE Jasper Telefónica SmartM2M/Jasper Etisalat Jasper Telekom Austria Comarch KPN Jasper Telenor Ericsson/Jasper Maxis Proprietary TeliaSonera Ericsson Megafon Ericsson Telkomsel Jasper Mobily Jasper Telstra Jasper MTN ZTE Jasper NOS Jasper Tigo Jasper NTT Docomo Prop./Jasper Turkcell Ericsson Ooredoo Ericsson Verizon Wireless Proprietary Optus Jasper Vimpelcom Jasper Orange Prop./Ericsson Vodafone GDSP

Source: Berg Insight

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1.2.4 IoT application enablement platforms Application enablement platforms (AEPs) constitute a relatively new solution category, although some of the products included have existed for a long time. AEPs are designed to simplify the development of M2M/IoT solutions by providing developers with tools and APIs for integrating connectivity, enable device management and collect data from devices. The most important features are however the tools and APIs for creating business applications including data management, event processing, automated tasks, business logic and data analytics. From end-to-end, application enablement platforms must be able to support a great diversity of devices, networking standards, data protocols and other relevant industry standards. In reality, it is unrealistic for any vendor to support every major vertical industry and application environment on a single platform. AEPs therefore must be either highly generic or focused on certain market segments. This means that the marketplace is likely to remain diverse without the emergence of one or a few dominant players.

The origins of the first application enablement platforms date back to the early 2000s, when companies like Anyware Technologies, Axeda, Arrayent, Device Insight, ILS Technology and SensorLogic introduced their first solutions. A wave of new entrants followed in the years 2008 through 2011, including 2lemetry, Cumulocity, Etherios, EVRYTHNG, PLAT.ONE, ThingWorx and Xively. The application enablement platform market is still in a relatively early phase with a fairly limited number of providers specialising in different market segments. The AEP market is also gaining interest from the broader M2M/IoT ecosystem expressed in the form of acquisitions and establishment of partnerships.

The leading IoT module vendors were among the first to take an interest in application enablement platforms in order to broaden their market propositions beyond core hardware products that are experiencing declining margins. Wavecom (now Sierra Wireless) acquired Anyware Technologies in 2008, Gemalto bought SensorLogic in 2011, Digi International acquired Etherios in 2012 and Telit purchased ILS Technologies in 2013. The AEP segment has also attracted interest from the IT sector. PTC, a leading global supplier of software solutions for the manufacturing industry, spent roughly US$ 280 million on the acquisitions of ThingWorx and Axeda in 2013 and 2014 respectively. The high valuation was motivated by the added capability for PTC to help its customers with rapid deployment of smart connected products and related services. More recently, in March 2015, Amazon entered the AEP

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market when it bought 2lemetry for an undisclosed sum. Several other major IT companies are developing their own application enablement platforms. Bosch launched its IoT Suite in early 2013. IBM introduced its IBM Internet of Things Foundation cloud service in October 2014 and BlackBerry announced its BlackBerry IoT platform in January 2015. The managed service provider Aeris Communications added its AerCloud service in 2013 and can now offer an M2M/IoT solution spanning from network connectivity to an application enablement platform with data management and analytics functionality.

Most application enablement platform vendors are now complementing their direct sales efforts by creating ecosystems of partners that act as lead generators, resellers and integrators. Ecosystem partners range from chipset and device vendors, to mobile operators, managed M2M connectivity providers, global and regional system integrators, vertical solution providers, consultancies and engineering companies.

Figure 1.9: Application platform and mobile operator partnerships (Q3-2015)

Operator Platform Operator Platform AT&T Etherios, ILS, PTC Sprint Etherios, ILS Belgacom Telit/ILS Telecom Italia PLAT.ONE Bell PTC Telefónica Carriots British Telecom PLAT.ONE Telkomsel PTC Deutsche Telekom Cumulocity, PTC, T-Mobile USA Etherios, ILS PLAT.ONE EE Cumulocity Verizon Wireless Etherios, PTC, ILS Elisa PTC KORE Telematics Etherios, PTC Etisalat Cumulocity, PTC Stream Technologies PTC NTT Docomo PTC Wyless PTC SingTel SeeControl

Source: Berg Insight

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In recent years, a number of mobile operators and managed connectivity providers have partnered with IoT application enablement platform providers for joint market propositions, sometimes using multiple vendors for different market segments. Whereas most Tier 1 and many Tier 2 operators have now selected and integrated an IoT connectivity management platform, the AEP ecosystem is much less mature with only about two dozen partnerships announced thus far. Many of the partnerships also center on device cloud solutions rather than complete end-to-end application development.

PTC has gained an early lead in terms of the number of partnerships that have been established by Axeda and ThingWorx. The company is now working with communication service providers such as AT&T, Bell, Deutsche Telekom, Elisa, NTT DoCoMo, Telenor, Telkomsel, Verizon Wireless, KORE Telematics, Stream Technologies and Wyless. Digi International’s Etherios division is a strategic partner of AT&T, Sprint, T-Mobile USA, Verizon and KORE Telematics. Telit’s subsidiary ILS Technology has partnered with AT&T, Sprint, T- Mobile, Verizon, Vodafone, Belgacom and Jasper to provide the deviceWISE AEP as part of their respective M2M application platform offerings.

Deutsche Telekom has selected Cumulocity’s platform for its Device Cloud service targeting the M2M developer community, as well as for its ICT business that focuses on enterprise customers. Cumulocity has also partnered with EE in the UK and Etisalat in the Middle East. PLAT.ONE has been selected by Deutsche Telekom’s T-Systems division to provide its platform for smart cities infrastructure projects. PLAT.ONE has also initiated a to provide end-to-end management of vending machines with Telecom Italia Digital Solutions (TIDS). The collaboration is now being extended to a variety of industry specific solutions, ranging from telemetry to remote control and automated diagnostics. SeeControl primarily markets its platform through channel partners including system integrators and resellers such as Alcatel-Lucent, SingTel, Verizon, Jasper, KORE Telematics and Wyless. AT&T and Verizon have developed proprietary application enablement platforms that integrate with third party platforms.

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1.3 International coverage and alliances One of the major challenges in cellular IoT is the demand for seamless international coverage. While regular mobile subscribers normally stay in one geographic territory most of the time and can be served by one network, many IoT applications have very different requirements on coverage. International OEMs normally have centralised manufacturing and global distribution of products to multiple continents and countries. Multinational corporations deploy assets all over the world. Specialised application providers may also serve customers in multiple countries. In all three cases, the end-customer benefits from having a unified IoT connectivity solution providing seamless network access in multiple countries. Traditional roaming can meet these requirements for low to medium volume applications, particularly if supported by IoT specific roaming SLAs. Complex high volume applications such as connected cars however require more sophisticated solutions, enabled by international mobile operator alliances.

1.3.1 Roaming and international coverage International cellular IoT network coverage can be achieved in multiple ways. Local souring of network connectivity services and SIMs is always a possibility, but the model becomes increasingly complex when scaling to a growing number of countries. Traditional roaming is a straightforward approach, based on existing agreements between mobile operators. Favourable roaming agreements between mobile operators in an international group or alliance, or in a geographic region, can provide a strong competitive advantage for offering IoT connectivity services to a customer with a matching footprint. At the global level, top international players such as Vodafone and AT&T can leverage their bargaining power to gain a competitive advantage for global SIM solutions. A number of countries such as Brazil and China however prohibit permanent roaming for mobile devices and therefore require localised network connectivity solutions.

The most flexible approach to international coverage needs is multi-domestic connectivity. The model provides IoT customers with a selection of SIMs from multiple mobile operators that collectively offer an optimised solution for the desired geographic footprint. Multi- domestic connectivity can be provided by resellers and managed service providers, as well as by traditional mobile operators under the terms of bilateral or multilateral alliances. The

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emerging mobile operator alliances in IoT are developing joint go to market models where international contracts are distributed among the alliance partners, based on their geographic footprint. The model is facilitated by the GSMA Embedded SIM standard that allows remote provisioning of devices for a local mobile network upon arrival at the final destination.

1.3.2 Mobile operator alliances The creation of alliances to provide global services has been one of the major trends in IoT/M2M among the mobile operators in the past years. The M2M World Alliance and the Global M2M Association (GMA) are dedicated alliances for M2M, whereas the Bridge Alliance and Conexus Mobile Alliance in Asia have added M2M to their existing capabilities. The Global M2M Association was established in 2011 by Deutsche Telekom, Orange, EE and TeliaSonera, with Telecom Italia, Softbank and Bell joining as additional members during 2013. At the beginning of 2012, KPN, NTT Docomo, Rogers, SingTel, Telefónica, Telstra and Vimpelcom created a formal alliance for collaboration around the use of the Jasper M2M platform that was eventually named the M2M World Alliance. Later Etisalat and Telenor have also joined, extending coverage in Europe, the Middle East and Asia.

The Bridge M2M Alliance was founded in early 2014 as a platform for M2M collaboration in Asia-Pacific by SingTel and other leading mobile operators in the region. The association has developed close ties to the Global M2M Association and announced in March 2015 that it would adopt the Ericsson DCP, already used by the GMA members, as the common connectivity management platform for the partner operators. The Conexus Mobile Alliance formed a taskforce for joint M2M offerings in October 2014. The main driver for creating the alliances is to respond to the needs for international connectivity in very high volume vertical markets such as automotive and consumer electronics. Furthermore, there is a common understanding that collaboration and harmonisation is beneficial for the entire M2M industry and necessary for driving additional growth. Particularly in Europe the fragmented state of the mobile communications market creates big challenges for anyone planning to launch a pan- European M2M service. Notably many of the world’s largest mobile operator groups, including Vodafone, AT&T, Verizon and China Mobile have so far opted not to participate in any of the alliances. SingTel and Softbank for their part have joined two of the three organisations.

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Figure 1.10: Mobile operator M2M alliances (Q3-2015)

Bridge M2M Alliance Global M2M Association M2M World Alliance Airtel Deutsche Telekom Telefónica AIS Orange NTT Docomo Avea Telecom Italia KPN CSL TeliaSonera Rogers Swisscom SingTel Maxis Softbank Telstra Mobifone Bell Mobility Vimpelcom Optus Etisalat SingTel Telenor SK Telecom Saudi Telecom Company Softbank Taiwan Mobile Telkomsel

Source: Berg Insight

Global M2M Association The Global M2M Association (GMA) was established in 2011 based on a service cooperation agreement between the European telecom operators Deutsche Telekom and Orange, later joined by TeliaSonera and Telecom Italia, to deliver best-in-class, enhanced and seamless M2M services globally and to maximize the business benefits of customers. At the end of 2013, the organisation extended its reach to North America and Japan through the admission of Bell Mobility and Softbank. Swisscom joined as the seventh member in September 2015. The GMA aspires to help businesses and organizations to increase the availability of enhanced M2M/IoT solutions and innovations, and make them easier to deploy and manage all around the world. Through this cooperation, participating mobile operators commit to offer

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customers enhanced quality of service, M2M/IoT roaming services and interoperability across a global footprint, by bringing together their technical and innovation capabilities. The GMA has launched two public offerings – a module certification program and multi-domestic connectivity service. The module certification program has approved a number of models from Sierra Wireless, Telit, u-blox and SIMCom. The multi-domestic service, launched in February 2015, offers a single consolidated M2M/IoT management platform provided by Ericsson, leveraging GSMA-compliant embedded SIMs and a subscription management platform provided by Gemalto. Previously, the Ericsson DCP platform had already been rolled out with TeliaSonera, Orange and Bell Mobility.

M2M World Alliance The M2M World Alliance is a global partnership of providers dedicated to providing their multinational customers with seamless M2M device connectivity around the world. Founded in 2012, the organisation has a global footprint through nine strong regional players – Etisalat, KPN, NTT Docomo, Rogers, SingTel, Telefonica, Telenor, Telstra and Vimpelcom – covering all major world regions. The name M2M World Alliance was adopted to identify the group’s coordinated operations in late 2013. At the end of the year, the M2M World Alliance unveiled its first multi-operator global solution, comprising a global SIM, centralised management of device status and usage and a single platform to manage connections globally. Key advantages with the joint approach include the ability to offer international M2M solutions through a single point of contact, lower connectivity costs through the use of multi-domestic SIM profiles and full compliance with local telecommunications regulations that may prohibit roaming. One of the first commercial achievements for the M2M World Alliance was the joint contract for Telefónica and KPN to provide connectivity for Tesla’s electric cars across large parts of Western Europe, announced in April 2014. At the beginning of 2015, the M2M World Alliance announced that its members were developing global solutions based on the GSMA Embedded SIM specifications.

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Bridge M2M Alliance Bridge Alliance is a partnership of 37 mobile operators in Asia with a combined customer base of over 700 million mobile subscribers. Members include Airtel (India, Bangladesh and Africa), AIS (Thailand), Avea (Turkey), CSL (Hong Kong), CMT (Macau), Globe Telecom (the Philippines), Maxis (Malaysia), Mobifone (Vietnam), SingTel (Singapore), SK Telecom (South Korea), Softbank (Japan), STC (Saudi Arabia), Taiwan Mobile (Taiwan), Telkomcel (Timor- Leste), Telkomsel (Indonesia) and Viva (Bahrain and Kuwait). Founded in 2004, the association has emerged as the leading mobile operator alliance in the Asia-Pacific region, providing seamless roaming and enterprise multi-country services across an extensive footprint of tier one or tier two networks. Bridge Alliance offers a unique platform for regional mobile communications solutions including roaming, unified pricing, multi-network SLAs and common support systems. In January 2014, its members launched the Bridge M2M Alliance to offer a one-stop-shop for M2M deployments across the Asia-Pacific region. Located in Singapore, Bridge M2M Alliance is a centre of excellence that help member operators and their partners to provide customers with end-to-end M2M regional capability. As an independent partner with a strong regional presence, the new organisation is open for collaboration with any constellation of industry players to support international deployments of applications for the automotive, consumer electronics and other sectors. In February 2015, the Bridge M2M Alliance announced plans to deploy a virtual core M2M network across its footprint, based on the Ericsson DCP connectivity management platform. The following month the Bridge Alliance entered a collaboration with China Unicom to jointly provide enterprise mobility offerings and services for multinational companies in China, Asia Pacific, Middle East and Africa. In November 2015, Avea joined as a new member, extending the footprint of the alliance to Turkey.

Conexus Mobile Alliance Conexus Mobile Alliance is an association of mobile operators in Asia, founded in 2006 to enhance international roaming and corporate mobile services for its members’ customers. The alliance has nine members – 3 (Hong Kong), Indosat (Indonesia), NTT Docomo (Japan), KT (Korea), Smart (Philippines), StarHub (Singapore), Far EasTone (Taiwan), True (Thailand) and Vinaphone (Vietnam) – with a combined customer base of about 280 million mobile subscribers. A partnership between the Conexus Mobile Alliance and Vodafone provides

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mutual access across their combined footprints. In October 2014, the Conexus Mobile Alliance launched a taskforce to address the increasing demand for international M2M services among multinational companies. One of the first results was presented in June 2015 as NTT Docomo and Indosat partnered with G&D to deploy a joint framework for embedded SIMs based on the GSMA Embedded SIM standard. Initially covering Japan and Indonesia, the framework is intended to be extended to additional countries in Asia.

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Chapter 2 Europe

2 Europe

2.1 Regional market trends Europe is a large and advanced market for wireless M2M/IoT communication. Western Europe is one of the most mature regions with five countries having 6 million M2M subscribers or more. Central and Eastern Europe is in general a few years behind in terms of adoption and have significantly fewer players developing international M2M solutions for the global market. Russia & CIS have started to take off in the past years. Berg Insight estimates that the total active base of M2M subscribers in Europe was 59.4 million at the end of Q4- 2014.

The European cellular M2M market is divided in two major segments. The international segment, comprising large multinational corporations, enterprises with operations in multiple countries and export-oriented OEMs, constitutes an integrated market at the European level. The domestic segment, comprising national players such as utilities, governments and local service providers, is highly fragmented with each European country constituting a separate market. The cellular M2M communication providers position themselves to serve one or more of these segments. Large players tend to focus on the international segment at large and the domestic segment in core market territories. Smaller players tend to focus on the domestic segment in their footprint and take an opportunistic approach to the international segment, mainly serving domestic customers with international expansion. The high level of fragmentation makes it difficult to present fully accurate data for the cellular M2M market in Europe. Domestic M2M SIMs are generally reported to the national telecom regulators and show up in official statistics. International M2M SIMs are sometimes included in national figures of the operator’s home market and sometimes counted separately and thus becomes excluded from all national data. In this section, Berg Insight presents national M2M subscriber data by country based on domestic market statistics. Leading international players such as Vodafone and Telefónica also have a substantial number of global M2M SIMs deployed in Europe, which are not included in the country data.

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2.1.1 Western Europe Western Europe is the most advanced and fastest growing region in Europe. At the end of Q2-2015, there were approximately 49.5 million M2M subscribers in Western Europe, up 23 percent from one year earlier. The market is partially integrated across national borders and shaped by common trends across the different countries. EU policies have a significant impact on the market, with regulations and policy recommendations driving adoption of OEM telematics and smart meters. Automotive and utilities are the two most dynamic vertical market segments in Western Europe, which are projected to account for a majority of the volume growth in the coming years. At the national level, the most active geographical markets are the main centres for the automotive industry and countries rolling out smart meters with cellular connectivity.

Connected car technology finally reaches the mass market Connected cars is the strongest pan-European trend in cellular M2M, driven by a combination of technology development in the automotive industry and the EU’s eCall initiative. After a slow start, the market is now ramping up to significant volumes. Berg Insight estimates that 25 percent of around 15 million cars sold in the EU28+EFTA area during 2015 will be fitted with an embedded telematics system, up from 15 percent in 2014. Attach rates will grow significantly in 2018 when the eCall emergency call system becomes mandatory. The number of active subscribers to telematics services with features beyond eCall will be highly dependent on pricing and the length of free trial periods or complimentary offerings. Today, BMW, Mercedes-Benz and PSA Peugeot Citroën offer basic telematics including eCall and remote diagnostics free of charge for lifetime and Audi for 10 years. Other brands including Porsche, Opel/Vauxhall and Volvo offer free services for 6–24 months.

Smart metering projects have massive impact in local markets Smart metering is another trend with massive impact on individual countries. While power-line communication (PLC) is the dominant technology for networking smart meters in Europe, millions of smart electricity meters with cellular connectivity have been deployed in the Nordic countries and elsewhere. The Netherlands is currently in the process of rolling out smart meters with cellular connectivity to nearly 8 million households. Two of the three main Dutch electricity distributors, Alliander and Stedin, have opted for using a private

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using the 450 MHz band for smart meter communication. The third major player Enexis considers using public LTE networks instead. In the UK, an even larger project will begin

within a few years as Telefónica O2 starts implementing a cellular network based communications solution for all residential electricity meters in the south and central parts of the country. Until the early 2020s, the project should add 25 million new cellular M2M subscribers in the UK. Austria and Norway are other countries where cellular smart metering solutions will be deployed on a large scale in the coming years.

Figure 2.1: Mobile operators in Western Europe by M2M subscriber base (Q4-2014)

Operator M2M subscribers Market share Vodafone 8,700,000 18 % Telenor 6,000,000 12 % Telefónica 5,500,000 11 % Telecom Italia 5,000,000 10 % SFR 4,200,000 9 % Deutsche Telekom 4,100,000 8 % Orange 4,000,000 8 % EE 1,900,000 4 % TeliaSonera 1,800,000 4 % Bouygues Telecom 1,500,000 3 % Other 6,000,000 12 % Total 48,700,000 100 %

Source: Operators and Berg Insight estimates

High level of fragmentation among cellular M2M communication providers The high level of fragmentation in the European telecommunications industry is reflected in the market share of cellular M2M communication providers in Western Europe. Berg Insight believes that while most national markets have a strong domestic market leader, no player has a market share above 20 percent at the regional level. Vodafone is the market leader

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through its strong position in the international market segment, but largely lacks domestic strongholds anywhere in Europe. At the end of 2014, Vodafone had approximately 20 million M2M subscribers worldwide, of which Berg Insight believes 8.7 million were in Western Europe, corresponding to a regional market share of 18 percent. Telenor ranked as number two with 6.0 million M2M subscribers in the region and a market share of 12 percent, followed by Telefónica with around 5.5 million and a market share of 11 percent. Other major players were TIM, SFR, Deutsche Telekom and Orange with 4–5 million M2M subscribers each and market share in the span 8–10 percent. Notably TIM and SFR, domestic market leaders in and France respectively, had more subscribers in the region than Deutsche Telekom and Orange that both have a broader international focus. Other top ten players included EE, TeliaSonera and Bouygues Telecom with 1.5–2.0 million M2M subscribers each. Based on available data from the first half of 2015, no major changes have occurred in the relative

market share of the main players during the period. If the proposed sale of Telefónica O2 UK is completed, Telefónica will however see its market share reduced, as Hutchison becomes one of the top ten players.

2.1.2 Regional market trends in Western Europe A majority of the countries in Western Europe have some form of official reporting of cellular M2M subscriber numbers, either from the regulators or the major operators. Based on this data, ten out of fifteen countries in the region had more than 1 million M2M subscribers at the end of 2014. France reported the highest official M2M subscriber base of 8.3 million and a year-on-year growth rate of 20 percent. Italy, the UK and Sweden followed next with 6.1–6.6 million M2M subscribers each. The number of subscribers in Sweden is inflated by a significant share of international M2M SIMs registered in the country. Germany was behind the other major countries in the region, ranking as the fifth largest market with 5.2 million officially reported M2M SIMs. Spain was also lagging at 3.0 million M2M subscribers and a negative growth rate, caused by the reclassification of a significant amount of SIMs during the year. The Netherlands recorded the strongest growth rate of 70 percent to 2.1 million as the country began deploying smart meters on a massive scale. Belgium, Norway and Finland had 1 million M2M subscribers or more, while Austria, Demark and Switzerland was just below the threshold. Portugal and Ireland were the smallest markets with around 0.5 million M2M subscribers each.

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Figure 2.2: Europe M2M connectivity market data (Q4-2014)

Country M2M subs YoY growth MNO rankings France 8,300,000 20 % SFR, Orange, Bouygues Italy 6,600,000 10 % TIM, Vodafone

UK 6,300,000 11 % Telefónica O2, Vodafone, EE Sweden 6,100,000 18 % Telenor, TeliaSonera, Tele2 Germany 5,200,000 21 % DT, Vodafone, Telefónica Spain 3,000,000 -4 % Telefónica, Orange, 2,100,000 70 % KPN, Vodafone, Tele2 Belgium 1,100,000 26 % Mobistar, Belgacom Norway 1,100,000 11 % Telenor Finland 1,000,000 10 % TeliaSonera, Elisa Switzerland* 900,000 15 % Swisscom Austria* 800,000 10 % Telekom Austria, DT Denmark 800,000 1 % TDC, Telenor Portugal 500,000 7 % TMN, Vodafone, NOS Ireland 500,000 20 % Hutchison, Vodafone Total (domestic) 39,200,000 16 % Vodafone, Telenor, Telefónica *Berg Insight estimates

Source: Telecom regulators, operators and Berg Insight

France is the largest national market for cellular M2M connectivity in Europe. At the end of Q2-2015, the French telecom regulator ARCEP reported 9.2 million M2M subscribers in the country, up 21 percent year-on-year. SFR was the clear market leader with 4.4 million connections, but saw its market share drop below 50 percent for the first time in many years. Meanwhile, Orange grew at twice the market average rate to reach 3.0 million connections and a market share of 33 percent. Bouygues Telecom and other communication providers had a combined installed base of 1.8 million and a combined market share of 20 percent. Yearly M2M communication revenues were estimated to € 88 million in 2014, corresponding to a monthly ARPU of around € 1 per subscription.

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Figure 2.3: France cellular M2M market connectivity data (2013–2015)

Thousands Q2-2013 Q2-2014 Q2-2015 YoY growth SFR 3,200 3,924 4,393 12 % Orange 1,547 2,083 2,975 43 % Bouygues/others 1,317 1,593 1,832 15 % Total 6,100 7,600 9,200 21 %

Source: ARCEP and operators

There are several explanations behind the strength of the cellular M2M communication market in France. SFR and recently also Orange have been successful in supporting top M2M customers with pan-European deployments. As one of the main Vodafone partner networks in Europe, SFR has access to favourable roaming agreements on a regional as well as a global basis. Orange is also using France as a base for multinational M2M deployments. In addition, France benefits from having a large base of international OEMs using cellular connectivity, such as the automotive manufacturers PSA and Renault and the world’s largest POS-terminal vendor Ingenico.

Italy constitutes the second largest national market for cellular M2M connectivity in Europe with an estimated installed base of 6.6 million connections at the end of 2014. According to a study from the Italian telecom regulator Agcom, vehicle telematics is the largest application area, accounting for nearly 50 percent of the installed base. Italy has a high adoption rate of telematics technology in the insurance industry, with millions of car owners subscribing to usage-based motor insurance (UBI) policies and stolen vehicle tracking services. UBI has helped the insurance industry address widespread problems with fraud and high claims costs and make comprehensive motor insurance policies more affordable for larger customer groups. Smart metering and utilities is the second largest application area, accounting for around 25 percent of the installed base. Italy was the first country in Europe to introduce smart metering for all electricity customers and is also planning a nationwide rollout of smart gas meters. TIM is the dominant market player with an estimated market share above 70 percent.

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United Kingdom & Ireland reported 6.3 million and 0.5 million M2M subscribers respectively

at the end of 2014. Telefónica O2 and Vodafone have historically been the regional market

leaders with strong positions in both countries. Telefónica O2 withdrew from Ireland in 2014 and plans to sell the UK operations. The buyer in both cases, Hutchison, is the market leader in Ireland and is set to take over Telefónica’s market position if the UK transaction wins

regulatory approval. Based on data from the telecom regulator Ofcom, Telefónica O2 had a market share of 35 percent in the UK at the end of 2014. Berg Insight believes that Vodafone UK was just behind with a market share of 31 percent. Both Telefónica and Vodafone also have global M2M SIMs deployed in the UK that are not fully included in the official statistics. EE, whose shareholders Orange and Deutsche Telekom entered an agreement for the sale of the company to BT, recorded the highest yearly growth rate of 17 percent in 2014 and ended the year with a market share of 30 percent.

Figure 2.4: UK cellular M2M market connectivity data (2013–2014)

Thousands 2013 2014 YoY growth

Telefónica O2 1,943 2,192 13 % Vodafone UK* 1,826 1,939 6 % EE 1,644 1,917 17 % Others* 282 252 -12 % Total 5,700 6,300 11 % * Estimated

Source: Ofcom, operators and Berg Insight estimates

The UK cellular M2M market is set to have a massive impact from the planned nationwide

rollout of smart meters to all electricity and gas customers. Telefónica O2 has been awarded a contract to provide point-to-point cellular connectivity for 25 million smart meter communication hubs until the early 2020s. The project alone will contribute to a fivefold increase of the number of M2M subscribers over the coming six to seven years.

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Germany is trailing behind the other major countries in Western Europe in the adoption of cellular M2M communication. According the Federal Network Agency (BNetzA) there were 6.1 million registered M2M subscribers in Germany at the of Q2-2015, up 17 percent year-on- year. At the same time Deutsche Telekom reported 4.3 million M2M connections, corresponding to a market share of 70 percent. The year-on-year growth rate of 33 percent was one of the highest recorded for a major operator in Europe in the period. The merger

between Telefonica O2 and E-Plus had a marginal effect on the M2M market, where the merged entity had a market share of just 8 percent. had an estimated market share of 21 percent with around 1.3 million M2M connections. The figure may however exclude a significant number of M2M SIMs deployed by German automotive and industrial OEMs, manged by Vodafone Global Enterprise. This would mean that the official statistics underestimate the size of the German market and relative market shares of Vodafone and Deutsche Telekom.

Figure 2.5: Germany cellular M2M market connectivity data (2014–2015)

Thousands Q2-2014 Q4-2014 Q2-2015 YoY growth Deutsche Telekom 3,210 3,670 4,260 33 % Vodafone DE* 1,100 1,120 1,330 21 % Telefonica DE 100 410 510 N/A E-Plus 340 – – – Total 4,750 5,200 6,100 28 % * Estimated

Source: BNetzA, operators and Berg Insight estimates

The German cellular M2M communications market is dominated by automotive and industrial OEMs that develop connected applications for international markets. The growing adoption of car telematics in Europe is one of the main growth drivers in the country. Germany has a significantly lower adoption of card payments and security alarm solutions than other major countries in Western Europe, which is reflected in lower volumes in these vertical segments.

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Spain & Portugal are relatively advanced markets for cellular M2M communications. According to official statistics, the total installed base was 3.4 million in Spain and 0.5 million in Portugal the end of Q2-2015. Telefónica is the leading player in Spain with a market share of around 50 percent. At the beginning of 2014, the operator revised its M2M subscriber statistics to remove inactive SIMs. Security alarms and POS-terminals were early applications to take off in Spain. Over the past years, demand has also been boosted by the nationwide rollouts of smart electricity meters. The next potential growth market is smart cities, where many Spanish municipalities and regions have launched projects, supported by EU and government funds.

Figure 2.6: Spain & Portugal cellular M2M market connectivity data (2013–2015)

Thousands Q4-2013 Q2-2014 Q4-2014 Q2-2015 YoY growth Spain 3,113 2,695 2,993 3,400 26 % Portugal 464 492 496 537 9 % Total 3,577 3,187 3,489 3,937 23 %

Source: CMT and ANACOM

Benelux is the fastest growing regional market for cellular M2M communication in Western Europe. The Dutch telecom regulator reported 2.4 million M2M subscribers at the end of Q2- 2015, up 77 percent year-on-year. Meanwhile, the Belgian market was developing slowly with 1.1 million M2M subscribers and a yearly growth rate of 3 percent. The rapid growth in the Netherlands is primarily driven by the nationwide rollout of smart electricity meters to 8 million households and businesses. All of the country’s three major regional utilities have opted for cellular communication solutions for their smart meters. Two of them, Alliander and Eneco, have established the new jointly owned mobile network operator UtilityConnect that is deploying a nationwide CDMA network using the 450 MHz band, dedicated to smart grid applications. The third player Enexis originally intended to use the G3 power-line communication standard but later decided to opt for LTE instead. During the first phase of the rollout all players have installed smart meters with embedded GPRS.

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Figure 2.7: Benelux cellular M2M market connectivity data (2013–2015)

Thousands Q4-2013 Q2-2014 Q4-2014 Q2-2015 YoY growth Netherlands 1,247 1,365 2,121 2,418 77 % Belgium 907 1,042 1,144 1,076 3 % Total 2,154 2,407 3,265 3,494 45 %

Source: ACM and operators

KPN and Mobistar are the market leaders in the Netherlands and Belgium respectively. At the end of Q2-2015, KPN reported 1.2 million M2M subscribers, corresponding to a market share of around 50 percent. Mobistar had 0.8 million connections and a domestic market share of more than 70 percent. Vodafone, Tele2 and Belgacom are other major regional players.

The Nordics is the most advanced region in Western Europe based on the number of M2M subscribers in relation to the total population. At the end of Q2-2015, there were around 9.5 million M2M subscribers, compared to a population of 27 million. The Nordic markets were fast to take off and demand has been supported by early adoption of smart meters and high regional penetration for residential alarm systems. In the past years, the market growth rate has slowed down to around 10–15 percent on an annual basis. Sweden stands out as one of the top five cellular M2M markets in Europe partly because it is the base of one of the leading international M2M communication providers Telenor Connexion. Telenor controls around two thirds of the Nordic market with 6 million M2M subscribers and has domestic market shares of almost 80 percent in Sweden and over 90 percent in Norway. TeliaSonera is the second largest player with approximately 1.5 million M2M subscribers. TDC is the domestic market leader in Denmark with a market share of around 50 percent. Tele2 and Elisa are other significant players in the region.

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Figure 2.8: Nordics cellular M2M market connectivity data (2013–2015)

Thousands Q4-2013 Q2-2014 Q4-2014 Q2-2015 YoY growth Sweden 5,185 5,578 6,140 6,464 16 % Norway 975 1,025 1,086 1,148 12 % Finland 900 950 990 N/A 10 % Denmark 807 824 819 N/A 2 % Total 7,867 8,377 9,035 ~9,500 13 %

Source: Telecom regulators

2.1.3 Central Eastern Europe and Russia & CIS The countries in the rest of Europe have achieved different levels of maturity. Advanced markets in Central Eastern Europe such as Poland and the Czech Republic were not far behind Western Europe, while the countries in the Balkans had barely seen their markets take off. Russia has evolved into a sizeable market with strong growth momentum. Berg Insight estimates that the total number of M2M subscribers was approximately 4 million in Central Eastern Europe and around 7 million in Russia & CIS at the end of 2014.

Poland is the largest geographical market in Central Eastern Europe with an estimated 1.7 million M2M subscribers at the end of 2014, according to data from the national telecom regulator. Orange claims to be the domestic market leader, ahead of Polkomtel and T-Mobile. No official data is available from other countries in the region but Berg Insight believes that countries such as the Czech Republic, Hungary, Romania and Greece do not have more than 0.5 million M2M subscribers each. A number of international mobile operator groups such as Vodafone, Deutsche Telekom, Orange, Telenor and Telekom Austria have a strong presence in one or several countries in the region where they frequently participate in the domestic

M2M market. O2 Czech Republic, formerly a part of the Telefónica group has a strong position in the Czech market.

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Russia ranks as one of the largest markets for cellular M2M communication in Europe, next to the major countries in Western Europe. At the end of 2014, there were approximately 6 million M2M subscribers in the Russian Federation, up 25 percent from one year earlier. MTS is the market leader with an estimated market share of 50 percent. Vehicle telematics is the largest application category, accounting for around half of the installed base. Russia has followed the EU in defining an automatic emergency call system for passenger cars. The ERA-GLONASS system is compliant with eCall but has an additional requirement that the satellite receiver must support the Russian GLONASS satellite navigation system. ERA-GLONASS will be mandatory on all new vehicles sold in Russia, Belarus and Kazakhstan from January 2017. Once fully implemented, the system will generate around 3 million new M2M subscribers in the region each year.

2.2 Mobile operators Vodafone is the largest provider of cellular M2M network connectivity based in Europe with a global installed base of 24 million at the end of Q2-2015. At least half of the group’s M2M SIMs are believed to be deployed in Europe. Telefónica is the second largest player based in Europe with a global M2M subscriber base of around 13 million. A majority of the SIMs are however deployed in Latin America. Spain and the UK are the main geographical markets in Europe, although the operator has announced intentions to exit the latter. Deutsche Telekom, Orange and Telenor are other major international players from Europe with in the range of 7– 10 million M2M subscribers worldwide. Germany and the US are the main geographical markets for Deutsche Telekom, but the operator also has a strong presence in a number of local European markets. Orange has its main geographic strongholds in France, Belgium and Poland. Telenor is the dominant player in the Nordic region, with a substantial international reach in Europe and worldwide. Significant regional players in Europe include EE, KPN, MTS, SFR, Swisscom, Telecom Italia, Telekom Austria, TeliaSonera and Tele2. MTS, SFR and Telecom Italia are the domestic market leaders in Russia, France and Italy respectively with 3–5 million M2M subscribers each. 3 Group Europe will become a new major market player in

Europe if the acquisition of Telefónica O2 UK goes ahead as planned. BT will also become directly involved in M2M with its proposed acquisition of EE.

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2.2.1 Vodafone Vodafone is the world’s largest mobile telecommunications company measured by turnover, with a significant presence in Europe, the Middle East, Africa, Asia-Pacific and India through the company’s subsidiary undertakings. Global sales in the financial year ending 2015 were £_42.2 billion (€ 53.8 billion) and the workforce comprises 106,000 employees. At the end of Q3-2015, the group had 454.2 million mobile subscribers worldwide. Over the past years, Vodafone has restructured its operations by offloading minority holdings in mobile operators to finance investments in the fixed communications sector. Recent significant transactions include the sale of its 45 percent stake in Verizon Wireless to for US$ 130 billion in early 2014 and the acquisitions of the fixed line operators Cable & Wireless (UK), Kabel Deutschland (Germany) and Ono (Spain) during 2012–2014.

Europe constitutes the largest geographic region by revenue with 121.5 million mobile subscribers. Vodafone has the largest footprint among all mobile operators in Europe, covering 65 percent of the EU population plus Turkey. Germany, Italy, the UK and Spain are the largest markets. Other significant European markets are Romania, Portugal, the Netherlands, Greece, the Czech Republic, Hungary and Ireland. Vodafone Partner networks in 21 European countries include the former associated companies SFR and Polkomtel, as well as Bite, Elisa, MTS, Proximus, Swisscom, Telekom Austria and TDC.

Vodafone is increasingly focusing on emerging markets for driving additional growth. Africa, the Middle East and Asia Pacific accounted for one third of group revenues in Q3-2015. India had the largest subscriber base in the group, exceeding 188 million at the end of the period. Vodafone’s key markets in Africa include Egypt, Ghana, South Africa and Kenya, the latter served by the majority owned subsidiary Vodacom (see chapter 5.2.6) and the associate . In the Asia-Pacific region, Vodafone’s presence is restricted to a wholly owned subsidiary in New Zealand and a joint venture in Australia. Significant Vodafone partner networks in the region include NTT Docomo, KT and Celcom. Vodafone has a limited presence in Latin America where its only partner networks are in the Caribbean and Central America and Entel in Chile.

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Group M2M strategy Vodafone has a vision to become a global leader in M2M and generated £ 224 million (€ 307 million) in revenues from its business in the first half of the financial year 2015/2016. Today, the group strategy for M2M has three main pillars. The first pillar is managed connectivity where the group aspires to be the leading global provider on any type of network, wireless or fixed. Vodafone has been among the leaders in the development of NB-IOT and launched the first trial network based on the standard in Spain in December 2015. The second pillar is Vodafone Automotive, established in early 2015 from the acquired business of Cobra AT, which provides complete solutions for the connected car market. The third pillar is to address a wider set of vertical markets, e.g. utilities, healthcare, industrial manufacturing and many more with industry-specific expertise to move up the value-chain beyond connectivity.

Vodafone Global Enterprise (VGE) has the overall responsibility for implementing the group’s M2M strategy. The division delivers unified total communication solutions to around 1,700 of the world’s largest multinational companies in over 100 countries. VGE offers global M2M capabilities as part of a portfolio that also comprises fully integrated fixed and mobile networks, cloud-based hosting platforms and other business services. The organisation has a centralised function for management, business development, technical development and international sales. VGE is responsible for the centralised GDSP M2M service delivery platform, which is currently available in 27 countries. A global marketing and sales organisation covers all of Europe, North America and Asia-Pacific, including countries where Vodafone does not have a direct presence. In addition, there are M2M teams in the national operating companies that primarily focus on domestic customers and market opportunities.

In August 2014, VGE acquired Cobra Automotive Technologies for € 145 million to establish a presence in the connected car market. Since early 2015, the business operates under the new name Vodafone Automotive. The company has nearly 900 employees and presence in the major vehicle producing countries in Europe, Asia-Pacific and Latin America. Vodafone Automotive is a leading provider of connected car products and services for applications such as stolen vehicle tracking and usage based insurance solutions. In addition, the company provides a wide range of automotive products such as parking sensors, alarms and immobilisers, Bluetooth hands free solutions, rear view reversing cameras, cruise control and speed limiters.

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Market strategy Vodafone is the world’s largest international provider of wireless M2M connectivity. At the end of Q3-2015, the operator reported an installed base of 24.0 million M2M global SIMs and a year-on-year revenue growth rate of 30 percent. This places Vodafone among the top three providers of M2M connectivity worldwide in terms of volume, with an unparalleled global reach. The group’s market for M2M strategy is focused on multinational enterprises and large regional organisations. Automotive and industrial OEMs with centralised manufacturing and global sales are a key priority segment. For regional businesses such as utilities, Vodafone is developing global industry practices that can support the M2M teams of the national operating companies with bespoke projects.

Europe is the largest geographic region for Vodafone’s M2M business. Vodafone is the market leader in the international segment, with a strong customer base in the automotive, industrial and multinational enterprise sectors. The market position is not fully reflected in national M2M market statistics that sometime exclude global SIMs manged on behalf of domestic customers. Vodafone’s operating companies in Germany, the UK, Italy and Spain rank all as number two in the domestic M2M market segment in their respective countries, behind the incumbents. Altogether, Berg Insight believes that the European market accounts for more than half of Vodafone’s global M2M subscriber base.

Outside of Europe, Vodafone has significant M2M operations in both Asia-Pacific and Africa & Middle East. has the largest proportionate M2M subscriber base in the group, exceeding 1 million compared to 2.3 million regular subscribers. A significant proportion of the connections are used for smart metering. Vodafone has a strong presence in the Middle East through the operating companies in Egypt and Turkey and Vodacom ranks as one of the leading M2M providers in Africa with 1.9 million subscribers in Q3-2015. is in an early stage of introducing M2M services but is starting to see uptake of the technology. Outside of its geographic footprint, Vodafone relies on partnerships and alliances for extended coverage. In Brazil, the group has entered a partnership with the domestic MVNE Datora to establish a local presence. Trading as Vodafone Brasil, Vodafone and Datora have the ability to provide local connectivity for M2M customers in Latin America.

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2.2.2 Deutsche Telekom Deutsche Telekom (DT) is an international telecommunications and information technology services group, represented in around 50 countries. Annual sales in 2014 were € 62.7 billion and the workforce comprises 228,000 employees. The group is organised in three telecommunications business units for Germany, Europe and the US and a fourth, Systems Solutions (T-Systems), which provides integrated ICT solutions for large customers in the enterprise and government sectors in over 50 countries worldwide. Under the T-Mobile brand, the group provided mobile communications services to 150.5 million subscribers in fully consolidated subsidiaries in ten European countries and the US at the end of 2014. Furthermore, it owns a 40 percent stake in OTE – a major regional telecom group in South East Europe headquartered in Greece. DT entered an agreement to divest its 50 percent share in the UK’s largest mobile network operator EE to BT in 2015. Germany is the largest geographical market, accounting for almost 41 percent of the mobile subscriber base in Europe. Other significant countries are Poland, the Czech Republic, Hungary, Austria and the Netherlands. In the US, DT has a 74 percent share of T-Mobile USA, which became an independent company listed on the NYSE, following the merger with MetroPCS in May 2013. T-Mobile USA is the fourth largest mobile operator in the US with 55 million customers. A separate profile of T-Mobile USA’s M2M business is found in section 3.2.4.

Group M2M strategy DT focuses on the B2B market as one of the main growth drivers for its business in Germany and Europe in the coming years. M2M is a key element in the value propositions of T- Systems in the multinational companies segment and the operating companies in Germany and other European countries in the mid-market enterprise segment. DT has established a group competence centre for M2M located in Germany, covering all functions from technology, products and support to marketing, sales and partnerships. The unit coordinates the activities of the local M2M teams in each operating country and interacts with other parts of the DT Group such as T-Systems and the T-Labs R&D centre. Including all units, there are several hundred people dedicated to M2M in the whole group organisation. A significant M2M-related R&D project in 2015 was the first live trial of a pre-standard NB-IoT network by DT and Huawei in Bonn, Germany. Commercial NB-IoT services are expected to become available in late 2016.

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DT focuses on products and services in nine different market segments: transport & logistics, vehicle telematics, energy, consumer electronics, security, retail & commerce, industrial automation, healthcare and the public sector. The strategy for addressing the market comprises four main elements – an M2M access layer for connectivity, complete M2M application stacks for major vertical markets, customised solutions from T-Systems and professional services related to M2M application development. DT provides a complete M2M stack comprising an in-house connectivity platform, middleware and standard solution platforms, developed together with partners. Open interfaces enable easy integration of devices, applications and third party platforms to allow the greatest flexibility for solution developers. By partnering with system integrators, end-to-end solution providers and other players in key vertical segments, DT can provide standard solution platforms for a growing number of application areas. One example is smart cities, where it has a partnership with IBM. For the most advanced projects, DT can take the role as lead system integrator through T- Systems. Furthermore, its professional services practice can support M2M application developers from planning and design to device certification, implementation and operation.

DT is very active in developing the ecosystem for M2M in Europe and worldwide. DT’s global M2M Partner Program has attracted more than a thousand companies at all levels in the value chain. These partners are allowed to sell products on the e-commerce portal M2M Marketplace and they are officially approved to participate in projects submitted by DT. Another initiative by DT is the M2M Developer Community that aims to be the definite source for the development of machine-to-machine applications. The community offers developer kits comprising M2M devices, SIM cards, cloud-based application platform and extensive documentation of APIs, as well as a platform for sharing ideas. At the beginning of 2014, DT announced the M2M Device Cloud service, powered by Cumulocity, which provides developers with an easy-to-use, cloud-based platform for connected applications.

Market strategy DT is one of the world’s largest providers of mobile communications and the only one with direct presence in both Europe and the US. Berg Insight ranks the operator among the ten largest providers of cellular M2M connectivity with an estimated 12 million subscribers in late 2015. Europe is the largest geographical region where DT and its associate OTE has an

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unbroken footprint stretching from the Netherlands, across Germany and Central Eastern Europe to the Balkans. T-Mobile Germany is in a rapid growth phase and reported 4.6 million M2M connections at the end of Q3-2015, up 33 percent compared to one year earlier. The M2M subscriber base in other European countries was in the region of 2–3 million. T-Mobile USA reported 5.0 million M2M connections in Q3-2015 and a year-on-year growth rate of 18 percent. Outside of its direct footprint, DT can also provide direct coverage throughout the rest of Western Europe, the Americas and Japan together with its partners in the Global M2M Association.

DT’s market strategy for M2M is mainly focused on customers and projects originating in Europe and North America. Marketing and sales channels include a dedicated organisation for international M2M projects, T-Systems, the B2B sales organisations in each operating country, solution partners and resellers. Germany is a key market where the operator benefits from its proximity to one of the world’s leading automotive and industrial clusters. DT works with many of the country’s leading industrial groups on an international scale to meet fast- growing demand in the areas of connected cars and industrial automation. T-Systems participates in many smart grid and smart city pilot projects in Germany and has introduced vertical solutions for smart metering aimed at the enterprise market. As a partner in the Toll Collect consortium, T-Systems has been the main system architect behind the world’s largest government telematics solution for electronic toll collection.

2.2.3 Telefónica Telefónica is one of the world’s largest telecommunications groups with 120,000 employees and annual sales of € 50.4 billion in 2014. Headquartered in Spain, the group is organised in five geographical units – Spain, Germany, Brazil and Hispanic America, which includes Argentina, Chile, Mexico, Peru, Uruguay, Venezuela and other Latin American markets. At the end of 2014, Telefónica and KPN merged their operations in Germany to create a third major player in the mobile communications market. The combined entity Telefónica Deustchland is majority owned by the Telefónica group and listed separately on the Frankfurt Stock

Exchange. At the beginning of 2015, Telefónica O2 UK was separated from the group under the terms of an agreement for the sale of the business to Hutchison Whampoa. At the time of publication the deal was still under regulatory review. At the end of Q3-2015, Telefónica had 251.4 million mobile customers and 54.7 million fixed , broadband and wholesale

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access customers in controlled subsidiaries. The group has three brands, Movistar in Spain

and Hispanic America, Vivo in Brazil and Telefónica O2 in the UK and Germany. The restructuring of Telefónica’s European operations has consolidated the operator as the number one player in terms of mobile subscribers in Spain and Germany. Outside its core geographical markets, Telefónica has established an international Partners Programme, whose members include Bouygues Telecom in France, MegaFon in Russia, Sunrise in Switzerland, Etisalat and MTN in the Middle East & Africa and China Unicom in Asia-Pacific.

Group M2M strategy M2M/IoT is a key strategic growth area for the Telefónica group that is starting to generate a substantial contribution in revenues. In 2014, the operator generated € 186 million in sales from M2M connectivity and end-to-end solutions, up 41 percent over the previous year.

Adjusted for the separation of Telefónica O2 UK, the year-on-year M2M revenue growth was 42 percent in Q3-2015, although full-year revenues are expected to decline marginally in absolute terms. Telefónica has built its M2M business over a long period of time and established itself as one of the major players in Europe and Latin America. In 2009, the group created a global M2M organisation with dedicated teams and resources at the headquarters and in all operating companies. In addition the group’s R&D organisation is active in the development of IoT technology solutions for smart cities and connected objects. Telefónica’s M2M/IoT value proposition is focused on horizontal solutions for managed connectivity and end-to-end vertical solutions in selected application areas. All operating companies in the group share one unified core network for M2M communication, providing global connectivity through roaming using a global SIM supported by dedicated M2M roaming agreements or with local SIMs from the group’s operating companies and partner operators. At the beginning of 2013, Telefónica officially introduced Smart M2M as the main horizontal solutions platform for the group. Developed in-house, the web-based platform provides connectivity, management and control of M2M devices across fixed and wireless networks. As a complement, Telefónica also offers the Jasper platform for wireless devices in Europe, Latin America and worldwide. Through its participation in the M2M World Alliance, Telefónica has access to a global platform for cooperation with international network partners for multi- national deployments based on the Jasper platform. In addition, the group has bilateral M2M agreements with a number of operators worldwide such as Avea, China Unicom, Etisalat, SingTel, Sunrise and Telenor.

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Vertical value propositions in M2M/IoT are developed for local markets to address the requirements in major applications areas such as fleet management, retail and smart energy. One typical approach is to incorporate end-to-end M2M solutions from local partners in the product portfolio sold through B2B sales channels. In Spain, Telefónica also provides a

dedicated solutions platform for smart cities projects. Telefónica O2 UK has been selected as the main communications provider for the country’s smart metering rollout and will eventually provide connectivity for 23 million smart meters. As part of the project, the operator will deploy a dedicated instance of its Smart M2M connectivity management platform in the UK for the purpose of device management.

Market strategy Telefónica is one of the leading providers of wireless M2M connectivity in Europe and Latin America, and reported 8.6 million active connections worldwide at the end of Q3-2015. Including wholesale and indirect customers, the total base of M2M connections was approximately 13.0 million. The operator has a leading market position in Spain with 1.7 million M2M subscribers a market share of 50 percent. Telefónica Deutschland is the smallest player in the German market with 0.6 million M2M subscribers but has improved its position since the acquisition of E-Plus. In Latin America, Telefónica ranks first or second in all major markets, of which Brazil is the most significant. Vivo (see chapter 3.2.8) is the fastest growing M2M connectivity provider in Brazil with 4.1 million subscribers and the end of Q3-2015. Among the other more developed markets in the region, Telefónica is positioned as a top player in Argentina and Chile and challenger in Mexico and Colombia. Year-on-year growth rates are in the span 10–30 percent and the total M2M subscriber base is still at 2.2 million.

Telefónica has adopted a market strategy based on two go-to-market models and three customer segments. The go-to-market models include a horizontal approach focused on connectivity services and a vertical approach focused on complete solutions. The customer segments are SMEs, Corporates and Large Strategic Accounts. Telefónica’s direct sales channels, including national B2B sales organisations and dedicated M2M teams, focus on complete solutions for all customer segments and connectivity services only for the large strategic accounts. Connectivity services for the SME and Corporate segments are provided through indirect partner channels. The model is supported by Telefónica’s M2M Partner

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Programme, which is open for Channel Partners and Solution Partners. Channel partners include authorised distributors such as Numerex, Orbcomm, KORE Telematics, Wireless Logic and Wyless and VARs providing either M2M devices or applications. In March 2015, Telefónica announced that it had enrolled 500 channel partners in Europe and the Americas. Solution Partners are selected application providers in key vertical industries, whose solutions are distributed through Telefónica’s own channels. Furthermore, Telefónica has a strategic partnership with Telit, providing network access in Europe and worldwide for the m2mAIR connectivity service.

Figure 2.9: Telefónica M2M subscribers by country (2014–2015)

Thousands Q1-2014 Q3-2014 Q1-2015 Q3-2015 YoY growth Spain1 1,445 1,567 1,662 1,706 9 % Germany 95 106 443 571 439 % UK 2,038 2,116 N/A N/A N/A

Brazil 2,629 3,198 3,688 4,106 28 % Rest of Latam. 1,873 1,971 2,126 2,214 12 %

Total (excluding the UK) 6,042 6,842 7,919 8,597 26 % 1Adjusted for the deactivation of 569k inactive SIMs in Q1-2014.

Source: Telefónica

2.2.4 Orange Orange is one of the world’s leading telecommunications operators with operations in more than 200 countries, 157,000 employees and consolidated revenues of € 39.4 billion in 2014. At the end of the year, the group was present in 32 countries and territories worldwide and had a total customer base of 263 million, including 202 million mobile customers and 18 million fixed broadband customers worldwide. Orange is also a leading provider of global IT and services to multinational companies, under the brand Orange Business Services (OBS).

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Orange is one of the largest mobile operators in Europe with operations in France, Spain, Poland, Belgium, Luxembourg, Romania, Slovakia, Moldova and Armenia. In recent years, Orange has withdrawn from a number of mature markets in Western Europe including the UK where the EE joint-venture with Deutsche Telekom is in the process of being sold to BT. At the same time, Orange has accelerated investments in network expansion and ownership consolidation in growth markets in Africa and the Middle East. The group currently has mobile operations in 18 countries in the region including Egypt, Tunisia, Morocco, Iraq, Jordan, Kenya, Cameroon, Niger, Mali, Ivory Coast and Senegal.

Group M2M strategy Orange was one of the first top international telecommunications groups to develop a strategy for the M2M market in the early 2000s. Today, the group has the view that the M2M market is entering a new phase with more sophisticated applications that connect people and machines, enabling them to freely exchange information, adding new dimensions to digital business and life. Orange’s Essentials2020 strategic plan includes a target to sixfold M2M/IoT revenues from around € 100 million in 2014 to € 600 million in 2020. To achieve this goal, Orange positions itself as a global operator and integrator, enabling customers to bring the benefits of M2M/IoT to their businesses. Leveraging the expertise of around 500 employees dedicated to M2M/IoT at group level, in the national operating companies and OBS, Orange focuses on six prioritized international vertical segments – automotive, telematics, industry, consumer electronics, healthcare and smart cities. Combining direct mobile operations in 29 countries with 33 additional countries covered by the members of the GMA and one of the world’s largest roaming networks, Orange can offer managed M2M connectivity solutions on a national, regional and global basis. In February 2015, the operator announced a new multi domestic service proposition, developed in partnership with Ericsson and Gemalto, enabling multinational customers to deploy and manage M2M connected devices on multiple mobile networks using a single platform. As a complement to cellular technology, Orange is also investing in the development of LPWA technologies. At the end of 2015, the operator announced plans to deploy a nationwide LoRa network in France, starting in Q1-2016. For bespoke projects, OBS has considerable expertise and experience in developing customised end-to-end M2M solutions for international customers. OBS is also a major provider of complete fleet management solutions, ranking as the market leader in France and among the top five players in Europe.

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Market strategy Orange is one of the leading international providers of wireless M2M connectivity in Europe. At the end of Q3-2015, the group had around 6.5 million M2M subscribers, up 30 percent from one year earlier. France was the largest regional market, followed by Belgium and Poland. The Middle East & Africa and international markets accounted for roughly 20 percent of the total subscriber base. The best performing market is currently France, where Orange reported 3.6 million M2M subscribers in Q3-2015 and a year-on-year growth rate of 65 percent. Much of the growth is related to contracts with multinational OEMs in the automotive and industrial sectors. Mobistar in Belgium meanwhile reported an unchanged M2M subscriber base of 0.8 million. Orange Poland does not disclose the number of M2M subscribers, but claims to be the domestic market leader, which would correspond to around 0.5–1.0 million subscribers. Some examples of M2M customers are Renault and PSA in automotive, Transics and Openmatics in fleet management, E.ON and Veolia in utilities, Sorin Group and Weinmann in healthcare, Nespresso in retail, Redsys and SIA in payments and Dacom in agriculture.

2.2.5 Telenor Telenor is an international telecom group based in Norway with sales of € 12.8 billion in 2014 and 33,000 employees worldwide. The group is organised into three business areas; mobile communications, fixed-line communications and . With 186 million mobile subscribers in fully consolidated subsidiaries in three geographical clusters – Nordic, Central Eastern Europe and Asia – it ranks as one of the world’s largest mobile operators. Telenor is the largest provider of broadband and services in the Nordic region and the second largest mobile operator with networks in Norway, Sweden and Denmark. Assets in Central Eastern Europe include mobile networks in Hungary, Bulgaria, Serbia and Montenegro. In Asia, the Telenor group has established operations in India, Pakistan, Bangladesh, Thailand, Malaysia and Myanmar. Furthermore, Telenor has a 33 percent stake in Vimpelcom, offering mobile services in an additional 17 markets.

Group M2M strategy Telenor was one of the first movers in wireless M2M in the global telecom industry. Seeking to leverage on its extensive experience and leadership on the advanced Nordic market, the group has set the target to become one of the leading global providers of wireless M2M

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connectivity. To underline the importance of this initiative, M2M has been defined as one of the key strategic growth areas for the whole Telenor group. During 2008, the group launched the independent subsidiary Telenor Connexion that operates as a global provider of managed M2M connectivity solutions. Telenor’s present business organisation for the M2M market comprises Telenor Connexion, responsible for the international market and local M2M teams in the various operating companies responsible for national markets. At the end of 2013, Telenor started to consolidate the M2M organisation in the Nordic markets into Telenor Connexion. According to data from national telecom regulators, Telenor had around 6.0 million M2M subscribers in Telenor Connexion and the subsidiaries in Sweden, Norway and Denmark at the end of 2014 – up 15 percent over the previous year – making it the undisputed market leader in the Nordic region. In Norway, Telenor has a completely dominant market position with a market share of 90 percent. Including all operating companies in Europe and Asia, Berg Insight estimates that Telenor has a global M2M subscriber base of approximately 8 million.

Figure 2.10: Financial data for Telenor Connexion (2010–2014)

€ million 2010 2011 2012 2013 2014 Turnover 12.6 18.5 28.6 43.0 58.4 EBIT -12.0 0.5 9.5 18.4 30.4

Source: Telenor Connexion annual report 2014

Telenor Connexion Telenor Connexion is an international enabler of connected business solutions in the Telenor group, offering global connectivity services, enabling services and professional services in M2M/IoT. According to the annual report for 2014, sales increased 36 percent over the previous year to reach € 58.4 million (SEK 531 million). Building on more than 15 years of experience from the M2M industry, the company has unique expertise in designing smart connected solutions on a global scale. Headquartered in Sweden, Telenor Connexion has international offices in the UK, Germany, France, the US and Japan. The customer base is a mix of Swedish and international OEMs and service providers across all world continents,

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including Volvo, Nissan, Scania, Hitachi CE, Securitas Direct and Telcare. International customers accounted for 37 percent of revenues in 2014. The number of M2M subscribers was 5.0 million in Q2-2015.

Telenor Connexion was among the first mobile operators in the world to develop a dedicated connectivity platform for M2M, which was subsequently sold to Ericsson. In 2011, the platform was acquired by Ericsson to form the core of the telecom vendor’s DCP platform for mobile operators. In February 2014, Telenor Connexion became the first M2M provider to offer capabilities from the two leading connectivity management platform providers Jasper Technologies and Ericsson. At the end of the year, Telenor joined the M2M World Alliance. During 2014, Telenor Connexion started to implement a new strategy, aimed at creating more value for the customers based on the new Cloud Connect platform. The concept behind Cloud Connect is to provide industrial OEMs with a complete managed solution for capturing, storing and managing data from connected products in the cloud. Together with partners, Telenor Connexion has the capability to design and operate complete solutions, with an initial focus on customers based in the Nordic countries and Germany.

2.2.6 3 Group Europe 3 Group Europe is a mobile operator with activities in Italy, the UK, Sweden, Denmark, Austria and Ireland. The businesses are part of Hutchison Whampoa (HWL) – a multinational diverse conglomerate headquartered in Hong Kong, employing over 280,000 people in 50 countries worldwide. Through the subsidiaries Hutchison Telecommunications Hong Kong Holding and Hutchison Asia Telecommunications, HWL also provides mobile services in Hong Kong, Macau, Indonesia, Vietnam and Sri Lanka. Three is the common brand for the group used in Europe, Hong Kong and Indonesia. 3 Group Europe ranks as one of the major mobile operators in Europe with 25 million active subscribers at the end of 2014 and yearly revenues of € 1.7 billion. In January 2015, the group agreed to enter into exclusive negotiations with

Telefónica for the potential acquisition of O2 UK. If approved, the deal will almost double the group’s customer base and consolidate a strong market position in the UK & Ireland.

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From the onset, 3 Group Europe has mostly focused on the consumer markets in the

countries where it operates. Following the acquisition of O2 Ireland, the group did however capture the number one position in the Irish market where it now holds a 53 percent market

share. The proposed takeover of O2 UK would establish 3UK as one of the major contenders

in the UK market and make it an attractive partner for collaborations in Europe. O2 UK reported 2.2 million M2M subscribers at the end of 2014, corresponding to a market share of 35 percent. Until 2020, the operator will deploy one of the world’s largest M2M solutions with the rollout of 23 million smart meters with embedded cellular connectivity.

2.2.7 Belgacom Belgacom is the largest telecommunications company in Belgium, majority owned by the state. Annual sales in 2014 were € 6.1 billion and the workforce comprises around 14,000 employees. The group is the leading provider of telephony, Internet and TV services in Belgium and has considerable international operations through its Belgacom International Carrier Services business unit. With around 5.7 million subscribers and a market share of 40 percent, Belgacom – operating under the Proximus brand – ranks as the largest mobile operator in Belgium. Belgacom is however a latecomer to the M2M market where it ranks as the second largest player with 290,000 reported connections at the end of Q2-2015 and a year-on-year growth rate of 19 percent.

Over the past years, the operator has launched several strategic initiatives to accelerate its M2M business, focused on enterprises in Belgium and Luxembourg. During 2011, Belgacom established a dedicated competence centre for M2M and extended its partner agreement with Vodafone to include M2M services. At the end of 2012, the operator announced the launch of a dedicated M2M service delivery platform, developed by KORE Systems – a subsidiary of KORE Telematics. In October 2013, it introduced the Belgacom M2M Factory platform for application developers, combining the deviceWISE application enablement platform with Belgacom connectivity services and pre-integrated hardware. Option’s CloudGate intelligent gateway is the first M2M device certified for the platform. In July 2015, Belgacom announced plans to roll out a LPWA network based on the LoRa standard across Belgium and Luxembourg. The network will be available in major Belgian cities at the end of the year and reach full coverage by 2016. Belgacom will also support international roaming in the Netherlands in partnership with KPN.

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2.2.8 EE EE is a leading digital communications company in the UK, offering 4G mobile services alongside fibre broadband. Founded in 2010, EE is jointly owned by Deutsche Telekom and Orange and runs the T-Mobile and Orange brands, delivering mobile communications to 31 million customers. At the beginning of 2015, British Telecom announced a £ 12.5 billion bid to take over EE. If approved, the transaction will create a new leading UK communications provider with annual sales in excess of £ 24 billion. EE is investing £ 1.5 billion over three years to rollout a nationwide LTE network in the UK and covered 98 percent of the population by the end of 2014. In mid-2015, the 4G subscriber base was 10.9 million. When established, EE inherited the M2M operations of Orange and T-Mobile in the UK. Since 2011, the operator’s M2M business belongs to the wholesale department. EE has the largest MVNO portfolio in the UK and direct access to an extensive footprint in Europe, North America and Africa through Deutsche Telekom and Orange, as well as other members of the Global M2M Association. The combination of a culture for partnering, international coverage and a competitive cost base has made EE an attractive partner for resellers such as KORE Telematics in the US and Wireless Logic, Arkessa and Stream Technologies in Europe. Furthermore, EE has a direct B2B sales team for M2M and a network of channel partners covering major vertical markets. Besides traditional segments such as automotive and fleet, EE has a strong focus on high bandwidth applications such as digital signage, interactive vending and retail. In September 2015, the operator launched the 4G-capable EE Connect service, based on the Jasper platform. The M2M subscriber base was 2.1 million at the end of Q3-2015, up 12 percent from one year earlier.

2.2.9 KPN KPN is headquartered in the Netherlands and ranks as one of the largest telecom groups in Europe with annual sales of € 8.1 billion in 2014 and 18,000 employees. The group is the leading communication provider in the Netherlands with around 12.5 million mobile subscribers. Furthermore it ranks as one of the leading ICT providers in the country through the KPN Consulting business. In the past years, KPN has refocused its business on the Dutch

market. At the end of 2014, the group completed the sale of E-Plus to Telefónica O2 Germany, in exchange of a minority stake in the merged company. In April 2015, KPN also sold the Belgian subsidiary BASE to .

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KPN was one of the first major network operators in Europe to consolidate all M2M operations in a single business unit to develop a pan-European value proposition. In 2009, it also became one for the first mobile operators to enter a partnership with Jasper Technologies. During 2012, KPN joined seven other mobile operators using the Jasper platform in the formation of the Global M2M Alliance. The group’s M2M market strategy has evolved over time. Today, KPN focuses on three core activities in the value chain – network connectivity, data storage and hosting and data services. Network connectivity capabilities range from fixed broadband to 2G/3G/4G mobile services and low power wireless LoRa. KPN achieved nationwide LTE coverage in early 2015 and plans to complete the rollout of a nationwide LoRa network before the end of 2016. Leveraging its leading capabilities in cloud computing and the 1,200 employees of KPN Consulting, the group can also support customers and partners through the entire process of developing and operating applications. KPN is working actively to support the IoT ecosystem through initiatives such as the IoT Academy for start- ups and developers in the Netherlands and a financial investment in the IoT platform developer Actility.

KPN ranks as the leading provider of M2M communication in the Netherlands. At the end of Q3-2015, the operator reported 1.3 million M2M subscribers, corresponding to a market share of around 50 percent. Smart metering is the largest application area by volume, where KPN provides cellular connectivity for several leading regional utilities. The largest customer Enexis is planning to deploy smart electricity meters with LTE capabilities to its residential customers over the coming five years. Another high profile customer is Tesla, which is served in partnership with Telefónica.

2.2.10 MTS Mobile TeleSystems (MTS) is the leading telecommunications group in Russia and the CIS, offering mobile and fixed voice, broadband, pay TV as well as content and entertainment services. At the end of Q2-2015, the group serviced 105.3 million mobile subscribers in Russia, Ukraine, Belarus, Armenia and Turkmenistan. Annual sales in 2014 were US$ 10.7 billion (€_8.1 billion) and the workforce comprises 58,000 employees. MTS is majority owned by Sistema, the largest publicly traded diversified holding company in Russia and the CIS. Other assets of the group includes a majority share in NIS, a leader in the Russian navigation

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and information market, carrying out the major technological projects of the Russian satellite navigation system GLONASS. NIS has a majority share in M2M Telematics, Russia’s leading system integrator in M2M with 300 employees, active in research, design, development, manufacture, sales and support of technologically advanced GPS/GLONASS/GSM systems for vehicle and asset tracking, fleet management and security.

MTS has been a leading player in the Russian M2M market since the inception, in strength of its leading position in the mobile industry. According to the operator, there has been an acceleration of growth since 2011, driven by increasing demand in all traditional segments. Between 2010 and 2013, MTS’ number of M2M subscribers more than tripled to 2.5 million. During 2014, the growth rate slowed with the subscriber base reaching 3.0 million at the year end. In the first half of 2015, MTS reported that M2M accounted for 18 percent of corporate data traffic. Fleet management is the largest application category, accounting for around 47 percent of the installed base, followed by security systems with 20 percent, POS-terminals and industrial applications with 12 percent each, utilities with 11 percent and other applications for the remaining 5 percent. According to its own estimates, MTS is the number one provider of M2M connectivity in Russia with a market share of around 50 percent.

2.2.11 SFR SFR is the second largest mobile operator in France with 21.9 million subscribers at the end of Q2-2015. At the end of 2014, SFR merged with the FTTH network operator Numericable. The combined group Numericable-SFR generated proforma sales of € 12.0 billion in 2014. SFR was an early-mover in the French M2M market and has maintained a leading market position for many years. In mid-2015, the market share did however drop below 50 percent as the subscriber growth rate fell behind the overall market. At the end of Q2-2015, SFR reported 4.4 million M2M subscribers, up 12 percent compared to one year earlier. SFR has an extensive network of partners, including 25 providers of telematics solutions such as Coyote, TomTom, Masternaut and Transics, and a wide range of application providers in areas such as remote monitoring, payments and building automation. The operator also provides complete fixed or wireless POS-terminal solutions for retailers. SFR has a long-standing close relationship with Vodafone and implemented the group’s GDSP platform at an early stage. In April 2014, the parties reconfirmed their continued collaboration by extending their strategic global alliance agreement for another four years.

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2.2.12 Telecom Italia Telecom Italia is an international telecommunications group headquartered in Italy with 66,000 employees and annual sales of € 21.6 billion in 2014. The group provides infrastructures, platforms and services for mobile and fixed phones, Internet, ICT solutions and media content. Telecom Italia is the leading communications provider in Italy, reporting 12.1 million fixed lines and 30.1 million mobile subscribers at the end of Q2-2015. The majority owned subsidiary TIM Brasil is the second largest mobile operator in Brazil with 74.6 million mobile subscribers and a market share of 26 percent. Telecom Italia has a strong position in the domestic enterprise market as a provider of telecommunications services, as well as ICT solutions. The operator has held a leading position in the M2M market from the onset. Berg Insight estimates that the M2M subscriber base was nearly 5.0 million at the end of 2014. The largest vertical market segment is automotive where Telecom Italia works with leading players such as Octo Telematics to provide pay-as-you-drive motor insurance to millions of Italian drivers. Other significant segments include metering, security, lift-control and remote monitoring of gaming machines. Outside of Italy, TIM Brasil has a substantial M2M business serving 1.4 million connections at the end of Q2-2015. In November 2015, Telecom Italia joined as one of the founding members of the NB-IoT Forum.

2.2.13 Swisscom Swisscom is Switzerland’s leading telecom provider, with 6.5 million mobile customers, 1.2 million digital TV customers and 1.9 million retail broadband connections. In 2014, the company generated a turnover of CHF 11.7 billion (€ 10.8 billion) and the workforce comprises about 21,000 employees. Swisscom offers a full range of products and services for mobile, and IP-based voice and data communication. In addition, the company also provides services for IT infrastructure outsourcing, as well as the management of communications infrastructure. Swisscom’s domestic market share in mobile communications is more than 60 percent overall and even higher in the enterprise segment where it counts 1.5 million wireless subscribers. Responding to a growing demand for M2M solutions, the operator established an M2M department at the end of 2011. The following year, Swisscom partnered with Ericsson to offer the DCP platform for enterprise customers deploying M2M applications.

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Swisscom’s M2M initiative has been well received by the market and the number of M2M connections reached close to 1.0 million in mid-2015. The fastest growth comes from medium sized industrial companies that frequently deploy international solutions. Swisscom has an extensive network of more than 600 international roaming partners. As a Vodafone Partner Network, Swisscom has a strong relationship to Vodafone, but the operator is also open for cooperation with other constellations of partners. In September 2015, Swisscom also joined the Global M2M Association to increase its international business opportunities. Swisscom is also betting on LoRa. In June 2015, Swisscom ventures was one of the investors behind a US$ 25 investment in Actility, a provider of network solutions and managed information systems for the Internet of Things market. Swisscom is also building a LoRa network that is available in Zurich and Geneva.

2.2.14 Telekom Austria Telekom Austria is a leading communications provider in Central and Eastern Europe with around 23 million customers across its operating markets. Since 2014, a majority stake in the group is held by America Móvil. The Austrian state holding firm OIAG also holds a large minority share. Telekom Austria has around 16,000 employees and revenues amounted to around € 4.0 billion in 2014. Telekom Austria currently operates in eight countries: Austria (A1), Slovenia (Si.mobil), Croatia (Vipnet), Serbia (Vip mobile), Macedonia (Vip operator), Bulgaria (Mobitel), Belarus (Velcom) and Liechtenstein (mobilkom Liechtenstein). A1 is the leading mobile operator in Austria with 5.4 million customers and a market share above 70 percent in the B2B segment. Mobitel and Velcom have similar market shares in Bulgaria and Belarus, with 4.3 million and 4.9 million mobile subscribers respectively. Altogether, Telekom Austria had 19.1 million mobile subscribers across its footprint at the end of Q3-2015. In addition to telecommunications, Telekom Austria is also active in ICT solutions, where it has extensive capabilities and a leading position in the domestic market.

Telekom Austria has more than a decade’s experience of M2M communication and holds leading market positions in its main footprint countries. Berg Insight estimates is in the order of 1.0 million M2M suscribers. At the end of 2011, the group established a new subsidiary for the M2M market. Telekom Austria Group M2M acts as a competence centre for all of the group’s operating companies and as a hub for the coordination of large projects with

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international customers and partners. The value proposition comprises managed connectivity as well as end-to-end solutions and turnkey projects in key vertical segments. Telekom Austria is positioning itself as a regional provider of managed M2M connectivity in its network footprint, as well as a provider of integrated solutions together with partners. The operator has implemented the versatile in-house M2M connectivity platform SIMplify developed by Comarch and as a Vodafone network partner, it can provide favourable roaming agreements for international deployments in Europe and worldwide.

For key vertical segments, Telekom Austria is developing an expanding portfolio of end-to- end solutions. Together with carefully selected solution partners, the operator provides a growing range of packaged M2M applications. PILOT and LORRY are fleet management solutions for vans and trucks respectively. Asset tracking applications include POLAR for road winter maintenance, THERMO for cold-chain transport monitoring, COUNTRY for agricultural machinery, ROBUSTO for construction equipment and TINO for container tracking. FLEXify and STARTify are two modular platforms providing standardised device, networking and software frameworks for remote monitoring and consumer oriented M2M applications respectively.

The utilities sector is the first vertical industry where Telekom Austria is positioning itself as a turnkey solution provider. The main focus market is Austria where the government has decided that a nationwide rollout of smart meters to all 4.7 million electricity customers should be completed by 2019. Leveraging its domestic field services organisation, Telekom Austria can support utilities through every phase of their smart metering rollout, from planning to installation and operation. In September 2014, Telekom Austria announced a turnkey end-to- end solution platform for smart metering applications branded Österreich Zähler. Through partnerships with the meter manufacturers Kaifa and Kamstrup, Telekom Austria has developed a broad portfolio of smart electricity meters supporting cellular point-to-point, wireless mesh and power-line communication. During 2015, support for dual mode 2G GPRS and 4G LTE was added to the portfolio. The largest contract was awarded by Netz Burgenland that serves nearly 200,000 customers in July 2015.

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2.2.15 TeliaSonera TeliaSonera is the leading telecommunications company in the Nordic and Baltic region and also holds strong positions in mobile communications in Eurasia, Turkey and Russia through majority owned subsidiaries and minority stakes in Megafon and Turkcell. In September 2015, TeliaSonera announced that it is not a long-term owner in the Eurasian region. At the end of 2014, the group had 65.6 million mobile subscribers in majority owned mobile operators in Northern Europe, Spain and Eurasia, plus 118 million mobile subscribers in associated companies in Russia, Ukraine and Turkey. In its core markets in the Nordic and Baltic region, TeliaSonera ranks as the market leader in mobile communications in Sweden, Estonia and Latvia and number two or three in Lithuania, Finland, Norway and Denmark. The market position in Norway was reinforced through the acquisition of Tele2’s operations in the country under an agreement reached in July 2014. Furthermore TeliaSonera has 7.2 million fixed telephony, broadband and telephony customers. The group’s subsidiary in Spain – Yoigo – ranks as the country’s fourth largest mobile operator and reached 4.0 million subscribers in Q4-2014. The Eurasian subsidiaries have leading market positions in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia, Moldova and Nepal. The turnover in 2014 was SEK 101.1 billion (€ 11.0 billion) and the workforce comprises 26,000 employees.

TeliaSonera has a long experience from the wireless M2M market, dating back to the time before the merger of the Swedish incumbent telecom operator Telia and its Finnish counterpart Sonera. The respective national operating companies have been involved in some of the largest smart metering rollouts in the Nordic region where they provide 2G connectivity for more than half a million smart electricity meters and have significant market positions in other major vertical segments such as security, payments and fleet management. Telia also supported the launch of Europe’s first M2M managed service provider Maingate (now part of Sierra Wireless) as an investor and wholesale network partner.

Recognising the strong growth potential for wireless M2M, the TeliaSonera group established a centralised M2M business unit for the Nordic and Baltic region during 2011. The organisation TeliaSonera Global M2M Services provides dedicated resources for M2M sales, project management, partnerships and R&D that support a unified proposition for all national markets. In July 2011, TeliaSonera joined the Global M2M Association where it now cooperates with Deutsche Telekom, Orange, Swisscom, Telecom Italia, Softbank and Bell

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around international business opportunities. At the end of 2012, TeliaSonera entered a partnership with Ericsson to deploy the DCP platform for M2M connectivity management. Berg Insight estimates that TeliaSonera had 2.5 million M2M subscribers in Northern Europe at the end of 2015.

TeliaSonera’s group strategy identifies M2M as one of three future growth markets. The primary strategies for capitalising on the opportunities are geographic expansion beyond the Nordic region, additional horizontal services such as SLAs, billing and hosting and expansion into carefully selected vertical markets. For horizontal services, the overall goal is to enable seamless integration between enterprise IT and connected devices through the combination of open platforms, more sophisticated services and partnerships with key ICT industry players. The ecosystem is supported by the TeliaSonera M2M Partner Program, whose 50 members include ICT companies and consultancies such as Accenture, Capgemini, Ericsson, IBM, HP, Intel, Oracle, TCS, Tech Mahindra and Tieto, as well as service providers in key vertical segments such Multicom Security in security. Partners are one of the main market channels, next to the B2B sales organisations in each country and the specialised M2M sales team. TeliaSonera is also building end-to-end solutions as well as investing in select M2M related companies. During 2014/2015, TeliaSonera has introduced two cloud- based end-to-end solution platforms, comprising devices, connectivity and data interfaces. M2M-in-a-box allows businesses and organisations to explore the opportunities with M2M and Telia Sense enables connected car applications through an OBD device and a app.

2.2.16 Tele2 Tele2 is a major telecommunications operator in Europe, providing services to 14.4 million customers at the end of Q3-2015. Annual sales in 2014 were SEK 27.0 billion (€ 3.0 billion) and the workforce comprises around 5,500 employees. Tele2 is currently present in 9 countries – Sweden, the Netherlands, Kazakhstan, Croatia, Estonia, Latvia, Lithuania, Austria and Germany. Tele2’s position and priorities vary across its footprint. Sweden is the home turf and number one in terms of revenues. In the Netherlands, Tele2 is undergoing a transformation from being the largest independent MVNO into a full licensed LTE network operator. Kazakhstan is a greenfield market where the operator is undertaking a new network rollout. In the Baltic States, Tele2 holds the position as market leader in Lithuania and

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challenger in Estonia and Latvia. Tele2 Croatia is a challenger in the mobile communications market and in Germany and Austria, Tele2 operates as an MVNO, providing mobile and fixed services.

Tele2 M2M Global Solutions was launched as the Tele2 group’s global business unit for M2M at the end of 2013. Leveraging the combined network footprint of the group and its international partners, the business is set up to support international M2M solutions in Europe and worldwide. The organisation has around 60 employees with dedicated sales teams throughout Northern and Western Europe. At the time of the launch, Tele2 selected the Jasper platform for connectivity management. In May 2015, the operator announced the Tele2 IoT Portal, providing a self-service management module and integrations with leading application platforms such as Telit deviceWISE, Microsoft Azure and ThingWorx. Tele2’s M2M market strategy is focused on connectivity services and partnerships with selected players in key vertical segments. Among system integrators, the operator is working with CGI in smart cities, HCL in healthcare and Wipro in industrial automation. Other partners include the M2M intelligent gateway vendor Netcomm Wireless and the meter manufacturer Landis+Gyr. Tele2 has also signed a number of high profile customers in the utilities sector including Vattenfall in Europe, Fortum in Sweden and the Lithuanian national power grid operator LESTO.

2.2.17 CDMA/LTE networks for the 450 MHz band The 450 MHz band has attracted significant interest for niche mobile communication providers in Europe. Several countries where the frequency band was previously used for analogue have reassigned it for alternative digital cellular networks. CDMA450 networks have been rolled out by among others Polkomtel in Poland, Telefónica

O2 Czech Republic and the Scandinavian operator AINMT that specialises in covering remote sparsely populated areas. AINMT’s subsidiaries Net1 and Ice.net have created M2M propositions for customers in the Scandinavian energy and forest industries for whom wide area coverage is critical. Examples of customers are the energy group Vattenfall and the hygiene and paper group SCA, which is the largest private owner of woodlands in Europe. At the end of 2014, Net1 announced plans to upgrade its network to LTE using the same frequency band. UtilityConnect is a mobile network operator in the Netherlands, entirely dedicated to providing services for smart energy and other mission critical applications in the public sector. The company holds a nationwide license for 2 x 3 MHz spectrum in the 450

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MHz band that it will use to deploy a new mobile network based on CDMA technology. Since October 2014, UtilityConnect is jointly owned by the regional Dutch utilities Alliander and Eneco which plan to use the network as the main platform for connecting around 5.0 million smart electricity meters among 60 percent of the Dutch population.

2.3 M2M managed service providers Europe has a handful of regional M2M managed service providers. Wireless Logic is the largest player with the broadest geographic footprint, covering most of Western Europe. Telit and Sierra Wireless have also entered the managed M2M connectivity market in Europe to complement their device business. Sierra Wireless is consolidating a new European market player through the combination of the acquired businesses of Wireless Maingate in Sweden and MobiquiThings in France. Cubic Telecom targets the automotive and enterprise M2M markets with a new pan-European LTE network service and Stream Technologies is seeking international expansion from its base in the UK.

2.3.1 Wireless Logic Wireless Logic is a European M2M managed services provider combining infrastructure, software and connectivity, headquartered in the UK. Since 2011, the company has expanded into continental Europe with support from the private equity firm ECI. At the beginning of 2015, Wireless Logic was sold to the private equity firm CVC Capital Partners for £ 232 million. Later in the year, Wireless Logic acquired the Danish M2M connectivity provider SimService to strengthen its presence in Northern Europe. After the acquisition, the company has regional offices in Germany, France, Spain and Denmark. The next target markets for expansion will be Scandinavia, the Netherlands and Italy.

Wireless Logic’s value proposition comprises airtime packages and billing according to customer needs, with capability to aggregate across SIMs, tariffs and networks. The company’s SIMpro platform is a monitoring and control tool for users with multiple devices, which is supported by partnerships with several global mobile network operators. In addition, its ManageNet delivers secure and resilient Infrastructure as a Service (IaaS), connecting devices and assets across its cloud-based private network. Wireless Logic currently has 26 global and local network agreements with leading European mobile operators including

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Vodafone, Telefónica, EE, 3 UK, Telenor, SFR, Bouygues Telecom, KPN and Telekom Austria. The combined footprint comprises two or more alternative mobile networks in most European countries. Wireless Logic targets all segments of the wireless M2M market, except the largest international and domestic customers that require very high volumes of SIMs. The company’s main unique advantage is the ability to support multiple mobile networks in any European country on a single platform. Its market approach is based on partnerships with system integrators and solution providers, who in turn resell M2M data plans from multiple mobile operators, delivered on Wireless Logic’s platform, to their customers. In August 2015, Wireless Logic reached 2.0 million SIMs under management on behalf of more than 1,000 solution partners. The UK remains the main geographical market, where it has a strong market position, particularly in the vehicle tracking segment.

2.3.2 Sierra Wireless – Wireless Maingate and MobiquiThings Sierra Wireless entered the European M2M connectivity market in 2015 through the acquisitions of Wireless Maingate in Sweden and MobiquiThings in France for € 76 million and € 14 million respectively. The deals have established Sierra as one of the largest players in the segment with a broad geographic footprint. Put together, the acquired businesses have nearly 600 customers and 600,000 connected devices. Sierra Wireless is also among the investors backing Cubic Telecom.

Wireless Maingate is a provider of M2M connectivity and data management services, based in Sweden. Founded in 1998, the company started as an MVNO in the M2M market in the Nordic region and subsequently developed a focus on developing customised energy solutions in the European market. At the beginning of 2015, Wireless Maingate was acquired by Sierra Wireless for US$ 90 million (€ 76 million). The acquisition enables Sierra Wireless to offer customers in Europe complete device-to-cloud solutions, with fully integrated hardware, embedded software development tools, cloud-based application development, device and subscription management, and wireless services. Before the acquisition, Wireless Maingate had around 500 customers and a subscriber base of more than 500,000 connected devices. Annual sales in 2014 reached € 15 million, of which more than 90 percent derived from customers in Sweden. Wireless Maingate has been a key player in the nationwide rollouts of smart meters in the Nordic countries, providing backend communication for 55 percent of the smart meters in Sweden and 20 percent in Finland. In addition the company connects 70

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percent of Sweden’s wireless POS-terminals and 40 percent of the monitored security alarms. Wireless Maingate’s smart energy platform and services business was spun-off as an independent company before the transaction.

MobiquiThings is an MVNO focused on managed connectivity services for the Internet of Things, based in France. The company offers a technology platform that includes MobiquiSIM, a dynamic attachment service that provides its customers with radio access network coverage, as well as SIM provisioning and management for 2G, 3G, and 4G connectivity. When acquired by Sierra Wireless in September 2015, the company had around 75 customers, which together comprise more than 100,000 wireless connectivity subscriptions.

2.3.3 Telit Telit entered the M2M connectivity services market in 2012 with the launch of the m2mAIR business. Telefónica is the preferred connectivity partner, providing global coverage in cooperation with roaming partners. In addition, Telit’s acquisition of US-based Crossbridge Solutions in early 2013 added a regional platform in North America through interconnect agreements with leading network operators for GPRS/HSPA/LTE, as well as CDMA. Telit’s approach to M2M connectivity is different in the sense that its services are provided as a complement to hardware products. Bundled offerings combining embedded modules and connectivity are a key part of the portfolio, which also includes pure device management services. Following the acquisition of ILS Technologies, Telit has integrated the deviceWISE application enablement platform into the m2mAIR offering. In February 2014, the company also entered an agreement to provide its customers with access to the Jasper platform. Telit’s market strategy for m2mAIR services is focused on the company’s existing sale channels and relationships to system integrators, distributors and VARs. The Telit IoT connectivity offering is currently available for European and North American customers with planned rollouts in other regions.

2.3.4 Cubic Telecom Cubic Telecom is a telecommunications company, headquartered in Ireland. In May 2015, the company completed its latest round of financing, raising € 18 million from Qualcomm and Audi Electronics Ventures. Other investors include Sierra Wireless, ACT Wireless Capital, TPS

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Investment and Enterprise Ireland. Cubic Telecom develops an integrated platform for 3G/4G and Wi-Fi network connectivity, offering features such as real-time billing, rating and provisioning and customized retail rates. The platform supports a wide range of billing models, including postpaid, prepaid, auto top-up and fair usage price plans with data bundles or selected country destinations. Cubic Telecom has its own core network infrastructure and a SIM-platform allowing for multiple operator agreements and local data pricing in multiple priority markets on a single SIM. Mobile operator partners include EE, EIR (formerly Eircom), Orange/Mobistar, Tele2, TIM and Salt (formerly Orange Switzerland) in Europe and China Unicom in China. Cubic Telecom leverages its platform to create global connectivity solutions for the automotive, computer OEM and retail sectors. Examples of services powered by the platform include Audi’s connected car services, HO Mobile Connect and Maxroam for Chromebook by Samsung. In November 2015, Cubic Telecom announced the launch of an independent LTE network platform for connected car and M2M application across 13 countries in Western Europe.

2.3.5 Stream Technologies Stream Technologies is a global enabler of M2M/IoT connectivity. Founded in 2000, the company is headquartered in the UK and has international offices in the US and Canada. Stream Technologies was an early pioneer in the British M2M market and launched the country’s first M2M connectivity management platform in 2005. IoT-X is the company’s multi- network technology platform, supporting 2G/3G/4G cellular, as well as satellite, LPWA and short range-wireless (e.g. Bluetooth, Wi-Fi and ZigBee). Stream operates a private global APN based backhaul network, interconnecting 16 mobile operators worldwide. Working with partners such as ARM, Thingworx, B&B Electronics and Multi-Tech, the company serves more than 500 enterprise customers. During 2015, Stream announced strategic partnerships with JT (Jersey Telecom) and the Caribbean mobile operator group Digicel, which will both use the IoT-X platform for their respective IoT/M2M businesses.

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2.4 LPWA networks Sigfox and LoRa have emerged as the most widely supported LPWA networking standards in Europe. At the end of Q3-2015, more than a dozen mobile operators, tower infrastructure operators and other players were rolling out large-scale networks based on the technologies in Western Europe. Sigfox reported 5.0 million confirmed device bookings in Europe in late 2015, while no data was available regarding LoRa. Other examples of LPWA technologies adopted in Europe is the Weightless standard and proprietary technology platforms for specific applications such as smart metering and street light management.

2.4.1 Sigfox and network partners Sigfox is a global M2M network operator headquartered in France, dedicated to low bandwidth communications for connected objects, with 140 employees. Founded in 2009, Sigfox has raised in total US$ 145 million in venture capital. The latest round, completed in early 2015, added seven new strategic investors – Air Liquide, Elliot Management Corporation, Eutelsat, ENGIE (formerly GDF SUEZ), NTT Docomo Ventures, SK Telecom and Telefónica – to support global expansion. Later in the year, Sigfox established regional headquarters in the US and the UAE to support new network rollouts in North America and the Middle East & Africa. Sigfox’s patented UNB (Ultra Narrow Band) technology uses unlicensed frequency bands to transmit data over a very narrow spectrum to and from connected objects. Designed for very low throughput, data messages up to 12 bytes in size can be sent up to 40 kilometres in open field and penetrate deeply into buildings or underground, with high reliability and very low power consumption. Furthermore, the narrow throughput transmission combined with sophisticated signal processing provides effective protection against interference. In the future, Sigfox plans to add satellite connectivity to the platform for truly ubiquitous coverage.

As of November 2015, Sigfox had announced network rollouts in ten European countries – France, the UK, Spain, Italy, the Netherlands, Belgium, Luxembourg, Portugal, Denmark and Ireland. In addition there are local network in several cities. Outside of France, Sigfox is working with local network operator partners who deploy the infrastructure and provide domestic services. Aerea launched the first international Sigfox network in the Netherlands in 2013 and covers 85 percent of the country. During 2014, coverage was extended to Spain

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and the UK through partnerships with Cellnex Telecom (formerly Abertis Telecom) and Arqiva respectively. Cellnex is the largest independent infrastructure operator for wireless telecommunications in Western Europe, operating 15,000 sites in Spain and Italy. Arqiva is the terrestrial broadcasting network operator in the UK and one of the main infrastructure partners for the country’s upcoming smart meter rollout. In H1-2015, the company completed the first phase of the Sigfox network rollout, covering ten major UK cities.

Figure 2.11: Sigfox network partners in Europe (Q3-2015)

Country Operator Country Operator France Sigfox Netherlands Aerea UK Arqiva Luxembourg POST/RMS.lu Spain Cellnex Portugal Narrownet Italy Nettrotter Denmark IoT Denmark Belgium ENGIE Ireland VT Networks

Source: Sigfox

New Sigfox network partners announced during the first nine months of 2015 included the utilities group ENGIE (formerly GDF-Suez) in Belgium, Nettrotter whose main shareholder is the Italian tower infrastructure operator EI Towers, the national telecommunications operator POST Luxembourg and the startups IoT Danmark in Denmark, Narrownet in Portugal and T Networks in Ireland. ENGIE plans to deploy a nationwide network in Belgium by 2017 that will be used by the subsidiary Electrabel for smart energy applications as well as external customers. Electrabel is largest producer and supplier of electricity in the Belgian market and has ownership interests in a large number of regional power and gas distribution companies.

2.4.2 LoRa networks LoRa is a low power wide area network specification intended for wireless battery operated things in regional and national or global networks using sub-GHz frequency bands (e.g. 868/915 MHz). The technology targets key requirements of the Internet of Things such as secure bi-directional communication, mobility and localisation services with data rates of 0.3

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kbps to 50 kbps. LoRa was originally developed by the US-based company SemTech. At the beginning of 2015, a group of companies including the IoT solution providers Actility, Cisco, Eolane, IBM, IMTS, MultiTech Systems, Sagemcom, Semtech and Microchip Technology, as well as the telecom operators Bouygues Telecom, KPN, SingTel, Proximus, Swisscom and FastNet (part of Telkom South Africa) launched the LoRa Alliance to promote the technology as an open interoperable industry standard. Later Orange also announced its commitment to the technology. KPN, Orange and Swisscom were among the investors in the latest financing round completed by Actility in July 2015.

Figure 2.12: Planned LoRa network rollouts in Europe (Q3-2015)

Country Operator(s) France Bouygues Telecom, Orange Netherlands KPN Belgium/Luxembourg Belgacom Switzerland Swisscom

Source: LoRa Alliance

As of October 2015, there were more or less definite plans for large-scale LoRa network rollouts in France, Switzerland and the Benelux region. Bouygues Telecom and Orange were among the more than 30 partners that participated in the first major pilot of what would eventually become the LoRa technology in the city of Grenoble, starting in late 2013. At the beginning of 2015, Bouygues Telecom announced plans to deploy a nationwide network in France that will initially cover 500 cities and towns including Paris, Marseille, Lyon, Lille, Nice, Rennes, Nantes, Montpellier and Angers. In September 2015, Orange announced the rollout of a second LoRa network, beginning in Q1-2016. Belgacom plans to deploy a LoRa network covering the major cities in Belgium by the end of 2015 and expand to full coverage nationwide and in Luxembourg by 2016. KPN has similar plans for the Netherlands and Swisscom launched pilot networks in Zurich and Geneva in the summer of 2015. The Czech television broadcasting company Ceske Radiokomunikace deployed a LoRa pilot network in Prague during 2015.

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Chapter 3 The Americas

3 The Americas

3.1 Regional market trends The Americas is an advanced region for wireless M2M. North America is one of the most developed M2M markets worldwide and Brazil has evolved into a mature market, ranking among the five largest in the world. The rest of Latin America is still in an early phase, with most countries being at the very beginning of the adoption cycle. Berg Insight estimates that the total active base of M2M subscribers in the Americas region was 70.6 million at the end of Q3-2015, with the US accounting for 69 percent.

North America started to take off in the late 2000s as the leading mobile operators launched their first wave of M2M initiatives. Since 2012, the market growth rate has slowed down and stabilised at yearly rates in the range 10–20 percent. Berg Insight believes that the early sunset for 2G network services has held back demand for cost-sensitive mass-market applications, even as module and device manufacturers have benefited from a temporary reversal of price deterioration during the shift to 3G/4G platforms. In the years ahead, Berg Insight foresees that North America will continue to have a leading role in the development and mass-market adoption of IoT-optimised LTE technology.

Latin America is dominated by Brazil, which accounted for nearly 60 percent of the total installed base with 11.3 million M2M subscribers at the end of Q3-2015. The year-on-year growth rate of 20 percent was twice the average for the rest of the region, where markets are growing at more modest rates. Mexico, Colombia and Argentina have also evolved into sizable markets with estimated M2M subscriber bases in the range of 1.0–2.5 million each. Berg Insight believes that Mexico has the best potential for growth acceleration in the near future.

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Figure 3.1: The Americas M2M connectivity market data (Q3-2015)

Market Operator M2M subs YoY growth rate Market share USA AT&T 24,064,000 30 % 49 % Verizon* 11,000,000 -21 % 22 % Sprint 8,914,000 57 % 18 % T-Mobile USA 5,034,000 18 % 10 % Total 49,012,000 16 % –

Canada 1,600,000 ~25 % 60 % Bell Mobility* 800,000 ~25 % 30 % TELUS* 300,000 ~30 % 10 % Total 2,700,000 ~25 % –

Brazil Claro 4,256,000 12 % 38 % Vivo 4,112,000 28 % 36 % TIM Brasil 1,430,000 10 % 13 % 1,211,000 18 % 11 % Other 329,000 132 % 2 % Total 11,338,000 20 % –

Rest of Latam. América Móvil* 3,900,000 ~15 % 51 % Telefónica 2,200,000 12 % 29 % Other* 1,500,000 ~10 % 20 % Total 7,600,000 ~12 % – *Berg Insight estimates

Source: Operators, ANATEL (Brazil) and Berg Insight estimates

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3.1.1 United States and Canada The US and Canada constitutes the world’s largest market for M2M/IoT solutions by value and the second largest by volume. At the end of Q3-2015, there were approximately 51.7 million M2M subscribers in North America, up 15 percent year-on-year. While volume figures may appear less spectacular than in many other regions, the underlying market value is significantly higher. Over the span of less than a decade, a new business has emerged in M2M/IoT that generates several billion dollars in yearly revenues for the mobile operators. Value creation is very much driven by technologically advanced high value applications. North America is leading the adoption of connected car technology, with LTE connectivity already available as a standard feature on a considerable share of new cars sold. The early 2G network sunset has accelerated the uptake of more data-intensive M2M applications that take full advantage of 3G/4G network speeds. As the exponential increase in demand for mobile data capacity forces the US operators to upgrade their network infrastructure with the most sophisticated technology available, they are also becoming the leading innovators in optimizing LTE for the special requirements of M2M/IoT communication. Over the next year, North America will become the first region where LTE overtakes all other cellular technologies and delivers superior performance at the same cost as today’s 2G solutions. Three major players will compete for leadership in the dynamic marketplace – AT&T that continues to consolidate a solid market leading position, Verizon that is still waiting for its massive capital investments to pay off and Sprint that challenges the top players with a clear market focus and long-term commitment to 2G network services.

A new billion-dollar business for telecom operators The surest sign that M2M/IoT in North America has actually reached a stage of maturity is that telecom operator revenues from the market can now be measured in billions of dollars. In October 2015, Verizon announced that it generated US$ 495 million in revenues from M2M/IoT in the first nine months of the year. AT&T has an even larger revenue base with twice as many M2M subscribers and the combined installed base for Sprint and T-Mobile USA matches that of Verizon. Altogether Berg Insight estimates that the US telecom operators will generate in the order of US$ 2–3 billion in revenues from M2M/IoT in 2015. A significant part of the revenues derives from applications and services beyond connectivity. The telecom operators in North America, like those in many other parts of the world, plan their strategies

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for M2M/IoT as part of a broader push into the enterprise IT market. As the communication markets reach a natural point of saturation, new growth opportunities are being pursued in cloud & IT infrastructure and business-critical applications. The main strategies are focused on enabling partners to develop end-to-end applications and reselling partner applications through the operator’s B2B channels. As a complement, there are regular attempts to create complete in-house end-to-end applications for major vertical market segments. Verizon took this strategy to the ultimate end in the connected cars market with the acquisition of Hughes Telematics, which established the operator as one of the leading providers of OEM and aftermarket telematics solutions in North America. Berg Insight believes that the trend of will continue as a result of revenue growth targets. Ultimately, the telecom operators will however need to choose between the roles as communication and application providers.

US operators lead the adoption of LTE in the post-2G M2M/IoT market AT&T’s forthright announcement of its plans to end 2G network services triggered a rapid transformation of the US cellular M2M market over the past years. A majority of the customers accepted the migration to 3G technology platforms, which have now overtaken 2G in the country. As T-Mobile USA also has begun reducing its 2G footprint, GPRS is rapidly disappearing from the North American continent. While CDMA has gained popularity as a temporary low-cost alternative to 3G, the industry leaders AT&T and Verizon focus their efforts on the optimization of LTE for M2M/IoT applications. AT&T was the first operator to launch 4G M2M connectivity solutions at a massive scale with GM OnStar. Verizon is actively driving the adoption of LTE CAT-1/0 through investments in new generations of low-cost, power-saving chipsets and a new IoT-optimised core network infrastructure. The transition to LTE in itself is a major paradigm shift in the US mobile market, which has historically been split between two incompatible technology families. All industry players share a common interest in unified standardization of cellular M2M on a single network technology platform. As the US market harmonizes on LTE, Berg Insight also believes that the international uptake will accelerate.

AT&T defends market leadership as Sprint challenges Verizon for the runner-up position AT&T is the clear leader in the US cellular M2M market with 24.0 million subscribers at the end of Q3-2015 and a market share of close to 50 percent. During 2015, AT&T has reported an accelerating growth trend with 4 million subscriber net additions in the first nine months of

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the year. Three out of four new connections were from the connected car segment, where AT&T is taking over GM OnStar’s subscriber base that was previously served by Verizon. As a result, Verizon’s M2M subscriber base has declined from an estimated 15 million at the end of 2014 to approximately 12 million at the end of Q3-2015. Meanwhile Sprint is rapidly gaining market shares. The operator reported 8.9 million M2M subscribers as of Q3-2015 and a year- on-year growth rate of 57 percent. If the trend continues, Sprint may challenge Verizon for the runner-up market position during the course of 2016. T-Mobile USA achieved 5.0 million M2M subscribers in Q3-2015 but trails behind in the competition with a market share of 10 percent. In Canada, Rogers Wireless has a stable market share around 60 percent with 1.6 million M2M subscribers at the end of Q3-2015.

Figure 3.2: US cellular M2M market connectivity data (2012–2015)

Thousands Q3-2012 Q3-2013 Q3-2014 Q3-2015 YoY growth AT&T 14,006 15,914 18,482 24,064 30 % Verizon* 9,000 11,000 14,000 11,000 -21 % Sprint 3,359 4,132 5,674 8,914 57 % T-Mobile USA 2,787 3,430 4,269 5,034 18 % Total 29,152 34,476 42,425 49,012 16 % * Estimate

Source: Operators and Berg Insight estimates

3.1.2 Brazil Brazil ranks as the world’s fourth largest market for cellular M2M communication by volume, with 11.3 million active subscribers at the end of Q3-2015 according to data from the national regulator ANATEL. The year-on-year growth rate was 20 percent. América Móvil’s Claro Brazil is the market leader with 4.3 million M2M subscribers and a market share of 38 percent at the end of the period. Telefónica’s Vivo was just behind in second place with 4.1 million M2M subscribers and is expected to surpass Claro by early 2016. TIM Brasil and Oi were in third and fourth place with 1.4 million and 1.2 million M2M subscribers respectively.

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Figure 3.3: Brazil cellular M2M market connectivity data (2013–2015)

Thousands Q4-2013 Q3-2014 Q3-2015 YoY growth Claro 3,641 3,812 4,256 12 % Vivo 2,363 3,204 4,112 28 % TIM Brazil 1,167 1,301 1,430 10 % Oi Telecom 966 1,024 1,211 18 % Others 159 134 329 132 % Total 8,296 9,475 11,338 20 %

Source: ANATEL

Brazil has a diverse M2M market, with significant adoption in multiple segments. Payments is the largest application area. Brazil has the world’s second largest installed base of POS- terminals with 5 million active units at the end of 2014, of which the great majority communicate via mobile networks. Automotive, transport and energy are other major vertical markets. A proposed mandatory anti-theft tracking system on all new vehicles sold in the country, referred to as Contran 245, was not implemented despite government decisions and was suspended in October 2015. Brazil has strict regulations prohibiting permanent roaming. Therefore all M2M devices must use SIM-cards from domestic operators. At the end of 2014, the Brazilian government significantly reduced the levies imposed on SIM-cards used for M2M communication, which had previously been the same as for all other mobile devices.

3.1.3 Rest of Latin America Latin America excluding Brazil had an active base of approximately 7.4 million M2M subscribers in mid-2015. Mexico constitutes the second largest market with an estimated 2.4 million M2M subscribers, followed by Colombia and Argentina with 1.5 million and 1.3 million respectively. Other significant markets include Chile and Ecuador with 0.5–0.6 million M2M subscribers each. América Móvil is the leading player overall with a market share around 50 percent and solild leadership in Mexico and Colombia. Telefónica is number two with a market share of 29 percent overall. National players such as Telecom Personal in Argentina and Entel in Chile have a strong presence in their respective domestic markets.

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Figure 3.4: Estimated number of M2M subscribers in Latin America ex. Brazil (H1-2015)

Country M2M subscribers Key market players Mexico 2,400,000 América Móvil, Telefónica Colombia 1,500,000 América Móvil, Telefónica, Tigo Argentina 1,300,000 América Móvil, Telefónica, Personal Chile 600,000 Telefónica, Entel Ecuador 500,000 América Móvil, Telefónica Venezuela 300,000 Telefónica, Movilnet Peru 200,000 América Móvil, Telefónica Paraguay 200,000 Tigo Uruguay 100,000 Anatel Other 300,000 N/A Total 7,400,000

Source: Berg Insight

3.2 Mobile operators AT&T ranks as the leading provider of M2M communications in the Americas region with 24.0 million subscribers at the end of Q3-2015. Verizon holds the second place with an estimated subscriber base of 11.0 million. Sprint ranks as number three with a subscriber base of 8.9 million. Behind the top US players, the Latin American market rivals América Móvil and Telefónica are also in the top five with around 8.0 million and 6.1 million M2M subscribers respectively. T-Mobile USA is the sixth major player with a subscriber base of 5.0 million. Other top ten players include TIM Brazil and Oi Telecom in Brazil and Rogers Wireless and Bell in Canada. Rogers is the market leader in Canada with 1.6 million M2M subscribers, while TIM Brazil and Oi Telecom have 1.4 million and 1.2 million respectively. Bell may reach the 1 million milestone for M2M subscribers during 2016.

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3.2.1 AT&T AT&T is the largest telecom operator in the US with annual sales of US$ 132.4 billion in 2014 and 244,000 employees. During the first half of 2015, the group entered the mobile communications market in Mexico through the acquisitions of Iusacell and Nextel Mexico for a total of US$ 4.4 billion. Later in the year, AT&T also acquired the leading US pay TV provider DirecTV for US$ 49 billion. To reflect the new corporate structure, the group has been reorganised in four reportable segments – Business Solutions, Entertainment & Internet Services, Consumer Mobility and International. Business Solutions is the largest segment by revenue, comprising wireless and wireline services for the enterprise and government sectors. Entertainment & Internet Services and Consumer Mobility are consumer oriented segments, while International includes the recently acquired mobile network operations in Mexico. AT&T operates the largest 2G/3G network in the US and a 4G network covering 99 percent of the country’s population. The 2G network has been phased out of operation since 2012 and will be shut down completely by the end of 2016. In Mexico, AT&T is in the early stage rolling out an LTE network that currently covers around one third of the population.

Group M2M strategy AT&T formally established a business organisation dedicated to M2M and connected devices in 2008. Today, the group’s value proposition in M2M/IoT is structured in three layers – connectivity, platforms and applications & solutions. For connectivity, AT&T offers domestic 3G/4G network services and a global SIM solution with highly competitive international roaming rates on over 500 networks in 200+ countries worldwide. Devices and subscriptions are supported by the A&T& Control Centre platform, powered by Jasper and a billing solution with advanced split billing capabilities, enabling application providers to split network charges from a single device in multiple ways. AT&T IoT Services provides open source technology platforms and professional services for M2M/IoT application developers, enabling seamless integration into leading enterprise IT systems and third party applications. M2X is a cloud- based fully managed time-series data storage service for connected devices. Designer is an application hosting and prototyping platform, offering predefined libraries and APIs for developers. AT&T also develops application-specific platforms and end-to-end solutions for major verticals. Examples include global track & trace solutions for transportation and logistics and smart grid data management solutions for small to medium sized utilities. AT&T

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Drive is an application platform for the automotive industry, enabling AT&T to work with partners to bring connected vehicle services to market. Key capabilities include global SIM, provisioning and billing; safety, security and diagnostics; voice enablement, secure firmware updates, application store capabilities and policy management solutions.

Market strategy AT&T is the leading provider of wireless M2M connectivity in the US. At the end of Q3-2015, the operator had 24.1 million M2M machines and connected devices on its network, corresponding to a market share of around 50 percent. The year-on-year growth rate was 30.2 percent, with connected cars being the principal driver. During the first nine months of 2015 the active base nearly doubled to 5.8 million, mostly as a result of AT&T’s partnership with GM to provide LTE connectivity as a standard feature for the car manufacturer’s US model programme. Overall, AT&T’s M2M subscriber base is very broad, reaching across all major vertical market segments.

AT&T’s legacy as the premier GSM-carrier in the US, has helped the operator to become a leading network partner for module vendors, device manufacturers and application service providers active in the North American market. In mid-2015, AT&T had certified around 2,000 speciality consumer and M2M devices from over 100 leading industry players in all parts of the ecosystem. AT&T continues to increase their sales force dedicated to selling M2M and other mobility services, but sales are also generated through channel partners that include OEMs, service providers, application developers and wholesalers such as KORE Telematics and Numerex. AT&T has strong market positions in many vertical market segments, including automotive, fleet management, metering, POS-terminals and security. Trimble, Teletrac, WebTech Wireless and Xirgo Technologies are a few examples of customers among providers of fleet management and vehicle tracking solutions. More than 15 million electricity meters communicate directly or indirectly via AT&T’s network using solutions from among others Aclara, Elster and Itron. The leading security alarm communication providers DSC, GE Security, Honeywell and Telular, as well as the top POS-terminal vendors Verifone, Ingenico and Hypercom also use AT&T’s network. Furthermore, AT&T is the connectivity partner for car brands including GM, Audi, Volvo and Tesla. During 2015, AT&T established a dedicated organisation for the smart cities market.

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3.2.2 Verizon Verizon Communications is a leading provider of wireless and wireline communications services in the US and enterprise networking solutions worldwide. The group generated sales of US$ 127.1 billion in 2014 and has a workforce of 178,000 employees. Verizon is organised in two operating segments – Wireless and Wireline. Since July 2015, AOL is also a wholly owned subsidiary of the group. Verizon Wireless is the largest mobile operator in the US with 110.8 million retail subscribers on its nationwide 2G, 3G and 4G networks at the end of Q3- 2015. The operator’s 4G LTE network covers 98 percent of the US population, with the 2G/3G CDMA/EVDO network providing even broader coverage. Verizon Wireline is one of the leading providers of fixed line communication services in the US serving around 28 million voice and broadband connections.

Group M2M strategy Verizon has a strong focus on the business and government markets, serving 99 percent of Fortune 500 companies, as well as business with 20 lines or more. Key assets and capabilities include a global IP network connecting more than 2,700 cities in over 150 countries worldwide and more than 50 cloud and data centres. Furthermore, Verizon has spent US$ 1.4 billion on acquisitions of businesses enabling enhanced M2M, video and cloud-based products and services, including the US$ 612 million purchase of Hughes Telematics in 2012. With an ecosystem of more than 1,000 channel partners, Verizon generated US$ 495 million from M2M/IoT and telematics solutions in the first nine months of 2015.

In October 2015, Verizon introduced a new global strategy to simplify M2M/IoT and accelerate market adoption. The highlights of the plan included the launch of ThingSpace as a new platform for application development, the creation of a new dedicated IoT core network for lower cost use-cases and the commercialisation of Verizon’s internal big data analytics engine for IoT deployments. ThingSpace is a web-based platform with dedicated APIs, partner development kits, as well as test and deployment services. The dedicated IoT core network, optimised for LTE CAT-1 and capable of scaling to support billions of connections, will be launched during 2016. Verizon advocates the use of LTE for wide area connectivity but recognises that chipset costs and complexity are significant barriers to adoption. Therefore it has partnered with semiconductor companies such as Sequance to support the development

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of new generations of LTE chipsets that will reduce the cost of 4G modules by 50 percent annually in the coming years, as well as introduce new power saving features to facilitate several years of battery lifetime. Verizon’s big data analytics engine is currently managing 1.5 trillion transactions per month in the operator’s network business.

The Verizon Enterprise Services organisation, which combines wireless and wireline sales, marketing and services for enterprise market, is the primary business units responsible of M2M/IoT. The product range comprises managed M2M connectivity, professional services and complete end-to-end solutions. Verizon provides a secure end-to-end infrastructure for communication between connected devices and private IP networks with full technical support and a range of professional services. Key network capabilities include end-to-end SLAs with guaranteed latency below 36 milliseconds for LTE and enhanced security through M2M-specific managed certificate services and data encryption. Verizon’s proprietary M2M Global Management Centre platform offers a single system for managing connected devices on Verizon Wireless 3G and 4G LTE networks in the US, as well as other domestic and international wireless networks and Verizon’s global IP network. Over the past years, Verizon has launched a range of end-to-end solution for connected cars, smart grids and smart cities. In October 2015, the group introduced three new smart cities solutions, Intelligent Video, Intelligent Lighting and Intelligent Traffic Management. Earlier in the year, Verizon introduced the Grid Wide platform offering electric utilities an integrated platform for smart metering, demand response and distribution monitoring and control. Connected car solutions are available from Verizon Telematics.

Verizon Telematics Verizon Telematics is a dedicated business unit for connected vehicles and fleets, created from the acquired business of Hughes Telematics in 2012. The portfolio includes a full range of aftermarket and OEM telematics solutions for consumers, insurance companies, fleet operators and car manufacturers. In August 2015, Verizon Hum became the latest addition to the consumer portfolio, enabling drivers to access a set of connected car applications from a smartphone app communicating with the vehicle via a Bluetooth dongle plugged to the OBD- port. In-Drive is another consumer telematics solution based on embedded connectivity, provided in partnership with the insurance company State Farm. The solution offers safety, security and convenience services to drivers plus the ability to participate in State Farm’s

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usage-based insurance (UBI) discount program. In the automotive OEM segment, Verizon is working with Mercedes-Benz and Volkswagen, powering the Mercedes-Benz mbrace connected car application in North America and Volkswagen Car-Net on three continents. Networkcar is Verizon’s fleet management solutions business, ranking as one of the leading application providers in North America for small to medium-sized businesses and government agencies. Verizon Auto Share is a complete platform for vehicle rental and car sharing applications.

Market strategy Verizon Wireless is the second largest provider of wireless M2M connectivity in the US. The group only provide guidance on its M2M subscriber base on an irregular basis. In a statement from October 2015, Verizon said it supported “more than 10 million IoT connections”. This was significantly lower than a previous figure of 15 million IoT connections at the end of 2014. Berg Insight believes that the apparent loss of market share is a direct result of the loss of GM OnStar that previously accounted for more than 5 million M2M connections at its peak. Verizon’s strong focus on LTE has so far been a disadvantage in cost-sensitive high volume applications segments and new wins in the connected car space have been too infrequent. On the international market, Verizon has not yet been able to establish a strong independent position after the dissolution of the joint-venture with Vodafone. Leveraging a B2B salesforce of 3,000 employees and existing customer relations in the enterprise market, Verizon is however nevertheless well positioned to grow its market share once again in the coming years.

3.2.3 Sprint Sprint is a telecommunications group headquartered in the US with annual revenues of US$_34.5 billion in the financial year ending 2015 and around 31,000 employees. In July 2013, Softbank acquired a 73 percent share in the company through a total investment of US$ 21.6 billion. Earlier in the year, Sprint completed a merger with the 4G wireless broadband provider Clearwire. Sprint ranks as the third largest mobile operator in the US with 57 million subscribers in mid-2015. Its nationwide communications network assets comprise CDMA/EVDO and LTE cellular networks, as well as fixed line network infrastructure. Sprint has pledged a long-term commitment to CDMA and intends to keep its 2G infrastructure running at least until 2020.

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Sprint launched a strategic initiative for addressing the M2M and mobile computing markets at the end of 2009. The following year, Sprint launched the M2M Collaboration Center initiative to bring together a cross-section of leading industry players and the following year it launched the Sprint Command Center M2M connectivity management platform, powered by Aeris Communications. In April 2015, Sprint announced the new 2.0 version of the platform, featuring enhanced functionality and global connectivity on multiple network standards. The platform offers a unique combination of CDMA/EVDO and soon LTE connectivity in the US and global GPRS/HSPA coverage in a single solution, provided in partnership with Aeris. Vodafone is the first international network partner on the platform.

Sprint’s overall strategy for M2M is to focus on selected vertical segments using multiple go- to-market models. In each of the priority segments – fleet and asset tracking (FAST), usage- based insurance and retail – the operator offers a portfolio of packaged solutions (e.g. fleet management), bespoke solutions to meet more complex application needs and wholesale network access. Through partnerships with leading solution providers Sprint is reselling packaged end-to-end solutions through its B2B direct sales channels. Packaged solutions in fleet and asset tracking include fleet management applications by Geotab and Spireon and distracted driver applications. Applications for the retail sector include digital signage, interactive in-store media and POS-terminal solutions. More complex opportunities are addressed by dedicated teams for each focus vertical segment. Sprint is no longer actively pursuing new business opportunities in the OEM automotive segment where it previously offered the Velocity platform.

Sprint’s market strategy has been highly successful in the past years. Since the end of 2013, the operator doubled its M2M subscriber base and is now close to challenging Verizon for the number two spot. At the end of Q3-2015, Sprint reported 8.9 million M2M subscribers and a year-on-year growth rate of 57 percent. As the last US operator committed to maintaining 2G network services, Sprint has gained a lot of traction in cost-sensitive application segments. Sprint expects that its CDMA network will remain in operation beyond 2020. A considerable proportion of the operator’s M2M subscribers derive from M2M aggregators. Sprint has developed a very close relationship with Aeris and is also a partner of KORE Telematics and Wyless.

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3.2.4 T-Mobile USA T-Mobile USA is the fourth largest mobile operator in the US with around 61 million customers and annual sales of US$ 29.6 billion in 2014. The company was established in its present form in Q2-2013, following the merger between Deutsche Telekom’s US arm and MetroPCS and is listed on the NYSE with DT as the majority shareholder. The merger provided T-Mobile USA with a strengthened spectrum position to accelerate the rollout of a nationwide 4G LTE network, while at the same time maintaining a legacy 2G infrastructure. Over the past year, the operator has reassigned MetroPCS spectrum currently used for CDMA/EVDO services to increase the bandwidth available for HSPA+ and LTE. T-Mobile USA’s existing frequency band for GSM/GPRS will thus not be affected, enabling the operator to maintain 2G coverage for roaming, M2M and legacy devices.

T-Mobile USA has traditionally positioned itself as a challenger against its larger rivals on the US wireless market. When the operator began developing a strategy for the M2M market, it took a similar stance, aiming to simplify business processes at every stage from device certification to operation. In 2009, T-Mobile reached the milestone of 1 million M2M subscribers and at the beginning of 2011, the number had once again doubled to 2 million. At the end of 2012, the 3 million milestone was achieved and in Q2-2014, the M2M subscriber base exceeded 4.0 million. At the end of Q3-2015, T-Mobile USA reported 5.0 million M2M subscribers, up 17 percent year-on-year.

During 2011, T-Mobile USA made a major strategic decision to spin-out most of its direct M2M business and focus completely on the role as a wholesale provider. In May 2011, the company named RACO Wireless as a preferred partner for M2M business development and operational support. At the same time most of T-Mobile USA’s M2M staff and customer contracts were transferred to the partner’s organisation. The deal established RACO Wireless as a major channel partner for T-Mobile USA in wireless M2M. At the end of 2014, RACO Wireless was acquired by KORE Telematics, which thus strengthened its relationship to T- Mobile USA. Other significant channel partners include Aeris Communications, Orbcomm and Wyless.

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3.2.5 Rogers Communications Rogers Communications is a diversified Canadian communications and media company engaged in the telecom and media businesses. Annual sales in 2014 were CA$ 13.0 billion (€_8.8 billion) and the workforce comprises 28,000 employees. The group operates through the segments Rogers Wireless, , Rogers Business Solutions and Rogers Media. Rogers Wireless is Canada’s largest wireless voice and data communications service provider, operating on the GSM/HSPA+/LTE technology platforms. Rogers Cable is a leading cable service provider, whose territory covers , New Brunswick and Newfoundland. Together with Rogers Business Solutions, it also provides scalable business telecom, data networking and IP connectivity and solutions to small, medium and large enterprise, government and carrier customers. At the end of Q3-2015, Rogers had 9.5 million wireless subscribers.

Rogers has a strong strategic focus on managed services and M2M/IoT as a growth driver for its business. The operator offers a broad portfolio of 2G/3G/4G mobile network connectivity, professional services and complete end-to-end solutions. Priority market segments are automotive, energy, retail, healthcare, government and transport. Rogers introduced the Jasper platform on the Canadian market in 2008 and participates as the only North American partner in the M2M World Alliance. With 1.6 million M2M subscribers at the end of Q3-2015, the operator has a domestic market share of approximately 60 percent. The Rogers Data Alliance is a partner program for developing the M2M ecosystem in Canada with more than 300 participating companies. Roger’s customer base in M2M is diverse, spanning retail, transportation, utilities, consumer electronics, healthcare and other industries. Furthermore the operator has partnerships with leading M2M managed service providers including KORE Telematics, Numerex, RACO Wireless and Wyless, as well as the satellite M2M provider Orbcomm.

3.2.6 Bell Canada Bell Canada is Canada’s largest communications company with annual sales of CA$_21.0 billion (€ 14.2 billion) in 2013. The group provides wireless and fixed telecommunications services, television, ICT solutions, television and other media. Wireless services are provided through Bell Mobility, SOLO and Virgin Mobile Canada to around 8.0 million subscribers. Bell

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Mobility is Canada’s second largest mobile operator, providing 2G/3G CDMA/EVDO services and 3G/4G HSPA/LTE services. Anticipating accelerated growth in domestic demand for M2M solutions, Bell has launched a series of new initiatives to position itself for emerging business opportunities. At the end of 2013, the operator announced the launch of Ericsson’s DCP platform for M2M connectivity management and joined the Global M2M Association as the alliance’s first member in North America. Later, the operator was among the first to support the GSMA Embedded SIM specifications. Over the past years, Bell has added packaged and bespoke M2M solutions to its enterprise product portfolio. The main focus is common applications such as asset tracking, connected cars, fleet management, POS terminals and remote monitoring and high value applications such as wireless backup connectivity and digital signage.

3.2.7 América Móvil América Móvil is the world’s fourth largest mobile operator and number one in Latin America with annual sales of US$ 66 billion in 2014. Headquartered in Mexico, the group has operations in 18 countries and 159,000 employees. At the end of Q3-2015, América Móvil had 288.4 million mobile subscribers in Latin America, the US and Central Europe. Mexico, Brazil and Colombia were the main geographical markets, accounting for nearly two thirds of the customer base. The subsidiaries Telcel in Mexico and Comcel in Colombia have dominant positions in their respective countries with market shares of 73 percent and 63 percent respectively. In July 2014, América Móvil announced the intention to voluntarily reduce its dominant market share in Mexico through the sale of assets including parts of its mobile business. Elsewhere in Latin America, América Móvil mainly operates under the Claro brand that is used in 14 countries including Brazil, Argentina and Peru. The group is also present on the US market through the MVNO TracFone that ranks as the fifth largest mobile communications provider in the country and number one in the prepaid segment. América Móvil entered the European market in 2012 by acquiring minority stakes in KPN and Telekom Austria. Since 2014, Telekom Austria is a majority owned subsidiary of the group, with a minority share held by the Austrian government.

América Móvil ranks as the leading provider of wireless M2M connectivity in Latin America. Berg Insight estimates that the group had approximately 8.0 million M2M subscribers in the

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region at the end of Q2-2015, mainly concentrated to Brazil, Mexico and Colombia. Brazil is the most advanced market in Latin America, which has evolved rapidly in recent years driven by a combination of a general strong economic development and high demand in specific vertical segments such as vehicle tracking, security and wireless POS. Claro was the first mover in the Brazilian M2M market and held on to the number one market position at the end of Q3-2015, with 4.3 million subscribers and a market share of 38 percent. The year-on-year growth rate of 12 percent was however considerably below the market average. If the trend continues Claro will be demoted to second place in early 2016. Telcel is the main provider of wireless M2M communication services in Mexico, with an estimated M2M subscriber base of roughly 2.0 million and partnerships with most of the leading industry players. Berg Insight also believes that Comcel has a dominant position in Colombia with an estimated subscriber base of nearly 1.0 million. Since 2010, Telcel has offered the Jasper Technologies platform in Mexico and the rest of Latin America. During 2013, regional implementations of the Jasper platform were also launched by Claro Brazil and Claro Argentina. At the end of 2015, América Móvil announced plans for a trial of low power wireless technology for IoT in Brazil in cooperation with Ericsson.

3.2.8 Vivo and Telefónica Latin America Telefónica is the second largest provider of mobile communications in Latin America with operations in 14 countries. The business is organized in two geographic segments – Telefónica Brasil, operating under the Vivo brand, and Telefónica Hispanoamérica, operating under the Movistar brand. Overall, Telefónica has a strong position as the second largest provider of M2M communications in the region. At the end of Q2-2015, the M2M subscriber base was 6.1 million, up 28 percent year-on-year. Brazil was the largest geographical market, accounting for 65 percent of the installed base. Vivo was late to enter the M2M market as it did not operate on the 900 MHz/1800 MHz frequency bands used elsewhere in the world. Since 2012, the operator has however been highly successful and grown several times the market average. In August 2015, Vivo reached the 4 million milestone for M2M subscribers and is on track to surpass Claro as the number one market player by early 2016. Telefónica is also gaining market shares in Mexico where the M2M subscriber base increased 37 percent year-on-year to reach 0.5 million at the end of Q2-2015. Argentina, Colombia and Chile showed more mixed results with moderate to negative growth trends in the period. All three

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countries had similar M2M subscriber bases of 0.3–0.4 million. Among other countries, Ecuador stood out with the number of M2M subscribers growing by 47 percent year-on-year to 0.2 million.

Figure 3.5: Telefónica M2M subscribers in Latin America by country (2013–2015)

Thousands H2-2013 H1-2014 H2-2014 H1-2015 Year-on-year growth Brazil 2,358 2,920 3,507 3,935 35 % Mexico 350 354 434 486 37 % Argentina 427 455 471 447 -2 % Colombia 393 416 428 444 7 % Chile 282 322 307 291 -10 % Ecuador 104 124 154 183 47 % Venezuela 120 130 142 148 14 % Peru 83 86 86 98 15 % Uruguay 33 37 41 48 31 % Total Latam. 4,149 4,844 5,570 6,080 26 %

Source: Telefónica

3.2.9 Other mobile operators in Latin America A majority of the mobile operators in Latin America have established dedicated M2M businesses to meet the growing demand in the market. TIM Brazil and Oi Telecom have both achieved more than 1 million M2M subscribers.

TIM Brazil is the number three player on the M2M market in Brazil with 1.4 million subscribers at the end of Q2-2015. The year-on-year growth rate of 10 percent was below the market average. As a member of the Telecom Italia group, the operator is part of the Global M2M Association, providing its members with a gateway to Latin America.

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Oi Telecom ranks fourth among the major players in the Brazilian M2M market. At the end of Q2-2015, the operator had 1.2 million subscribers and a market share of 11 percent. In November 2015, Oi Telecom signed a partnership with Nokia to establish a joint LTE IoT lab in Brazil.

Telecom Personal is one of three major M2M market players in Argentina with around 0.4 million subscribers and an estimated market share of 30 percent. At the end of 2014, the operator completed the implementation of the Jasper platform.

Digicel is a mobile operator group with operations in 31 countries in the Caribbean, Central America and Oceania. In April 2015, the group selected the IoT-X platform from Stream Technologies to power its M2M business.

Tigo is the principal brand of the Millicom group, used in 14 countries across Latin America and Africa. The group has operations in Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica, Colombia, Bolivia and Uruguay. Over the past years, Tigo has introduced the Jasper M2M platform across its main markets in Latin America.

3.3 M2M managed service providers M2M managed service providers have played a key role in the North American market from the inception. Today, the category constitutes one of the main distribution channels for M2M connectivity services in the region, managing around 30 percent of the total M2M subscriber base. Seasoned players such as Aeris Communications and KORE Telematics have both developed their business for more than a decade and established strong positions in their respective market segments. Managing 6.0 million and 4.0 million M2M susbcribers respectively, Aeris and KORE have operations of a scale comparable to many of the world’s larger mobile operators. Wyless and Numerex also manages millions of M2M subscribers. Numerex stands out from its peers by focusing on providing complete end-to-end solutions, rather than connectivity.

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3.3.1 Aeris Communications Aeris Communications is a provider of M2M communications in North America and worldwide. Headquartered in the US, the company has nearly 140 employees and international offices in the UK, India and Japan. Aeris was founded in 1992, began offering wireless data services in 1998. Today the company’s value proposition comprises managed M2M connectivity, IoT platform-as-a-service and cloud-based IoT applications and analytics. Aeris operates a purpose built mobile core network for M2M, supported by the AerPort connectivity management platform. AerCloud is an IoT application enablement platform for collecting, managing and analysing sensor data. AerVoyance is an advanced data analytics platform providing visibility, insights and alerts about device usage, performance and costs.

Through relationships with Sprint, Vodafone and others, Aeris offers CDMA, GSM and LTE cellular coverage on 50 networks in North America and over 500 worldwide. At the end of 2014, the company introduced the Neo self-service platform, providing IoT developers with easy access to cellular connectivity. Aeris has attracted a strong inflow of customers to its platform over the past years. By the end of 2015, the company expects to have over 6.0 million active subscribers, compared to less than 4.0 million one year earlier. Since 2014, it also offers the GSP global M2M service platform for mobile operators. Aeris is a long-time partner of Sprint and powers the US operator’s Command Centre M2M platform. At the beginning of 2015, Tech Mahindra announced the Jumpstart IoT program to help mobile operators grow profitable IoT services business in association with Aeris. In October 2015, Aircel entered a partnership with Tech Mahindra to provide complete vertical IoT solutions in India, based on Aeris’ platform. Examples of enterprise customers using the Aeris platform include Hyundai in automotive, Badger Meter in metering and a number of leading fleet management solution providers in North America such as Trimble and Peoplenet.

3.3.2 KORE Telematics KORE Telematics is a leading international specialised provider of wireless M2M/IoT communication with around 300 employees and over US$ 100 million in yearly revenues. Founded in 2003, KORE is a privately held profitable company with offices in the US, Canada, Australia, Singapore, the UK and the Dominican Republic. In 2011, the group established a presence in the Asia-Pacific region through the acquisition of the Australian M2M communication provider Mach Communications. During 2014, KORE made two acquisitions

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of RACO Wireless and Jazz Wireless Data in the US and established its first European office. At the time of the acquisition, RACO Wireless was the largest M2M reseller partner of T-Mobile USA. RACO’s former subsidiary Position Logic continues to operate as an independent business, providing GPS tracking software and platforms for enterprise customers.

Providing unified control and management for cellular and satellite network service delivery in more than 180 countries worldwide, KORE empowers its application, hardware and wireless operator partners to efficiently deliver M2M solutions for connected devices across the globe. M2M applications in industries as diverse as healthcare, utilities, enterprise IT, transaction processing and fleet management rely on the KORE network to deliver operational efficiencies and cost-savings. KORE offers a range of technologies – including GSM, HSPA, CDMA EVDO and LTE, as well as satellite services – on a global platform of four fully redundant data centres, ensuring the greatest possible reliability and coverage. Global network operator partners include AT&T, Verizon Wireless, Sprint, T-Mobile, Rogers, Vodafone, Telefónica, EE and Singtel.

A core component in KORE’s proposition for the M2M market is the PRiSM PRO managed connectivity platform. Through a web-based interface, the platform enables self-management, real-time activation, connectivity control and monitoring of 2G/3G/4G cellular devices. Web services APIs allow easy integration with third party software. Reporting tools for usage monitoring and billing are also available. The platform is available to mobile operator partners through the subsidiary KORE Systems Group, which has announced Belgacom in Belgium and StarHub in Singapore as its first reference customers. KORE is active in all major vertical segments of the wireless M2M market, ranging from vehicle based applications to smart grid, payments, security, asset management and healthcare. With around 1,500 M2M enterprise customers and nearly 4.0 million active connections, KORE has a strong ecosystem in North America and worldwide. Latin America and Asia-Pacific will be the primary target regions for geographic expansion in the near future. In some countries such as Japan, KORE operates in joint venture with local industry partners.

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3.3.3 Numerex Numerex is a provider of managed M2M enterprise services, enabling the Internet of Things. Founded in 1992, the company with around 200 employees is based in the US and publicly listed on the NASDAQ stock exchange. Annual sales in 2014 were US$_94 million, of which 70 percent were recurring service revenues. In the first nine months of 2015, revenue growth slowed to 1 percent, with deteriorating gross margins. At the end of the year, Numerex had around 8,000 commercial customers and an installed base of more than 2.0 million M2M connection. Numerex’s value proposition is to offer a single source for devices, connectivity and services in a framework branded Numerex DNA (Devices Network Applications). The elements are available as components or bundled and offered as pre-engineered, pre- configured solutions. The nxFAST platform offers a complete environment for application developers, offering global 2G/3G/4G cellular and satellite connectivity, pre-packaged vertical IoT solutions and application enablement interfaces. Numerex has experience from over 50 vertical segments and offers a portfolio of branded or white-label products for applications such as asset tracking, security supply chain management, tank monitoring and mobile personal emergency response system (mPERS).

3.3.4 Wyless Wyless is a global provider of M2M managed services and enterprise connectivity solutions. Founded in 2003, the company began operations in Europe and later expanded into the US where its headquarters are now located. In October 2013, Wyless entered Latin America through the acquisition of a majority stake in TM Data and the joint formation of Wyless TM Data Brazil. At the beginning of 2014, Wyless reinforced its position in Europe through the acquisition of Aspider M2M in the Netherlands. Both companies had been long-time partners with Wyless. Wyless delivers reliable 2G/3G/4G communications with wireless devices across 120 countries in partnership with leading international mobile operators. From the onset, Wyless has been closely aligned to the Deutsche Telekom group and in particular T-Mobile USA. At the end of 2015, Wyless had more than 1 million connections on T-Mobile USA’s network. Furthermore, the company has established partnerships with AT&T, Verizon Wireless, Sprint and Rogers in North America; Claro and Vivo in Latin America; EE, Telefónica and Vodafone in Europe and SingTel in Asia-Pacific.

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Wyless provides a resilient networking platform, featuring powerful management tools for real-time monitoring and control, as well as a comprehensive suite of managed services and engineering services. The company offers two alternative connectivity models where customers either use Wyless’ wholesale agreements into MNOs for an end-to-end backbone solution, or utilises Wyless as a managed service provider using their own direct agreements with MNOs. Wyless Connect is a secure connectivity solution for financial, digital signage, POS terminals and healthcare devices. The acquisition of Aspider M2M also added a considerable installed base in smart metering.

3.4 LPWA networks North America has a significant number of large-scale private LPWA networks in the utilities sector. The market leaders Silver Spring Networks, Itron, Landis+Gyr, Sensus and Elster have deployed more than 60 million radio network nodes using the unlicensed 915 MHz frequency band as part of smart metering for electricity and gas. The largest networks connect up to 5 million nodes across considerable service territories. While the smart metering networks can be used for a wide range of energy-related applications, they are not intended for access by third party application developers. Instead new market entrants such as Ingenu (formerly On-Ramp Wireless) and Sigfox have entered a race to roll out public low- power IoT networking infrastructure across the region. RPMA and Sigfox have similar technical characteristics and will compete in the same market segments. LoRa has also attracted interest for network deployments in the region. The leading US mobile operators are evaluating the available technologies but have not yet announced any decisions regarding what they may support in the future.

Sigfox established a North American subsidiary during 2015 and hopes to cover 90 percent of the population within three years. In the initial phase, the company is constructing local networks in 10 metropolitan areas, starting in San Francisco. Meanwhile, the domestic wireless technology veteran Ingenu has dropped its old name and presented a bold plan to roll out a nationwide network based on its patented RPMA technology. In the first phase Ingenu will roll out networks in Phoenix and Dallas/Fort Worth across a total land area of 3,800 square miles. By the end of 2016, Ingenu’s Machine Network should cover an area of

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nearly 100,000 square miles in 30 major metropolitan areas. The end goal is to cover 70 percent of the US population.

Senet announced North America’s first LoRa network in July 2015, covering 15,000 square miles in Silicon Valley. M2M Spectrum Networks is a startup with ambitious plans to roll out a nationwide LPWA network using licensed frequency bands. In October 2015, the company joined the LoRa Alliance. Silver Spring Networks entered the public LPWA network segment in December 2015 through the launch of its Starfish public IPv6 network service in Chicago, San Antonio and San José. Berg Insight believes that the future direction of the North American LPWA market will be decided when the major telecom operators decide which standards they prefer to support and put their weight behind network rollouts.

The adoption of LPWA network technologies in Latin America is in a very early stage. At the end of 2015, no networks had yet become operational. A number of pilots are however expected to start in the next few year. Telefónica is planning pilots of Sigfox networks in Latin America and América Móvil has announced a joint project with Ericsson to trial low power wireless IoT networking technology, presumably NB-LTE, in Brazil.

3.5 Satellite networks M2M communications is a growing segment of the international market for satellite data communications. North America is the most advanced region, due to its leading role in the global space industry and the limited availability of cellular networks in remote parts of the continent. Other world regions are mostly in a very early stage of adoption. Significant global growth opportunities exist in a number of sectors such as maritime and intermodal transportation, oil and gas industry exploration, energy and governments. Berg Insight estimates that the global installed base of active M2M satellite devices was around 2.1 million units at the end of Q3-2015. Orbcomm is the global market leader with 1.3 million M2M subscribers, following the acquisition of SkyWave – the largest M2M service provider on the Inmarsat network – at the beginning of 2015. Iridium and Globalstar are other major players with approximately 380,000 and 200,000 M2M subscribers respectively. Inmarsat serves the M2M market as a wholesale connectivity provider with Orbcomm as its main reseller partner.

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Orbcomm, Inmarsat and Globalstar have entered a strategic alliance to collaborate on joint product development and distribution to address the needs of the global satellite M2M market. Together, they have developed joint specifications for compatible modems, providing identical form factors and standardised network and terminal management tools to enable multi-mode offerings for the three global networks. The European satellite operator Eutelsat is among the investors financing Sigfox. In September 2015, Sigfox announced that it will deploy Eutelsat’s SmartLBN technology in its base station infrastructure.

Figure 3.6: Satellite network operators by M2M subscriber base (Q3-2015)

Operator M2M subs Year-on-year growth rate Market share Orbcomm 1,330,000 42 % 65 % Iridium 380,000 12 % 18 % Globalstar ~200,000 N/A 10 % Others ~150,000 5–10 % 7 % Total 2,060,000 10–15 % –

Source: Operators and Berg Insight estimates

3.5.1 Orbcomm Orbcomm is a leading provider of global M2M solutions and the only commercial satellite operator dedicated to M2M. Founded in 2001, the company is headquartered in the US and has around 190 employees. Annual sales in 2014 were US$ 96.2 million (€ 88.6 million), an increase of 30 percent over the previous year. In January 2015, Orbcomm acquired SkyWave, the largest M2M service provider on Inmarsat’s network, as part of a strategic alliance between the two companies. SkyWave added 250,000 subscribers and access to Inmarsat’s network with extended geographic coverage in Russia, China, Southeast Asia and parts of Africa, previously not covered by Orbcomm. The deal helped boost the company’s M2M subscriber base to 1.3 million at the end of Q3-2015, an increase of 42 percent year-on-year. Since 2011, Orbcomm has also made a series of strategic acquisitions of end-to-end solution providers, predominantly active in cold-chain management and intermodal transportation.

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Orbcomm operates a global network of 31 low-earth orbit (LEO) satellites and 16 ground stations, providing narrowband services across 120 countries and territories worldwide. The system provides near-real-time and store-and-forward communication where information is transmitted in the form of short messages, between six bytes and several kilobytes at data rates of 2.4–4.8 kbps. Orbcomm’s next generation network OG2, which should be fully deployed at the end of December 2015, offers increased throughput, faster data transmission speeds and improved reliability. In April 2015, the company launched the ORBCOMMconnect multi-network connectivity platform for M2M subscriber management. The platform provides unified access to the Orbcomm, Inmarsat and Globalstar satellite networks, as well as the cellular networks of AT&T, Verizon, T-Mobile, Rogers, Vodafone, Orange and Telefónica.

Major network services customers include the leading global heavy equipment OEMs Caterpillar, Doosan, Komatsu Hitachi Construction Machinery, Volvo CE and Hyundai Heavy Industries; VARs such as ID Systems, inthinic and American Innovations; leading refrigeration unit manufacturers such as Carrier and Thermo-King; and leading brands like Walmart, Tropicana, Maersk Line, Ryder, Chiquita, Hapag-Lloyd and China International Marine Container Company (CIMCC).

3.5.2 Iridium Iridium is a mobile satellite service (MSS) provider offering coverage over the entire globe. The Iridium constellation of 66 low-earth orbiting (LEO), cross-linked satellites provides critical voice and data services for areas not served by terrestrial communication networks. A second-generation satellite constellation – Iridium NEXT – offering enhanced functionality and performance is anticipated to begin launching in 2016. Headquartered in the US, Iridium is a publicly traded company and reported annual sales of US$ 409 million in 2014. At the end of Q3-2015, Iridium had 781,000 subscribers in the commercial and government sectors. M2M accounted for 49 percent of the total subscriber base and 25 percent of service revenues. The monthly ARPU for M2M devices declined to US$ 15, compared to US$ 17 in the previous year.

Iridium’s M2M growth strategy includes serving mission-critical enterprise communication needs for OEMs and after-market solution providers through fleet and vehicle tracking, heavy equipment monitoring, container and mobile asset tracking, utility, oil and gas, maritime and

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aviation. Operating as a wholesale provider of hardware and airtime, Iridium is partnering with solution providers, system integrators and M2M connectivity providers worldwide to deliver two-way data communication anywhere on the planet. Its short burst data (SBD) service enables highly reliable transmission of short data messages to even the remotest location with short latency. Around 100 partners have integrated Iridium hardware for applications that include telemetry from unattended sensors, fleet management, enterprise logistics and supply-chain visibility, tracking soldiers and military vehicles, and personal two-way navigation and mapping. Many of the solution platforms are dual-mode satellite and cellular.

3.5.3 Inmarsat Inmarsat is a global provider of satellite communication services, with annual revenues of US$ 1.2 billion in 2014. With an in-orbit fleet of eleven geostationary satellites, the company provides a comprehensive portfolio of wholesale, direct and indirect global mobile satellite communications services for use on land, at sea and in the air. The Inmarsat Solutions division is responsible for global direct and indirect sales through four market-facing business units for Maritime, Government, Global Government and Enterprise. The Inmarsat Enterprise business unit focuses on worldwide opportunities in a wide range of sectors including M2M. During the past years, Inmarsat has introduced two services for the M2M market. IsatData Pro, provided in partnership with SkyWave Communications (acquired by Orbcomm in January 2015), supports data messages of up to 10 kB downlink and 6 kB uplink and can transmit short messages for mission-critical applications in 15 seconds. Typical applications include vehicle tracking in the transportation sector and the remote management and control of fixed assets. BGAN M2M is a more advanced service for applications in the utilities, energy and retail banking markets, supporting end-to-end IP data capability for real-time communication with monthly data volumes of 1–50 MB. In November 2015, Inmarsat and Ericsson announced an agreement to develop new services and standards for satellite communication and application integration among shipping companies.

3.5.4 Globalstar Globalstar is an international provider of mobile satellite voice and data services to commercial and recreational users in 120 countries worldwide. Founded in 1991 as a joint venture between Qualcomm and Loral Corporation, the company launched its first generation

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of satellites in the early 2000s. Following a financial restructuring, the company remerged in 2004 and launched a second generation constellation of 24 satellites between 2010 and 2013. The second generation network has the capacity to accommodate 34 billion text messages, M2M transmissions or other small-bit messages or 19 million voice or data minutes per day and an IP-based network architecture. Globalstar also holds considerable wireless spectrum licenses in the 1.6 GHz and 2.4 GHz bands, which have been proposed for use as a privately managed extension to the 802.11 ecosystem for reducing Wi-Fi congestion. Annual sales in 2014 increased 8 percent to US$ 90.1 million, but the financial result remained negative with operating loss of US$ 95.9 million. In April 2014, Globalstar’s shares were relisted on the . Globalstar offers a range of Simplex and Duplex data modems, designed for one-way or two-way communication, which are suitable for a wide range of M2M applications. New products in the pipeline, designed for the second generation of satellites, include a miniature M2M transmitter and a consumer asset tracker. M2M industry partners working with Globalstar include the system integrators Nupoint Systems and Lasso Technologies as well as Numerex. Berg Insight estimates that Globalstar has a few hundred thousand M2M subscribers.

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Chapter 4 Asia-Pacific

4 Asia-Pacific

4.1 Regional market trends Asia-Pacific is the largest regional market for cellular M2M connectivity in terms of volume. China is the main growth engine and has seen a massive increase in domestic demand over the past years. Berg Insight estimates that the number of M2M subscribers in China reached 62.9 million at the end of 2014 and will exceed 80 million in early 2016. As the country’s economic growth slows down and the government seeks to implement a new model focused on private consumption rather than public investments there is a clear risk for disturbances that can have a significant negative impact on the M2M/IoT market in the short to medium term. The Chinese automotive industry will play a key role in shaping the M2M/IoT market in the entire Asia-Pacific region in the coming five years. If connected cars take off in China and the car market remains strong, there will be another massive increase in demand for M2M connectivity. Moreover, the concept will spread faster to Southeast Asia that still has a huge untapped market potential for motor vehicles. Connected cars will also be important to re- energise the M2M markets in Japan, South Korea and Australia that are currently growing at modest annual rates of 15–20 percent. Japan is the second largest M2M market in Asia- Pacific with an installed base of 11.2 million at the end of 2014.

Southeast Asia and India remain in the earliest phases of M2M/IoT technology adoption. Major countries in Southeast Asia are beginning to see sizeable subscriber bases for M2M and SingTel has taken a leading role in facilitating multinational deployments in the region. India has recently seen a number of initiatives related to M2M/IoT that could help accelerate market demand. Economic development and government initiatives will be the most significant drivers for future market growth.

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Figure 4.1: Asia-Pacific M2M connectivity market data (2014/2015)

Country Operator M2M subs YoY growth rate Market share China China Mobile 43,400,000 34 % 69 % China Unicom 13,000,000 ~40 % 21 % China Telecom* 6,500,000 ~20 % 10 % Total 62,900,000 37 % –

Japan Softbank 4,360,000 14 % 39 % NTT Docomo 4,170,000 25 % 37 % KDDI* 2,670,000 10 % 24 % Total 11,200,000 17 % –

South Korea SK Telecom 1,310,000 22 % 44 % KT 900,000 27 % 30 % LGU+ 800,000 11 % 27 % Total 3,010,000 20 % –

Indonesia Telkomsel* 1,150,000 ~ 15 % 55 % XL Axiata 510,000 11 % 24 % Indosat* 440,000 N/A 21 % Total 2,100,000 ~15 % –

Australia & NZ Vodafone* 1,700,000 ~25 % 40 % Telstra 1,500,000 23 % 36 % Other 1,000,000 ~20 % 24 % Total 4,200,000 ~23 % – *Berg Insight estimates

Note: Data as of Q4-2014 for China and Indonesia and Q1-2015 for all other markets.

Source: Operator data, regulator data and Berg Insight estimates

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4.1.1 China China is the world’s largest market for M2M connectivity services. Berg Insight estimates that the number of M2M subscribers was 62.9 million at the end of 2014 and will exceed 80 million in early 2016. The Chinese M2M market has developed rapidly in the 2010s. The growth has coincided with China’s emergence as the world’s leading producer of vehicles and massive public investments in smart grids and other forms of smart infrastructure. The Chinese government played an instrumental role in kick-starting the market after identifying the Internet of Things (IoT) as one of seven strategic emerging industries in the five year plan for 2011–2015. At the beginning of the period, the government allocated RMB 5 billion (€ 0.6 billion) per year in funding or subsidies for the IoT sector. In 2014, the funding was doubled to RMB 10 billion (€ 1.2 billion). At the beginning of 2015, the Chinese Prime Minister Li Kegiang presented the governments new “Internet+” action plan, promoting the integration of mobile Internet, big data, cloud computing and the Internet of Things with modern manufacture to achieve industrial upgrading and updating.

Nationwide rollout of smart electricity meters to 300 million households The most significant government project driving demand for cellular IoT has been the nationwide rollout of smart electricity meters. China’s national utilities State Grid and Southern Power Grid completed the first phase of the project in 2015 and now cover more than 300 million households with the technology. While an overwhelming majority of the meters use power-line communication (PLC), there are more than 20 million PLC data concentrators, which are mostly connected to cellular networks. In addition, there are millions of C&I electricity meters that communicate directly via cellular. Altogether, Berg Insight believes that utility meters account for roughly 50 percent of the M2M subscriber base in China.

Motor vehicle parc doubled in four years Automotive and transport is the second largest vertical segment in the Chinese market. Between 2009 and 2013, the country’s vehicle parc doubled to nearly 127 million. The fast growth of commercial and government vehicle fleets has generated a massive demand for vehicle tracking and fleet management applications. Furthermore, there is a strong interest in the development of telematics applications for the consumer market. GM and its Chinese partner SAIC introduced a localized version of OnStar for Cadillac, Chevrolet and Buick

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vehicles in 2013. Two years later, approximately 30 automotive OEMs, including the leading European premium brands provided or planned to introduce connected car services in the country. SAIC has entered a cooperation with Alibaba to develop what they describe as China’s first car on the Internet in 2016. In March 2015, the companies jointly set up a RMB 1 billion fund to further the project. Baidu is also working with several car manufacturers on projects related to connected services and autonomous driving.

Card payments replace cash in the retail sector Economic growth in China is reflected in a rapid increase in card payments. During 2014, the number of POS-terminals connected to the Chinese Union Pay network increased by 50 percent to reach 15.9 million. Still the relative adoption of card payments in the country is less than one third of the level in other emerging economies such as Brazil and Turkey. Berg Insight estimates that there are at least 5–6 million POS-terminals with cellular connectivity in China, of which a majority have been deployed in the past few years.

China Mobile maintains a dominant market position in M2M China Mobile has been able to extend its dominant position in the domestic mobile market into the emerging M2M connectivity services market. Berg Insight estimates that the world’s largest mobile operator has a market share of almost 70 percent. The main stronghold is the 2G market segment, which still accounted for more than 90 percent of all new M2M devices in 2015. China Mobile has the most extensive 2G network in China based on GSM. For 3G/4G services, the operator is however hampered by its use of the domestic TD-SCDMA and TD- LTE sub-standards. China Unicom is the preferred partner for international collaborations thanks to its position as the only Chinese operator using the global WCDMA/HSPA and LTE- FDD standards. As a result, China Unicom has taken the lead in the connected cars segment where it has relations to most leading international automotive OEMs. China Telecom is trailing behind in the M2M market, partly as a result of its network infrastructure based on CDMA/EVDO and TD-LTE. The additional cost for 3G/4G hardware based on domestic standards will remain a disadvantage for both China Mobile and China Telecom for many years to come.

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4.1.2 Japan and South Korea Japan and South Korea are the most developed M2M markets in Asia besides China. In terms of adoption, Japan is a few years ahead of South Korea. At the end of Q1-2015 there were 8.8 M2M subscribers per 100 inhabitants in Japan, compared to 6.6 in South Korea. The Japanese market started to take off in 2010 and grew at yearly rates of 35–45 percent until 2013 when the growth slowed down to 15–25 percent. South Korea has moved slower with net additions of around 500,000 M2M subscribers in both 2012 and 2013. According to public data, the number of M2M subscribers in Japan and South Korea stood at 11.2 million and 3.0 million respectively at the end of Q1-2015.

Softbank and NTT Docomo compete for market leadership in Japan with 4.4 million and 4.2 million reported M2M subscribers respectively in Q1-2015. As a late market entrant, Softbank managed to outgrow NTT Docomo in the period 2010–2013 to become the number one M2M connectivity provider. During 2014/2015, NTT Docomo has however improved its position and closed in on its main competitor. Meanwhile, KDDI is trailing behind with an estimated M2M subscriber base of 2.7 million. In South Korea, SK Telecom has maintained a leading market share of 40–45 percent in the past years. The operator reached 1 million M2M subscribers at the end of 2013 and reported 1.3 million at the end of Q2-2015. KT and LGU+ are trailing behind with around 0.9 million and 0.8 million subscribers at the same time. Both operators are on track to reach 1 million during 2016. KT has its main strength in the vehicle telematics market where it has a market share near 50 percent.

Figure 4.2: Japan cellular M2M market connectivity data (2012–2015)

Thousands Q1-2012 Q1-2013 Q1-2014 Q1-2015 YoY growth Softbank 2,050 2,900 3,834 4,355 14 % NTT Docomo 2,330 3,170 3,338 4,173 25 % KDDI 2,037 2,284 2,426 2,700 11 % Total 6,417 8,354 9,598 11,228 17 %

Source: Operators

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The Korea Communications Commission (KCC) has released M2M subscriber statistics, segmented by five major application categories – remote monitoring, vehicle telematics, POS- terminals, wearables and others. Remote monitoring was the largest category, accounting for 52 percent of total connections as of August 2015. Vehicle telematics came second with 22 percent, followed by POS-terminals 18 percent and wearables 8 percent. In absolute terms, 730,000 vehicle telematics devices were installed, corresponding to a penetration rate of 4 percent of the entire vehicle parc. The statistics also indicated that 14 percent of the M2M devices in the country were permanently roaming.

Figure 4.3: M2M subscribers by application category (South Korea, August 2015)

Application category M2M subscribers Share Remote monitoring 1,704,000 52 % Vehicle telematics 726,000 22 % Wireless payments 581,000 18 % Wearables 274,000 8 % Other 181,000 6 %

Source: Korea Communications Commission

4.1.3 Australia and New Zealand Australia and New Zealand are among the most advanced markets in Asia-Pacific with around 2.7 million and 1.5 million M2M subscribers respectively. New Zealand boasts one of the highest M2M penetration rates in the world with almost one M2M device per three inhabitants. The reason for the very high uptake is extensive use of point-to-point cellular communication for smart meters. In April 2014, the domestic market leader Vodafone reached 1 million M2M subscribers while only having 2.3 million regular subscribers. Vodafone also has a presence in the M2M market in Australia, where the main competitors are Telstra and SingTel’s subsidiary Optus. Telstra is the market leader with a market share around 55 percent and reported 1.5 million M2M subscribers in Q2-2015. Australia was one of the first countries in the world to phase out 2G services and most M2M devices have migrated to 3G.

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4.1.4 Southeast Asia Southeast Asia is an emerging market for cellular M2M connectivity. Growing populations and economies and increasing motorization create favorable conditions for rapid growth in the coming decade. Indonesia has seen a rapid uptake of cellular M2M since 2013 and now has more than 2 million connections. Reportedly, Vietnam has recorded the highest growth rate in 2015, starting from low levels. Automotive & transport and payments are the main vertical segments. Demand for vehicle tracking and fleet management applications is stimulated by the rapid growth of motor vehicle populations in the region. SingTel and the Bridge M2M Alliance are key regional players, enabling seamless connectivity solutions for multinational enterprises. Telkomsel is the market leader in Indonesia with more than 1 million M2M subscribers. Malaysia’s main telecom groups Axiata and Maxis are also active in the M2M markets in multiple countries.

4.1.5 India and South Asia India and South Asia has not yet seen any major commercial breakthrough for cellular M2M. A low rate of motorization – India has less than 20 vehicle per 1,000 inhabitants – and limited uptake of card payments are two factors holding back adoption. Over the past year, there have however been a number of initiatives that could help accelerate the M2M/IoT market in India. In June 2015, the Indian government announced a national smart city program supported by US$ 7 billion in funding. At the same time, the country’s major mobile operators have started to implement dedicated technical platforms for M2M. Vodafone India has full access to the global M2M infrastructure and competency of the Vodafone group. Airtel and Aircel have partnered with Tech Mahindra and Aeris to develop their M2M capabilities. In August 2015, Reliance Communications entered a partnership with Jasper to deliver IoT services across India. The Reliance group is one of the largest industrial conglomerates in India, active in telecom, , construction, entertainment, power, healthcare, manufacturing, defence, aviation and transport. Other companies in the group will be the anchor clients for the launch of IoT services in India, next to other enterprises and state governments across India. PTCL and Etisalat have jointly launched M2M solutions in Pakistan, where other market participants include Vimpelcom’s Mobilink and Telenor.

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4.2 Mobile operators China Mobile ranks as the number one provider of wireless M2M communication in the Asia- Pacific region and reported record net additions of 11.4 million M2M connections in 2014, taking the total subscriber base to 43.4 million at the year-end. China Unicom holds the second place with a reported subscriber base of 13.0 million. China Telecom does not report any M2M subscriber data but is believed to have around 6–7 million connections. Softbank and NTT Docomo are also in the top five with more than 4 million M2M connections each, far ahead of KDDI whose subscriber base remains below 3 million. Other mobile operator groups in Asia-Pacific with more than 1 million M2M subscribers include Vodafone, Telstra, Telkomsel and SK Telecom. KT and the Axiata group are also expected to reach the milestone by the end of 2015. SingTel has so far not disclosed any M2M subscriber data.

4.2.1 China Mobile China Mobile is the world’s largest mobile operator, having 810 million mobile subscribers at the end of Q2-2015. Annual sales in 2014 were RMB 641 billion (€ 78.1 billion) and the workforce comprises 242,000 employees. China Mobile is a state controlled enterprise that dominates the domestic mobile services industry and has a domestic market share of about 70 percent. Its nationwide GSM network covers 98 percent of the population. For next generation mobile services, China Mobile has committed to the domestic TD-SCDMA (3G) and TD-LTE (4G) technology standards. At the end of Q2-2015, the number of 4G base stations was 940,000 and the 4G customer base was 190 million. Moreover, China Mobile has deployed over 4 million Wi-Fi hotspots in metropolitan areas. Internationally, the group has established the mobile operators Zong in Pakistan and TrueMove-H in Thailand.

China Mobile is a key player in the Chinese IoT industry, developing cellular M2M communication as a part of a broader portfolio of wireless technologies. The operator established an IoT competence centre in Chongqing in 2010, which was transformed into an independent subsidiary in 2012. The China Mobile M2M Company is active in the operation of IoT networks, the development and production of chipsets and modules for the IoT industry and the development of platforms for IoT-based cloud services. China Mobile has built a dedicated M2M network, supported by a unified communications platform and the China Mobile Wireless Protocol (WMMP) that allows manufacturers to quickly develop devices for the network. Moreover, China Mobile has developed a suite of

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standardised complete M2M solutions for applications such as home security, fleet management, stolen vehicle tracking and remote surveillance. In mid-2014, China Mobile partnered with GM/SAIC to provide 4G connectivity for Cadillac, Chevrolet and Buick vehicles using the OnStar Service. One year later, the operator launched a standalone 4G IOV (Internet of Vehicles) service that is expected to attract 500,000 subscribers until the end of 2015.

China Mobile is also acting as a technology partner for a wide range of IoT projects with enterprises and local governments throughout the country. Examples of applications developed by the operator include environmental monitoring in cities, real-time information for public transport, healthcare information, digital education and connected sensor monitoring applications for agriculture, forestry, mining and oilfields. These applications use a wide range of technologies and forms of communication beyond what falls under the definition of cellular M2M. For instance, sensor networking applications can use low power short range wireless technologies such as Wi-Fi and RFID.

China Mobile’s strong focus on IoT has resulted in a massive growth for all forms of wireless M2M communication over the past few years. According to the company’s annual report, the number of M2M subscribers has been growing at a rate of around 10 million per year since 2011. During 2014, the subscriber base increased by 34 percent to reach 43.4 million at the end of the year. Based on this trend, the subscriber base is projected reach around 55 million at the end of 2015. Berg Insight believes that utilities, vehicle tracking, POS-terminals and government applications are the main vertical market segments for China Mobile’s M2M business. Smart meters and data concentrators may account for up to 40 percent of the subscribers. China Mobile is the principal provider of cellular backhaul connectivity services for State Grid’s smart metering system, comprising 300 million smart electricity meters with PLC communication and roughly 20 million data concentrators.

4.2.2 China Unicom China Unicom is a state-controlled telecommunications operator in China with annual sales of RMB 295 billion (€ 35.6 billion) in 2013. The operator is engaged in mobile communications businesses in 31 provinces, municipalities and autonomous regions in China, the provision of fixed-line voice, broadband and other Internet-related services, information and

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communications technology services, business and data communications services, and other related telecommunication value-added businesses. In mid-2015, China Unicom provided 78 million wireline access lines, 71 million broadband lines and 290 million mobile network connections – ranking second in both the fixed and wireless communication markets. The share of 3G/4G mobile subscribers was 55 percent. China Unicom started to deploy hybrid TD-LTE /LTE FDD networks in major cities during 2014 and accelerated the rollout in 2015.

China Unicom is the number two provider of M2M connectivity services in China and reported 13.0 million subscribers at the end of 2014. The operator benefits from being the only player in China using the main global mobile technology standards GSM, WCDMA and LTE FDD, making it an attractive partner for international cooperation. At the end of 2011, China Unicom announced an M2M alliance with its strategic partner Telefónica that will see the two operators work together on M2M platforms, technical standards and other issues. The following year, China Unicom and Telefónica presented a joint framework for remote management of the subscription data of embedded M2M SIMs. In April 2014, the Ireland- based international mobile connectivity provider Cubic Telecom announced an agreement with China Unicom to enable M2M communications on its network. At the end of the year, the operator entered an agreement to deploy the Jasper platform. China Unicom has implemented the platform at two domestic data centres in Nanjing and Guangzhou, providing national coverage in 360 cities. In early 2015, China Unicom entered a strategic partnership with the Bridge Alliance to jointly provide enterprise mobility offerings and services for multinational companies in China, Asia Pacific, Middle East and Africa.

International cooperation has enabled China Unicom to take the lead in the connected car segment. Through partnerships with 25 automotive OEMs, the operator provides M2M connectivity services for more than 3.0 million vehicles in China, corresponding to 25 percent of the subscriber base. Partners include both international players such as BMW, Audi, PSA, Hyundai, Volvo Cars and Tesla and domestic leaders like SAIC, FAW, Changan and BAIC. Government was the second largest vertical segment, accounting for 17 percent, with security monitoring and health monitoring being the main application areas. Utilities, where the principal customers are China’s two electricity grid operators State Grid and Southern Power Grid, ranked as number three with 14 percent of the installed base. Manufacturing, consumer products and merchants were the other main vertical segments, accounting for 11–

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13 percent each. Major customers include Haier and Gree in the appliances industry; Otis, General Elevator and Hitachi in elevators and China’s leading payment terminal transaction networks. The installed base of cellular POS-terminals is around 1.4 million units.

4.2.3 China Telecom China Telecom is the world’s largest wireline telecommunications and broadband operator and the world’s largest CDMA mobile operator. In August 2015, the state controlled enterprise provided 138 million wireline access lines, 110 million wireline broadband lines and 193 million mobile network connections. Annual sales in 2014 were RMB 324 billion (€ 39.0 billion). China Telecom entered the mobile communications market in 2008 by acquiring the CDMA network of China Unicom. The operator has a strong focus on 3G services and mobile data applications to drive subscriber and revenue growth. At the beginning of 2014, China Telecom also launched 4G services based on TD-LTE. In line with the national policy to promote the development of the Internet of Things, China Telecom is also developing its M2M communication capabilities. The operator has implemented ZTE’s M2M Service Platform and partnered with the telecom vendor for several end-to-end M2M solutions. Moreover it has developed 36 applications for 15 industries, including government services, social management, healthcare, culture and education, transportation and logistics, business and finance. The operator also participates in Smart City programs in 160 cities in 28 provinces, autonomous regions or municipalities. China Telecom has however not developed the same focus on M2M as its domestic peers and trails behind in terms of subscribers. Berg Insight estimates that the operator had a market share of around 10 percent for M2M connectivity at the end of 2014, corresponding to around 6–7 million subscribers.

4.2.4 Softbank Softbank Mobile is the number three mobile operator in Japan with 37.8 million mobile subscribers on an all HSPA/LTE network at the end of Q1-2015. The operator is a part of the Softbank group, a Japanese telecommunications and media corporation with annual sales of ¥ 8,670 billion (€ 62.4 billion) in the fiscal year ended 2015. In July 2013, Softbank completed the acquisition of a 75 percent share in Sprint, creating a new international mobile communications group with around 110 million subscribers in Japan and the US. Softbank/Sprint also ranks as a leading international player in M2M with a combined subscriber base of 11.5 million at the end of Q1-2015.

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Softbank is the largest provider of M2M connectivity services in Japan, with a market share of nearly 40 percent. At the end of Q1-2015, the operator reported 4.4 million M2M subscribers even as the year-on-year growth rate slowed down to 14 percent. When entering the M2M market in 2008, Softbank differentiated from its competitors by working with international module vendors supplying products based on global standards instead of domestic electronics industry players. This resulted in lower component prices and greatly facilitated international deployments. Softbank currently offers wireless modules from u-blox, SIMCom, Huawei, AM Telecom and Option as part of its enterprise M2M product line-up as well as modems, intelligent gateways, handheld devices and POS-terminals. Another strategic initiative by Softbank was to take a lead in the development of no-handset mobile products for the consumer market. Connected consumer electronics has been the main driver behind the operator’s M2M subscriber growth in the past years. In 2009, Softbank introduced the PhotoVision range of digital photo frames with cellular connectivity that automatically display photos sent by e-mail from mobile handset users. PhotoVision was an immediate success and launched a new consumer device category on the Japanese market that is now available from all the leading mobile operators. The latest versions of the products are full-fledged television sets including DTV broadcasting receivers. In 2011, Softbank launched the Mimamori range of connected security and safety products, which includes solutions for home alarm, video surveillance and people tracking. At the beginning of 2014, the operator launched the new Softbank HealthCare range of solutions for fitness and health management. The first product is a 3G-enabled body composition scale manufactured by Seiko Instruments.

Softbank is actively involved in international cooperation with other mobile operators around M2M. In October 2013, it joined the Global M2M Association and at the beginning of 2014 it also took part in the formation of the Bridge M2M Alliance. The alliances in combination with the ownership in Sprint, provides Softbank with one of the most far-reaching international network footprints for M2M. Softbank has adopted a vendor agnostic M2M platform strategy, supporting Jasper and Ericsson DCP as well as Sprint’s Command Centre 2.0. In October 2015, Softbank selected Oberthur Technologies to provide the DIM (Device Identity Module) line of embedded and removable M2M SIM cards, optimised for automotive, industrial, smart metering and similar applications.

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4.2.5 NTT Docomo NTT Docomo is the leading mobile operator in Japan with 67.5 million subscribers and a market share of 45 percent. The company is a majority owned subsidiary of the NTT group with 24,000 employees and annual sales of ¥ 4,383 billion (€ 31.8 billion) in March 2015. NTT Docomo was one of the first mobile operators in the world to migrate its entire subscriber base, including M2M devices, to the 3G FOMA network. The operator is now well under way with the migration to the 4G Xi network, which was launched in 2011. At the end of Q1-2015, NTT Docomo had 32.6 million LTE subscribers, corresponding to 46 percent of the total subscriber base.

NTT Docomo was an early mover in the M2M market at the beginning of the 2000s and but has faced intensified competition in the past years. At the end of Q1-2015, the ranked as the second largest player in the Japanese market with 4.2 million M2M subscribers and a market share of 37 percent. The year-on-year growth rate of 25 percent was however above the market average. In July 2013, NTT Docomo established an independent business department for M2M to drive business expansion in the domestic and international markets. The operator is a member of the M2M World Alliance and entered an agreement with Vodafone for cooperation around the delivery of M2M services in June 2014. NTT Docomo was also among the first operators in the world to support the GSMA Embedded SIM standard.

NTT Docomo provides an extensive portfolio of M2M solutions including devices, network, platforms and cloud applications, along with technical support. Historically, the operator has developed its own range of industrial and telematics modules with domestic electronics industry partners. This strategy has changed and NTT Docomo now provides M2M modules from a wide range of international vendors including Sierra Wireless, Gemalto, Telit, Huawei and u-blox as well as regional Asian players such as AM Telecom, Askey Computers (part of Asus), Fujitsu/MTC, Pantech, Seiko Industrial Instruments and Wisteon NeWeb. NTT Docomo’s connectivity service offering comprises M2M data plans for its 3G/4G networks, and a private networking solution enabling secure remote access to connected devices from enterprise networks. In September 2015, the operator launched a new flat rate M2M data plan for LTE to accelerate the migration from the 3G FOMA to 4G Xi.

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4.2.6 KDDI KDDI is a telecommunications company in Japan, engaged in mobile and fixed-line communications services, as well as ICT solutions. Annual sales in the fiscal year ended 2014 was ¥ 4,573 billion (€_32.9 billion) and the workforce comprises 28,000 employees. The mobile communications segment operates under the au brand, the number two player in the Japanese market with 44.1 million subscribers. The fixed-line segment provides broadband services, including FTTH and cable TV, as well as domestic and overseas communication services, data centre services and other ICT solutions. KDDI provides 3G mobile communications using CDMA and launched 4G services based on LTE in December 2012.

KDDI has been active in the M2M market from the inception and ranked as the second largest player until 2012, when it was demoted to third place. Recently, the operator’s M2M business has trailed behind its competitors, growing at a yearly rate of less than 10 percent. Berg Insight estimates that KDDI had around 2.7 million M2M subscribers at the end of Q1-2015, corresponding to a market share of 24 percent. The main vertical segments are automotive, security and utilities, where customers include Toyota, Isuzu and Secom. KDDI offers enterprise customers an integrated approach to M2M, supporting them in every phase of a project from business development to design, operation and marketing. The operator offers a limited range of wireless modules from Kyocera (LTE) and Seiko Instruments (CDMA), equipped with functions such as GPS and Earthquake Early Warning. In addition, a wide range of manufacturers offer both generic modems and industry specific solutions adapted for KDDI’s network. In May 2013, KDDI announced a partnership with Telenor Connexion to provide its customers with a global SIM solution, international roaming in 190 countries, service provisioning and technical support. For international deployments, KDDI is providing M2M modules from Gemalto.

4.2.7 SK Telecom SK Telecom is the leading mobile operator in South Korea with around 26 million subscribers and a market share of 45 percent. The operator is a leading adopter of LTE technology with more than 70 percent of its subscribers using 4G devices. Annual sales in 2014 were KRW 17,164 trillion (€ 12.3 billion) and the workforce comprises 22,000 employees. SK Telecom has adopted a group strategy to transform from a traditional telecom operator into a next generation platform player, offering a variety of converged services in the areas of lifestyle,

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media, IoT and health. The IoT portfolio spans smart home solutions and major B2B/B2C applications areas such as connected cars, security and energy services. In May 2015, SK Telecom launched a smart home platform to create a basis for an open smart home ecosystem in Korea. More than 25 companies have signed up for using the platform, including Samsung and LG. The lifestyle portfolio comprises a number of innovative wireless devices such as activity trackers, smart watches for children and pet tracking devices. SK Telecom’s health business consists of the Lifeware and Healthcare units. Lifeware launched the new umbrella brand UO in July 2015 to initiate global expansion in China, Europe and North America. The Healthcare unit develops diagnostics devices and medical services for the international market, with an initial focus on Asia and the Middle East.

SK Telecom ranks as the leading provider of M2M connectivity in South Korea with a market share of 44 percent. At end of Q2-2015, the operator had 1.3 million M2M subscribers, up 22 percent year-on-year. Remote monitoring and control was the largest vertical segment, accounting for over 50 percent of the connections, followed by POS-terminals and wearables with around 20 percent each. Since 2009, the operator has followed a strategy to drive growth by actively seeking new business models in eight key sectors – distribution, logistics, finance, education, healthcare, automotive, housing & construction and SMEs. SK Telekom has launched a series of M2M projects across different vertical segments. These include U- remote metering, for remote checking of high voltage power usage, buildings and facilities; U-facility safety for facility maintenance; U-traffic control for vehicle control; U-security through tracking and tracing; U-environmental surveillance for disaster and environmental monitoring and U-Farm for monitoring of agriculture, fisheries and livestock conditions and facilities. In July 2013, SK Telecom announced a partnership with Kia Motors, Samsung Electronics and UDTech to develop connected car applications. Furthermore SK Telecom participates in South Korea’s smart grid programme and smart fish farming pilot projects. On the international market, the operator participates as a partner in the regional Bridge M2M Alliance. Moreover, SK Telecom has entered strategic collaborations with a number of international telecom operators, including China Unicom and Spark in New Zealand. In November 2015, SK Telecom and Nokia Networks performed a joint demonstration of low- power LTE technology in a testbed with IoT devices provided by GCT Semiconductor.

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4.2.8 SingTel SingTel is a leading communications group in Asia, providing a wide range of services that include voice and data solutions over fixed, wireless and Internet platforms, as well as information technology and pay TV. Annual sales in the financial year ended 2015 were SG$_17.2 billion (€ 10.6 billion). Headquartered in Singapore, the group has a strong presence in Asia through the subsidiary Optus in Australia and strategic investments in six regional mobile operators – (India), Telkomsel (Indonesia), AIS (Thailand), Globe (Philippines), Warid Telecom (Pakistan) and PBTL (Bangladesh). Including its affiliates, SingTel has a footprint covering 550 million mobile subscribers in 25 countries across Asia and Africa. Bharti Airtel is the number one mobile operator in India and has operations in 17 countries across Africa, serving a total of 307 million mobile subscribers. Telkomsel and AIS are the number one mobile operators in Indonesia and Thailand respectively. Globe ranks second in the Philippines, whereas Warid Telecom and PBTL rank fourth and fifth in Pakistan and Bangladesh respectively. The main companies in the SingTel group form the core of the Bridge Alliance of mobile operators in Asia, whose members also include SK Telekom (South Korea), Softbank (Japan), Maxis (Malaysia), Taiwan Mobile (Taiwan), CSL (Hong Kong) and CMT (Macau). SingTel’s wholly owned subsidiary NCS ranks as one of the leading ICT solution providers in Southeast Asia with more than 7,000 employees.

SingTel was one of the first mobile operators in Southeast Asia to launch a dedicated business unit for M2M in 2012 and a SIM management platform powered by Jasper Technologies, which at the same time received an investment from the group’s corporate ventures fund Innov8. Leveraging on its extensive regional footprint and close relationships to tier-1 and tier-2 mobile operators in key markets, the group is uniquely positioned to offer regional network coverage for M2M deployments in Asia. Through NCS, the group has also the IT expertise and resources required for providing advanced end-to-end solutions.

SingTel’s M2M business strategy is focused on complete solutions and connectivity services across four key vertical segments – automotive & transport, security, utilities and consumer devices. As the B2B market leader in Singapore, SingTel can leverage on existing relationships with domestic as well as international enterprise customers to become the partner of choice for local and regional M2M projects. Together with its partners in the Bridge

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Alliance, SingTel can provide seamless coverage with unified pricing and multi-network SLAs across the greater part of Asia, supported by Ericsson’s DCP platform. The operator has a very open approach to all forms of international partnerships, engaging actively in associations such as the M2M World Alliance as well as bilateral partnerships with mobile operators and M2M managed service providers in other parts of the world. Beyond basic connectivity, SingTel is developing a partner strategy for M2M solution providers in its selected vertical segments. A joint go-to-market model provides partners with full access to the combined sales channels of SingTel and Optus. At the end of 2014, SingTel had a few thousand active M2M customers, including several international automotive OEMs and logistics companies.

4.2.9 Axiata Axiata Group is one of the largest telecommunication groups in Asia with over 250 million customers and its headquarters located in Malaysia. The group has controlling interests in the mobile operators Celcom (Malaysia), XL (Indonesia), Dialog (Sri Lanka) and Robi (Bangladesh), as well as minority interests in (India) and M1 (Singapore). Annual sales in 2014 were US$ 5.7 billion and the workforce comprises 23,000 employees. Axiata’s main operating companies have all launched strategic initiatives for addressing emerging opportunities in the M2M market over the past years. Celcom, the largest mobile operator in Malaysia with 13 million subscribers, entered a partnership with nTels at the beginning of 2013 for the development of a new M2M billing and connectivity management platform. Looking ahead, Celcom intends to develop products and solutions for three selected market segments – telemetry, smart cities and security. XL, the number two mobile operator in Indonesia with 59.6 million subscribers, launched M2M services in 2011 with an initial focus on smart metering and POS-terminals. During 2013, XL launched Ericsson’s DCP platform in the Indonesian market and began to see a significant uptake in demand. In 2014, the number of M2M subscribers increased by 11 percent to reach 510,000 at the year-end. Dialog became the second operator in the Axiata group to launch the Ericsson DCP platform for M2M customers in January 2014. Sri Lanka’s mobile communications market leader is looking to tap into the opportunities in the nascent domestic M2M market with applications such as fleet management, security surveillance and wireless POS terminals.

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4.2.10 Telstra Telstra is Australia’s leading telecommunications and information services company, offering a complete range of fixed and wireless services to the consumer and enterprise markets. Annual sales in the fiscal year ending 2015 were AU$ 26.6 billion (€ 18.5 billion) and the workforce comprises 38,000 employees. Telstra is the number one provider of mobile communications in Australia with 16.7 million subscribers at the end of 2014 and a market share above 50 percent. The operator has Australia’s largest 3G and 4G enabled mobile network, covering 99.3 percent of the population across more than 2.4 million square kilometres. International assets of the Telstra group include a majority stake in the Hong Kong mobile operator CSL. Telstra ranks as the number one provider of wireless M2M connectivity services in Australia with an estimated market share of 55 percent. At the end of Q2-2015, the operator reported 1.5 million M2M subscribers, an increase of 23 percent over the previous year. Telstra is among the few operators in the world disclosing revenue figures for M2M. In the financial year 2015, M2M generated AU$ 113 million (€ 76 million) in sales, up 12 percent year-on-year. The monthly ARPU for M2M devices in H1-2015 was AU$ 6.70 (€ 4.50), compared to AU$ 7.54 one year earlier.

Telstra began developing a dedicated M2M business in 2005 at the time when the operator was launching the NextG 3G network. Over time, Telstra has extended its focus from core connectivity services to hardware and application partnerships, as well as complete customised solutions. The operator’s connectivity portfolio comprises the domestic and international data plans, the Jasper M2M platform, M2M form factor SIM-cards and various network enhancements. Nearly all of Telstra’s M2M subscribers have migrated to 3G, with only a few legacy solutions remaining on 2G. Most of the transition took place in 2008 when the operator closed its CDMA network. As a complement to mobile networks, Telstra can also offer satellite communication in partnership with Iridium. Telstra is actively supporting the development of the M2M ecosystem in Australia through go-to-market partnerships with multiple industry players. During 2016, the operator will launch a new application enablement platform to better support the ecosystem. On the international scene, Telstra participates in the M2M World Alliance.

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Chapter 5 Middle East & Africa

5 Middle East & Africa

5.1 Regional market trends The Middle East & Africa is largely the smallest and least developed world region for wireless M2M. Adoption rates are closely linked to the general level of economic development and political stability in different countries. Turkey and South Africa have evolved into substantial markets with a diversity of players and millions of M2M subscribers. The Gulf States are also relatively advanced markets, though limited in size. Populous countries such as Egypt and Nigeria are beginning to see significant uptake of M2M as well. Berg Insight estimates that the number of M2M subscribers in the Middle East & Africa was 10.9 million at the end of 2014, up 27 percent over the previous year.

5.1.1 Middle East The Middle East has growing uptake of M2M/IoT in the most developed economies. Adoption is primarily taking place in the transport and energy sectors. The difficult global economic climate in combination with falling oil prices is putting strong pressure on national governments to improve fuel and energy efficiency. Fleet management solutions help improve the efficiency of road transport and smart metering technology is being deployed on a large scale to better manage electric power consumption and reduce grid losses. In both cases governments play a key role in driving investments through state-owned enterprises that control key areas of the national economies. POS-terminals is a third major application area, with growth stimulated by the global shift from cash to card payments. Turkey alone has around 1.0 million POS-terminals connected to mobile networks. The country constitutes the largest geographical market in the Middle East with 2.8 million M2M subscribers at the end of Q2-2015 and a year-on-year growth rate of 20 percent. Turkcell has a dominant market share of 65 percent, ahead of Avea and Vodafone. Etisalat and Ooredoo are early adopters of M2M/IoT in the Gulf States and North Africa, along with Orange and Vodafone. Sigfox established a regional office in the UAE in late 2015 as a base for future LPWA network rollouts in the Middle East & Africa.

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Figure 5.1: Turkey cellular M2M market connectivity data (2013–2015)

Thousands Q4-2013 Q2-2014 Q4-2014 Q2-2015 YoY growth Turkcell 1,400 1,500 1,700 1,800 20 % Avea* 400 500 500 600 20 % Vodafone* 200 300 300 400 33 % Total 2,000 2,300 2,500 2,800 22 % * Estimate

Source: ICTA, Turkcell and Berg Insight estimates

5.1.2 Africa Sub-Saharan Africa is largely at a very early stage of M2M/IoT technology adoption. South Africa is an exception, where strong adoption of vehicle tracking and fleet management applications has already generated several million M2M subscribers. Nigeria is the region’s second largest market with rapidly growing demand from the transport and energy sectors. Overall, vehicle tracking and fleet management is taking off across all of the more developed economies in Africa. In addition, multinational enterprises increasingly use cellular and satellite M2M for asset monitoring all over the continent.

5.2 Mobile operators Vodafone is the largest provider of cellular M2M connectivity in the Middle East & Africa with an estimated 3–4 million active subscribers in mid-2015. The South Africa-based subsidiary Vodacom had nearly 2 million M2M subscribers and in addition, Vodafone has direct market presence in countries such as Egypt, Turkey and Qatar. Turkcell ranked number two in the region with 1.8 million M2M subscribers in Turkey at the end of Q2-2015. Etisalat, FastNet, MTN, Ooredoo and Orange are additional significant regional players. Since the launch of a dedicated M2M business in 2012, Etisalat has introduced services in the UAE, Saudi Arabia, Egypt and Nigeria. MTN announced a new pan-African IoT platform developed in partnership with ZTE in May 2015. By the end of the year, Ooredoo will complete the rollout of Ericsson’s M2M platform to Qatar, Algeria and Tunisia. Orange is another significant player with almost 1 million M2M subscribers in the region.

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5.2.1 Etisalat Etisalat is the Middle East’s leading telecommunications operator and one of the largest corporations in the UAE with annual revenues of AED 32.2 billion (€ 8.0 billion) in 2014. The group operates through subsidiaries and associated companies in 19 countries across the Middle East, Africa and Asia. At the end of 2014, Etisalat acquired a majority stake in Maroc Telecom and subsequently transferred its operations in West Africa to the new subsidiary. At the end of Q2-2015, Etisalat had around 110 million mobile subscribers in majority owned subsidiaries in the UAE, Egypt, Morocco, Afghanistan, Sri Lanka, Benin, Central African Republic, Cote d’Ivoire, Gabon, Niger, Togo, Sudan and Tanzania. Furthermore, the group had associated companies in Pakistan, Nigeria and Saudi Arabia (Mobily).

Etisalat aims to boost the group’s position in the digital ecosystem and drive innovation and advanced services across all areas of operation. In 2012, the group created a new division that will focus on emerging applications such as M2M, cloud services, commerce, digital advertisement, advanced communications, digital entertainment and video services. During the year, Etisalat entered a customer relationship with Jasper Technologies and became the first mobile operator to offer its platform in the Middle East & Africa. Etisalat also joined the M2M World Alliance and has been among the first operators in the world to implement full support for the GSMA Embedded SIM specifications. During 2015, Etisalat announced the deployment of new IoT application enablement platforms from Cumulocity and PTC.

The Etisalat group currently offers M2M/IoT services in six markets – the UAE, Saudi Arabia, Egypt, Morocco, Nigeria and Pakistan. The portfolio comprises managed connectivity with domestic SIMs based on the Jasper platform and end-to-end solutions for key vertical market segments from external partners. Etisalat has local partnerships with leading providers of vehicle tracking and fleet management solutions in each market. In the UAE, the operator is also working with the domestic ICT solutions provider Pacific Controls to retrofit buildings with M2M sensors, monitoring devices and management modules. Overall, Etisalat perceives a fast growing demand for vehicle tracking, fleet management and utilities M2M in the markets where it operates.

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5.2.2 FastNet FastNet is an M2M operator in South Africa with 200 employees that is part of the Telkom Group. Telkom is a leading domestic telecom operator with 3.4 million fixed and 2.1 million mobile subscribers. Annual revenues in the financial year ending 2015 were ZAR 31.7 billion (€ 2.3 billion) and the workforce comprises around 18,000 employees. FastNet was the first company in South Africa to use radio technology to connect payment terminals and is the leading provider of 2G/3G POS solutions for retailers. The company also operates its own independent MPLS core network with fast fibre interconnections. FastNet offers a wide range of cellular M2M services and solutions, including both connectivity and complete applications. The connectivity portfolio comprises M2M SIM cards and data plans for all major South African mobile networks. End-to-end solutions include energy and temperature monitoring, vehicle tracking and asset management. In November 2014, FastNet announced its intention to deploy a purpose-build wireless IoT network based on the LoRa standard in South Africa. FastNet believes that LoRa meets the requirements for smart grid, asset tracking, metering and many other applications.

5.2.3 Ooredoo Ooredoo is an international telecommunications provider headquartered in Qatar active in 12 countries in the Middle East, North Africa and Southeast Asia. Ooredoo has a presence in markets such as Qatar, Kuwait, Oman, Algeria, Tunisia, Iraq, Palestine, the Maldives, Myanmar and Indonesia. The company group reached a customer base of 107 million at the end of 2014. Group revenues in 2014 decreased by 2 percent to QAR 33.2 billion (€ 8.4 billion). Indosat, the largest operator in the group, is part of the Conexus Mobile Alliance together with 8 additional operators in Asia. Ooredoo is committed to deploy a coordinated M2M offering across its entire footprint, which will appeal to enterprise customers with global operations. In March 2015, Ooredoo’s Indosat announced the launch of Ericsson Device Connection Platform (DCP). Indosat in Indonesia was the first member of Ooredoo Group to launch the platform with Qatar, Algeria and Tunisia to follow later during the year.

Indosat’s M2M strategy is focused on three pillars – connectivity, managed connectivity and end-to-end solutions. The company is connecting everything from taxi cars to POS terminals and ATMs. In April 2015, Indosat’s vehicle telematics solution was launched. The solution is targeting operational car fleets, transport & logistics, distribution, rental and insurance

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companies in Indonesia. Indosat reported 0.4 million M2M connections at the end of 2014. Berg Insight estimates that the number of M2M subscribers for the entire Ooredoo group is in the range of 0.5–1.0 million.

5.2.4 MTN MTN is a leading emerging markets mobile operator, connecting over 230 million people in 22 countries across Africa and the Middle East. Headquartered in South Africa, the group has market leading positions in 15 markets. Annual sales in 2014 were ZAR 146.9 billion (€ 10.5 billion) and the workforce comprises 22,000 employees. Nigeria and South Africa were the most significant countries, contributing to nearly two thirds of revenues. MTN is the number one mobile operator in Nigeria with a market share of 49 percent and number two in South Africa where the market share is 34 percent. In May 2015, MTN launched a new initiative to accelerate the growth of IoT across its territories. Starting in South Africa, the operator will roll out a pan-African IoT platform provided by ZTE and a global SIM card, offering a single rate for M2M connectivity across its footprint in Africa. Target application areas include fleet management, security, smart metering and smart cities. In December 2015, MTN entered a strategic partnership with Telefónica, focused on enterprise solutions such as M2M.

5.2.5 Turkcell Turkcell is a telecommunications operator headquartered in Turkey with international operations in Ukraine, providing mobile services to 48.0 million subscribers. In addition, the group has operations in Central Asia through the affiliated holding company Fintur, which is majority-owned by TeliaSonera that also holds a 38 percent stake in Turkcell. Annual sales in 2014 were TRY 12.0 billion (€ 4.1 billion). Turkcell is the leading mobile operator in Turkey, with around 34 million mobile subscribers and a market share of around 50 percent. Through its leading market position, the operator has been in a natural position to drive the adoption of wireless M2M communication in Turkey. Turkcell was the first Turkish operator to establish an M2M department and partnered with Ericsson to launch the country’s first M2M connectivity platform at the beginning of 2012. The operator is the number one M2M communications provider in Turkey with approximately 1.8 million active connections at the end of Q2-2015, up 20 percent year-on-year, corresponding to a market share of 64 percent.

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Turkcell has 33 M2M solution partners across all major vertical segments, including Turkey’s leading fleet management solution providers Arvento and Mobiliz and key players in the financial sector. POS-terminals and payments is the largest segment, accounting for around 45 percent of the installed base, followed by fleet management and other automotive applications with around 35 percent. Currently, Turkcell connects around 30 percent of Turkey’s POS-terminals and ATMs and 10 percent of the entire commercial vehicle fleet. The operator also perceives that there is a major growth potential in the smart metering, smart buildings & security and industrial applications, as well as connected cars. In July 2014, Turkcell announced the launch of Turkey’s first connected car platform. Available in select Subaru and Volvo models from Q3-2014, the platform offers an online infotainment screen that delivers information and entertainment content such as real-time traffic information, location-based information, and full access to Turkcell’s live streaming music service Fizy with 3 million songs.

5.2.6 Vodacom Vodacom is a mobile communications company providing voice, messaging, data and converged solutions to around 62 million active customers in Africa. The company is majority owned by Vodafone and listed on the JSE stock exchange. Headquartered in South Africa, it also has operations in Tanzania, DR Congo, Mozambique and Lesotho. Through Vodacom Business Africa, it also offers managed services to enterprises in 40 countries across the continent. Annual sales in the fiscal year ending 2015 were ZAR 77.3 billion (€ 5.5 billion) and the workforce comprises 7,200 employees. Vodacom ranks as the number one mobile operator in South Africa with a market share around 40 percent and an even stronger position in the enterprise segment. The operator reported nearly 1.9 million M2M subscribers at the end of Q3-2015, up 17 percent compared to one year earlier. South Africa is the principal geographical market, accounting for around 80 percent of the installed base. The largest application segments are fleet management and stolen vehicle tracking, which are well developed markets in South Africa. Vodacom offers M2M solutions based on the Vodafone group’s GDSP connectivity platform for business customers in South Africa and the rest of Africa.

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Chapter 6 Market forecasts and trends

6 Market forecasts and trends

6.1 Geographic markets The global cellular M2M market is diverse, shaped by the economic conditions in different parts of the world. The leading centres for adoption are China, Western Europe and North America. China is the largest region in terms of installed base with an estimated 66 million M2M subscribers in Q1-2015. The Chinese market is driven by a combination of general economic development and government action plans aimed at promoting the adoption of new technology in key sectors such as manufacturing and energy. Western Europe and North America remain the most advanced and valuable markets, characterised by the largest diversity of applications and ROI-driven adoption in the enterprise sector. At the end of Q1- 2015, the regions had in roughly 50 million M2M subscribers each. Japan and Brazil are two sizeable regional markets where the installed base stood at 11 and 10 million connections respectively in the same period.

Figure 6.1: Key regional markets for cellular M2M (Q1-2015)

Region M2M subscribers YoY growth China 66,200,000 25–30 % Western Europe 50,600,000 15–20 % North America 49,400,000 15–20 % Japan 11,200,000 10–15 % Brazil 10,100,000 15–20 %

Source: Berg Insight

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6.1.1 Global market summary Berg Insight estimates that the global number of cellular M2M subscribers increased by 23 percent during 2015 to reach 265.2 million at the end of the year – corresponding to around 3 percent of all mobile subscribers. Until 2020, the number of cellular M2M subscribers is forecasted to grow at a compound annual growth rate (CAGR) of 22.9 percent to reach 744.2 million at the end of the period. During the same period, cellular M2M network revenues are forecasted to grow at a compound annual growth rate (CAGR) of 23.3 percent from € 8.0 billion in 2015 to approximately € 22.8 billion in 2020. Meanwhile the monthly ARPU is expected to remain stable at around € 2.50.

East Asia was the largest region, closely followed by Western Europe and North America. Altogether they accounted for around 76 percent of the global cellular M2M subscriber base at the end of 2015. Until 2020, the relative share of the regions is expected to decrease slightly as adoption takes off in other parts of the world. At the end of 2015, East Asia was the largest regional market with 90.4 million cellular M2M subscribers, growing 25 percent year- on-year. Western Europe came second with 59.0 million M2M subscribers and 21 percent year-on-year growth. North America ranked third with 52.5 million cellular M2M subscribers, and a year-on-year growth rate of 24 percent. Among individual countries, China was clearly number one with around 70 million M2M subscribers, ahead of the US approximately 50 million M2M subscribers. The combined size of the EU+EFTA market was around 64 million M2M subscribers.

Other world regions accounted for around 24 percent of the global cellular M2M subscriber base at the end of 2015. Latin America had an estimated 20.5 million M2M subscribers, with Brazil being the most advanced country. South Asia and Southeast Asia were in a very early phase of adoption with adoption notably taking off in Indonesia. Vietnam was reportedly one of the countries where cellular M2M had a commercial breakthrough in 2015. The Middle East & Africa market was dominated by South Africa and Turkey, which had 2–3 million M2M subscribers each.

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Figure 6.2: Cellular M2M subscriber forecast, by region (World 2014–2020)

Millions 2014 2015 2016 2017 2018 2019 2020 Europe 59.4 71.9 91.8 120.7 161.0 203.0 249.4 Western Europe 48.7 59.0 75.2 97.8 129.6 162.4 199.5 Central Eastern Europe 4.2 5.0 6.4 8.4 11.3 14.2 17.5 Russia & CIS 6.5 7.9 10.1 14.5 20.1 26.4 32.4

Americas 59.4 73.0 90.2 114.1 140.6 169.7 200.2 North America 42.3 52.5 65.0 82.8 103.4 125.1 146.2 Latin America 17.1 20.5 25.2 31.2 37.2 44.6 54.0

Asia-Pacific 85.4 106.3 128.5 152.3 178.6 207.9 241.1 East Asia 72.6 90.4 107.9 127.9 147.3 169.5 196.5 Southeast Asia 6.0 7.4 10.3 12.2 16.1 18.7 21.7 South Asia 3.2 3.9 4.8 5.9 7.9 11.4 13.3 Australia & Oceania 3.7 4.6 5.5 6.3 7.3 8.3 9.6

Middle East & Africa 10.9 14.0 17.9 23.1 30.2 40.0 53.5 Middle East 5.6 7.3 9.5 12.3 16.0 21.2 28.4 Africa 5.4 6.7 8.4 10.9 14.2 18.8 25.2

Total all world regions 215.1 265.2 328.4 410.2 510.5 620.6 744.2 YoY growth rate 23 % 23 % 24 % 25 % 24 % 22 % 20 %

Source: Berg Insight

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Figure 6.3: Cellular M2M network revenue forecast, by region (World 2014–2020)

€ million 2014 2015 2016 2017 2018 2019 2020 Europe 1,565 1,919 2,474 3,311 4,582 5,813 7,144 Western Europe 1,284 1,573 2,029 2,682 3,689 4,650 5,715 Central Eastern Europe 110 134 173 232 321 407 500 Russia & CIS 172 211 272 397 573 756 929

Americas 1,870 2,433 3,159 4,016 4,950 5,917 6,932 North America 1,408 1,877 2,472 3,157 3,931 4,704 5,468 Latin America 463 556 687 859 1,019 1,213 1,464

Asia-Pacific 2,568 3,223 3,885 4,576 5,330 6,176 7,122 East Asia 2,183 2,740 3,264 3,844 4,398 5,033 5,804 Southeast Asia 180 226 311 366 480 556 641 South Asia 95 119 145 176 236 339 393 Australia & Oceania 110 139 166 190 217 248 284

Middle East & Africa 326 417 534 686 892 1,173 1,562 Middle East 166 217 283 364 473 622 828 Africa 160 200 251 322 419 551 734

Total all world regions 6,330 7,992 10,053 12,589 15,755 19,078 22,760 ARPU (€) 2.45 2.51 2.55 2.56 2.57 2.56 2.55 YoY growth rate 31 % 26 % 26 % 25 % 25 % 21 % 19 %

Source: Berg Insight

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6.1.2 Europe Europe recorded strong volume growth in the wireless M2M market during 2015. The number of M2M subscribers in the region increased by 21 percent to reach 71.9 million at the year- end. Western Europe accounted for the greater part of the subscriber base, around 59.0 million. The main countries – Germany, France, the UK and Italy – had in the range of 7–11 million M2M subscribers each. Germany is currently the fastest growing market with a reported year-on-year growth rate of 28 percent in Q2-2015. Proportionately, the Nordic countries Sweden, Denmark, Finland and Norway had the highest share of M2M subscribers – approximately 10 million – despite having a combined population corresponding to 30 percent of Germany’s. Iberia and Benelux each had more than 4 million M2M subscribers. The countries in Central Eastern Europe and Southeast Europe had achieved different levels of maturity. Advanced markets such as Poland and the Czech Republic were not far behind Western Europe, while the countries in the Balkans remain in an early stage. Berg Insight estimates that the total number of M2M subscribers in the region was about 5 million at the end of 2015. Russia & CIS had approximately 8 million M2M subscribers at the end of 2015, mostly concentrated to Russia.

Berg Insight forecasts that the number of cellular M2M subscribers in Europe will grow at a compound annual growth rate (CAGR) of 28.2 percent between 2015 and 2020 to reach 249.4 million. The number of M2M subscribers in Western Europe is projected to reach 199.5 million at the end of the period. Central Eastern Europe and Russia & CIS are forecasted to grow at compound annual growth rates of 28.2 percent and 32.6 percent respectively to reach 17.5 million and 32.4 million by 2020. Total M2M network revenues in the whole of Europe are expected to increase from € 1.9 billion in 2015 to € 7.1 billion in 2020.

Among vertical segments, OEM automotive is projected to have the highest growth rate. Between 2015 and 2020, the relative market share of the segment in terms of connections is expected to nearly threefold from 11 percent to 29 percent. Meanwhile the share of network revenues is forecasted to reach 37 percent.

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Figure 6.4: Cellular M2M communication market forecast (Europe 2014–2020)

Millions 2014 2015 2016 2017 2018 2019 2020 Network connections OEM automotive 5.1 8.0 14.9 24.8 40.6 57.0 73.3 Commercial fleet 9.5 11.4 13.1 15.2 17.5 20.1 22.5 Insurance/Finance/SVR 7.0 8.0 9.2 10.6 12.2 14.0 16.1 Utilities 8.9 10.5 12.5 16.3 21.5 27.4 34.0 Security 5.1 5.9 6.8 7.8 8.9 10.0 11.3 Payments 4.1 4.4 4.6 4.8 5.1 5.3 5.6 Industrial/other 13.5 16.9 22.8 30.8 41.6 52.0 65.0 Consumer/healthcare 6.2 6.9 7.9 10.4 13.8 17.2 21.5

Total 59.4 71.9 91.8 120.7 161.0 203.0 249.4

Network revenues OEM automotive 122 220 446 803 1,461 2,051 2,640 Commercial fleet 341 410 471 546 628 723 809 Insurance/Finance/SVR 83 96 110 127 146 168 193 Utilities 214 252 300 392 516 658 816 Security 183 212 243 280 319 361 408 Payments 149 157 165 174 182 191 201 Industrial/other 325 406 548 740 999 1,249 1,561 Consumer/healthcare 149 166 190 250 330 413 516

Total 1,565 1,919 2,474 3,311 4,582 5,813 7,144

Source: Berg Insight

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6.1.3 North America North America is one of the most advanced markets for cellular M2M communication worldwide. During 2015, the number of M2M subscribers in the region increased by 23 percent to reach approximately 52.5 million at the year-end. The US ranked as the world’s second largest market for cellular M2M with more than 50 million subscribers. Berg Insight forecasts that the number of cellular M2M subscribers in North America will grow at a compound annual growth rate (CAGR) of 22.7 percent in the next five years to reach 146.2 million by 2020. M2M network revenues in the region are expected to increase from US$ 2.0 billion in 2015 to US$ 6.0 billion in 2020.

The US market is at the forefront in the adoption of 3G and 4G technology for cellular M2M. New deployments of GPRS devices are rapidly declining and most existing devices are either replaced or upgraded. HSPA is largely the preferred replacement technology, with CDMA mainly being an alternative for the most cost-sensitive applications. Adoption of LTE started in the OEM automotive segment in 2015. During 2016, the availability of low-cost LTE CAT-1/0 devices is expected to accelerate the migration to 4G networks in M2M. Berg Insight also expects that North American operators will be among the first to adopt LTE-M once it becomes commercially available.

The M2M market in North America is heavily focused on vehicle based solutions that accounted for around 55 percent of the installed base in 2015. Government regulations have had less impact on the market than in for instance Europe, although there are some compliance applications such as fuel tax reporting. Over the next years, Berg Insight expects strong growth in the OEM and aftermarket automotive segments. Fast growing adoption rates for UBI and finance applications in the consumer market is expected to drive demand for aftermarket telematics solutions. Other industrial and enterprise M2M applications will also continue to grow at a constant high rate.

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Figure 6.5: Cellular M2M communication market forecast (North America 2014–2020)

Millions 2014 2015 2016 2017 2018 2019 2020 Network connections OEM automotive 11.1 14.6 18.7 25.0 31.7 38.3 44.2 Commercial fleet 4.7 5.5 6.3 7.3 8.4 9.7 11.1 Insurance/Finance/SVR 5.7 8.6 12.9 19.4 27.1 35.2 42.3 Utilities 2.5 3.1 3.7 4.4 5.3 6.3 7.6 Security 4.1 4.5 4.9 5.4 6.0 6.6 7.2 Payments 2.1 2.5 2.9 3.4 3.9 4.6 5.4 Industrial/other 7.6 8.9 10.4 12.2 14.3 16.7 19.5 Consumer/healthcare 4.4 4.8 5.3 5.9 6.7 7.7 8.9

Total 42.3 52.5 65.0 82.8 103.4 125.1 146.2

Network revenues OEM automotive 535 790 1,119 1,499 1,905 2,298 2,654 Commercial fleet 169 198 226 262 301 348 399 Insurance/Finance/SVR 69 103 155 232 325 423 507 Utilities 153 183 220 264 317 380 456 Security 98 107 118 130 143 157 173 Payments 51 59 69 81 95 111 130 Industrial/other 228 320 437 548 684 800 936 Consumer/healthcare 106 116 128 141 162 186 214

Total 1,408 1,877 2,472 3,157 3,931 4,704 5,468

Source: Berg Insight

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6.1.4 Latin America Latin America is becoming a relatively advanced market for cellular M2M communication. Brazil is the most developed market in the region, while other countries have evolved at a slower rate. During 2015, the number of M2M subscribers in the region increased by an estimated 20 percent to reach approximately 20.5 million at the year-end. Brazil is the largest and most advanced market in the region, accounting for around 60 percent of the installed base. According to the Brazilian telecom regulator the number of cellular M2M subscribers was 11.3 million in Q2-2015 with a year-on-year growth rate of 20 percent. Mexico, Colombia and Argentina were other significant countries with an estimated 1–3 million M2M subscribers each and annual growth rates of 10–30 percent.

Berg Insight forecasts that the number of cellular M2M subscribers in Latin America will grow at a compound annual growth rate (CAGR) of 21.3 percent in the next five years to reach 54.0 million by 2020. M2M network revenues in the region are expected to increase from US$ 0.6 billion in 2015 to US$ 1.6 billion in 2020. Next to Brazil, Berg Insight believes that there is a strong potential for growth in Mexico, where adoption could be accelerated by ongoing market reforms and new market entrants.

The M2M market in Latin America is diverse with adoption in many different industries. Payments, automotive and utilities are the main application categories, accounting for around 15–30 percent of the M2M subscriber base each. POS-terminals is currently the largest application category in Brazil and other advanced countries. Berg Insight expects that the automotive segment will grow faster than the market average in the next five years, as the result of increasing adoption of OEM telematics. The utilities segment has a lot of potential, as smart meter rollouts are being discussed in the region, but in the absence of set time frames it is difficult to predict when mass market deployments will actually begin.

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Figure 6.6: Cellular M2M communication market forecast (Latin America 2014–2020)

Millions 2014 2015 2016 2017 2018 2019 2020 Network connections OEM automotive 0.2 0.4 1.3 2.7 3.0 3.5 4.5 Commercial fleet 2.1 2.4 2.7 3.1 3.6 4.0 4.4 Insurance/Finance/SVR 0.7 0.9 1.0 1.3 1.5 1.8 2.2 Utilities 2.8 3.3 3.8 4.5 5.3 6.2 7.2 Security 1.3 1.5 1.8 2.1 2.4 2.8 3.2 Payments 5.2 6.0 6.9 8.0 9.1 10.5 12.1 Industrial/other 3.9 4.8 5.9 7.3 9.0 11.0 13.5 Consumer/healthcare 0.8 1.1 1.6 2.3 3.3 4.7 6.8

Total 17.1 20.5 25.2 31.2 37.2 44.6 54.0

Network revenues OEM automotive 6 16 48 98 109 127 163 Commercial fleet 77 88 99 113 131 146 160 Insurance/Finance/SVR 9 10 13 15 18 22 26 Utilities 101 118 138 162 190 222 260 Security 31 36 42 49 57 67 77 Payments 125 144 166 191 219 252 290 Industrial/other 94 116 143 175 215 265 325 Consumer/healthcare 19 27 38 55 79 113 162

Total 463 556 687 859 1,019 1,213 1,464

Source: Berg Insight

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6.1.5 Asia-Pacific Asia-Pacific is the fastest growing region for cellar M2M communication, driven by a strong uptake in China. During 2015, the number of M2M subscribers in the region increased by 24 percent to reach approximately 106.3 million at the year-end. East Asia accounted for the greater part of the M2M subscriber base and most of the growth, as the cellular M2M subscriber base in China reached around 70 million. Japan was the second largest market with around 12 million M2M subscribers. South Korea and Indonesia were other significant markets with 2–3 million M2M subscribers each, while India is believed to have less than 1 million. Australia and New Zealand recorded growth rates in the order of 20 percent, ending the year with a combined active base of 4.4 million M2M subscribers.

Berg Insight forecasts that the number of cellular M2M subscribers in Asia-Pacific will grow at a compound annual growth rate (CAGR) of 17.8 percent in the next five years to reach 241.1 million by 2020. The number of M2M subscribers in East Asia is projected to reach 196.5 million at the end of the period. South East Asia and South Asia are forecasted to grow at compound annual growth rates of 23–27 percent to reach 21.7 million and 13.3 million by 2020, whereas Australia & Oceania is projected to reach 9.3 million. Total M2M network revenues in the whole of Asia-Pacific are expected to increase from € 3.2 billion in 2015 to around € 7.1 billion in 2020.

Asia-Pacific is a vast and diverse region comprising countries with very different economies and levels of development. Overall, the M2M communication market in the region is focused on familiar vertical segments such as automotive and utilities. The countries in East Asia however stand out through the active involvement of governments in M2M initiatives. China has a national program to develop M2M applications for public administration at province and city level. Smart grid programs that include nationwide deployment of smart meters have also been launched in East Asia, as well as in Australia & New Zealand. India has a significant untapped market potential, which in a positive scenario could generate significantly stronger growth. A key difference between emerging markets like India and Western markets is that the key focus for M2M/IoT lies on monitoring and controlling business processes, rather than business transformation and automation.

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Figure 6.7: Cellular M2M communication market forecast (Asia-Pacific 2014–2020)

Millions 2014 2015 2016 2017 2018 2019 2020 Network connections OEM automotive 3.5 6.5 11.0 16.0 20.5 25.5 30.3 Commercial fleet 13.7 16.9 20.3 24.4 29.2 35.1 42.1 Insurance/Finance/SVR 2.0 2.4 2.8 3.4 4.1 4.9 5.9 Utilities 29.8 34.9 38.3 39.9 41.4 43.1 44.8 Security 2.5 2.7 3.0 3.3 3.7 4.0 4.4 Payments 6.8 7.8 8.7 9.7 10.7 11.9 13.2 Industrial/other 21.7 28.3 35.3 44.1 54.3 65.7 79.5 Consumer/healthcare 5.4 6.7 9.0 11.5 14.6 17.7 20.8

Total 85.4 106.3 128.5 152.3 178.6 207.9 241.1

Network revenues OEM automotive 106 235 396 576 738 918 1,090 Commercial fleet 491 609 731 877 1,053 1,264 1,516 Insurance/Finance/SVR 24 28 34 41 49 59 71 Utilities 1,074 1,257 1,379 1,435 1,492 1,552 1,614 Security 59 66 72 80 88 96 106 Payments 164 188 209 232 258 286 317 Industrial/other 522 678 848 1,060 1,303 1,577 1,908 Consumer/healthcare 128 161 216 276 350 425 499

Total 2,568 3,223 3,885 4,576 5,330 6,176 7,122

Source: Berg Insight

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6.1.6 Middle East & Africa Middle East & Africa is in an early phase of cellular M2M communication adoption. During 2015, the number of M2M subscribers in the region increased by an estimated 28 percent to reach approximately 14.0 million at the year-end. A few advanced countries account for the greater part of the installed base. South Africa and Turkey are the largest markets in the region with 2–3 million M2M subscribers each. Berg Insight forecasts that the number of cellular M2M subscribers in the Middle East & Africa will grow at a compound annual growth rate (CAGR) of 30.8 percent in the next five years to reach 53.5 million by 2020. M2M network revenues in the region are expected to increase from € 0.4 billion in 2015 to € 1.6 billion in 2020.

The Middle East & Africa is a diverse region comprising countries at very different levels of economic development. The most advanced M2M markets in the region are countries which have large populations and advanced economies. In the Middle East, Turkey has seen the strongest growth for cellular M2M in the past years with widespread adoption of various applications in the automotive, utilities, payments and security segments. Egypt, Israel, Jordan and the UAE are significant markets in the region. In Africa, South Africa stands out as the by far most advanced M2M market. The country’s M2M industry is highly focused on automotive and security. Nigeria has also evolved into a sizable market.

Berg Insight anticipates an increasing adoption of M2M technology in a wider range of countries in the Middle East & Africa over the coming five years. The strong performance of the market in Turkey serves as an example for the telecom industry in the Middle East that M2M technologies offer significant business opportunities in the region. Automotive and transport offer the best growth potential as the number of vehicles in use is relatively high in many countries. There are however significant political and regulatory barriers in many countries that complicate the market situation. In Africa, the development of the wireless M2M market is expected to follow the general economic trend, with a growing number of opportunities in the leading regional economies. POS-terminals offer significant opportunities if card payments start to take off on a large scale across the continent.

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Figure 6.8: Cellular M2M communication market forecast (MEA 2014–2020)

Millions 2014 2015 2016 2017 2018 2019 2020 Network connections OEM automotive 0.2 0.3 0.4 0.6 1.0 1.8 3.2 Commercial fleet 3.3 4.2 5.4 6.9 8.8 11.3 14.4 Insurance/Finance/SVR 1.2 1.6 2.1 2.8 3.8 5.1 6.8 Utilities 3.1 3.9 4.9 6.2 7.8 9.8 12.3 Security 0.4 0.5 0.7 0.9 1.2 1.5 1.9 Payments 0.6 0.7 0.9 1.1 1.4 1.7 2.2 Industrial/other 1.8 2.2 2.6 3.2 3.8 4.6 5.5 Consumer/healthcare 0.3 0.5 0.8 1.4 2.4 4.2 7.4

Total 10.9 14.0 17.9 23.1 30.2 40.0 53.5

Network revenues OEM automotive 5 9 14 22 38 66 114 Commercial fleet 119 152 195 249 318 406 518 Insurance/Finance/SVR 14 19 26 34 45 61 81 Utilities 113 142 178 223 280 352 442 Security 10 13 17 22 28 36 46 Payments 14 17 22 27 34 42 52 Industrial/other 44 53 64 76 92 110 132 Consumer/healthcare 6 11 19 33 58 101 176

Total 326 417 534 686 892 1,173 1,562

Source: Berg Insight

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6.2 Vertical markets Automotive was the most significant vertical market segment in cellular M2M communication in terms of value, as well as volume in 2015. Berg Insight estimates that aftermarket and OEM automotive applications accounted for more than 35 percent of the cellular M2M subscribers worldwide. By 2020, the share is expected to increase to around 48 percent of the device shipments and 43 percent of the subscribers. Commercial fleet applications, mainly fleet management and in some markets also electronic road charging and compliance reporting, is currently the largest automotive M2M application category. Predominantly consumer- oriented aftermarket applications such as UBI (usage-based insurance), SVR (stolen vehicle recovery) and vehicle financing also make up a significant share of the automotive M2M market. OEM telematics has so far only penetrated the mass-market in North America and currently ranks as a relatively minor application in other world regions. Berg Insight anticipates that OEM telematics also will become widely adopted in Europe and Asia-Pacific over the next five years, with demand on the European market boosted by the expected implementation of the eCall initiative. As a result OEM telematics will emerge as the largest M2M application in terms of both volume and value. Berg Insight believes that the next generation of connected car applications, leveraging the full capabilities of 4G networks, has a strong potential for network revenue generation.

Utilities is another major vertical market segment in cellular M2M communication. Berg Insight estimates that smart meters and other applications in the utilities sector constitute 21 percent of the subscribers in 2015. Growth rates in the years ahead are however projected to be moderate and by 2020, the share is expected to have decreased to around 14 percent of the subscribers. Consumer and healthcare devices is expected to gain in relative importance and account for 7–10 percent of the subscribers by 2020. The long tail of niche application areas in the industrial and enterprise segment will remain a significant part of the wireless M2M market in the coming five years, maintaining a 20–25 percent share of connections through the entire period.

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Figure 6.9: Cellular M2M communication market forecast, by vertical (World 2014–2020)

Millions 2014 2015 2016 2017 2018 2019 2020 Network connections OEM automotive 20.1 29.8 46.3 69.1 96.9 126.1 155.6 Commercial fleet 33.3 40.5 47.8 56.9 67.5 80.1 94.5 Insurance/Finance/SVR 16.6 21.4 28.1 37.5 48.7 61.0 73.2 Utilities 47.2 55.7 63.3 71.3 81.3 92.8 105.9 Security 13.3 15.2 17.2 19.5 22.0 24.8 28.1 Payments 18.9 21.4 24.0 26.9 30.3 34.1 38.5 Industrial/other 48.6 61.1 77.2 97.6 123.0 150.0 183.1 Consumer/healthcare 17.0 20.0 24.6 31.5 40.8 51.6 65.3

Total 215.1 265.2 328.4 410.2 510.5 620.6 744.2

Network revenues OEM automotive 774 1,270 2,024 2,998 4,250 5,460 6,662 Commercial fleet 1,198 1,457 1,721 2,047 2,431 2,885 3,402 Insurance/Finance/SVR 199 257 338 449 584 732 879 Utilities 1,655 1,953 2,216 2,476 2,795 3,164 3,587 Security 381 435 493 561 635 717 810 Payments 502 567 631 704 787 882 990 Industrial/other 1,213 1,573 2,039 2,599 3,293 4,001 4,863 Consumer/healthcare 408 480 591 755 979 1,238 1,567

Total 6,330 7,992 10,053 12,589 15,755 19,078 22,760

Source: Berg Insight

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6.2.1 Connected cars is becoming a global phenomenon Connected cars is one of the major global technology trends in the automotive industry. Network connectivity is a key enabler for ADAS (Advanced Driver Assistance Services) and infotainment – two of the main focus areas for new functionality in motor vehicles. The first generations of telematics systems featured 2G cellular connectivity to external servers and call centres to enable safety, security, convenience and diagnostics applications. Bluetooth- based hands-free systems provided basic integration between mobile phones and the in- vehicle infotainment systems. The latest generation of systems go further in realising the vision for connected cars by featuring 4G connectivity, in-vehicle Wi-Fi hotspot access and close smartphone integration. Given that new vehicles have an expected life-span of at least 10–15 years, 4G is a natural choice for automotive OEMs in developed markets, even as the technology at this moment remains relatively expensive. North America was the first market to take off in the late 2000s. In the past years, there has also been a growing uptake in Europe and East Asia, where China is taking the lead. Berg Insight estimates that 18 percent of all vehicles sold globally in 2015 had an embedded telematics solution. By 2020, the attach-rate is projected to reach 62 percent.

Figure 6.10: OEM telematics attach rates in new vehicles, by region (2015/2020)

Market Vehicle sales (2014) Attach-rate 2015 Forecast 2020 Asia-Pacific 39,212,000 14 % 49 % North America 18,731,000 38 % 80 % Europe 17,673,000 24 % 96 % Latin America 6,749,000 7 % 56 % Middle East & Africa 5,874,000 4 % 21 % Total 88,239,000 18 % 62 %

Source: Berg Insight

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North America was the first region where telematics was introduced for mass-market vehicles through the launch of GM OnStar as a standard feature on all GM vehicles in 2007. Today all major car brands in the US offer telematics services as a standard or optional feature. Berg Insight estimates that 38 percent of all cars sold in North America during 2015 had an embedded telematics system. By 2020, the attach-rate is forecasted to reach 80 percent. The number of active cellular M2M subscribers in the segment is forecasted to grow from 14 million at the end of 2015 to 42 million in 2020.

Europe has seen demand for telematics services accelerate in the past years. Berg Insight estimates that 24 percent of all cars sold in Europe during 2015 were be fitted with an embedded telematics system, up from 15 percent in 2014. Attach rates will approach 100 percent in the years after 2018, when the eCall emergency call system becomes mandatory. As a result, the number of active telematics service subscribers in EU28+EFTA is forecasted to grow from nearly 9 million at the end of 2015 to 65 million in 2020.

Asia-Pacific is an emerging market for telematics services. Berg Insight estimates that 14 percent of the cars sold in the region in 2015 had an embedded telematics system. There are significant regional differences in adoption. Japan and South Korea were the most advanced markets with attach rates of 15–20 percent, followed by China with around 10 percent. Berg Insight projects that the attach rate will threefold to 49 percent in 2020, with the number of telematics subscribers growing from nearly 7 million at the end of 2015 to 30 million by 2020.

Latin America was expected to become a growth market for telematics when the Brazilian government announced plans for a mandatory security tracking system in all new vehicles. The plan was however abandoned in late 2015. Berg Insight estimates that the attach rate for embedded telematics in the region was 7 percent in 2015 with less than half a million active subscribers. By 2020 the attach rate is expected to reach 56 percent with a subscriber base of 5 million.

Middle East & Africa has a very limited uptake of telematics solutions. Berg Insight believes that the market will not take off until the end of this decade. The attach rate is projected to increase from 4 percent in 2015 to 21 percent in 2020.

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6.2.2 International consolidation and growth in the fleet management industry Motor vehicle fleet management is one of the most mature application areas for cellular M2M communication around the world. The industry started with satellite based systems for road transportation in the 1980s and subsequently expanded into the broader market of light commercial vehicles. A great number of players have emerged in local markets, of which some have later expanded regionally and internationally, often with the support from larger industrial groups and financial investors. In the past years, there has been an accelerating trend of consolidation on a regional and global basis. At the end of 2015, there were more than 20 fleet management solution providers connecting 200,000 vehicles or more. While the majority are based in Western Europe and North America, there are also many large players in emerging economies like Brazil, China, Russia, South Africa and Turkey.

Berg Insight ranks Fleetmatics, Trimble, Omnitracs and TomTom Telematics as the leading providers of fleet management solutions, all having installed bases of more than half a million active units. Trimble has presence in the fleet management space in all world regions except Latin America and approximately 650,000 vehicles under management. Fleetmatics and TomTom Telematics have consolidated leading regional market positions in North America and Europe respectively and have operations in both regions. At the end of Q3-2015, Fleetmatics reported 660,000 subscribers while TomTom Telematics had 520,000. The pioneering player Omnitracs today mainly operates in the Americas, serving around 600,000 vehicles including trucks and trailers. The diversified industrial group Danaher ranked number five worldwide through the subsidiaries Navman Wireless and Teletrac. Geotab, Telogis, Arvento Mobile Systems, Gurtam and Zonar Systems are other players with 400,000–500,000 subscribers. Geotab, Telogis and Zonar have their primary operations in North America, while Arvento is based in Turkey and ranks as the regional market leader in the Middle East. Gurtam is number one in Russia & CIS and also has a considerable international subscriber base. Verizon Telematics furthermore has about 360,000 subscribers in North America while Masternaut is the second largest player in Europe with around 350,000 subscribers. Several regional players in emerging economies have moreover achieved around 200,000–300,000 subscribers. These include E6GPS and Etrans in China, Astrata in Asia-Pacific, ENDS and NIS Group in Russia & CIS, Mobiliz in the Middle East and Sascar in Latin America. SkyBitz is the world’s largest provider of trailer tracking solutions and has also expanded into the local fleet management market, having a total installed base of around 240,000 active units.

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Figure 6.11: Top 25 international providers of fleet management solutions (2015)

Company Region(s) Installed base Fleetmatics North America, Europe 660,000 Trimble Global 650,000 Omnitracs Americas 600,000 TomTom Telematics Europe, North America 520,000 Navman/Teletrac (Danaher) Global 500,000 Geotab North America 480,000 Telogis North America 450,000 Arvento Mobile Systems Middle East, Europe 400,000 Gurtam Europe, Global 400,000 Zonar Systems North America 400,000 Verizon Telematics North America 360,000 Masternaut Europe 350,000 E6GPS China ~300,000 Spireon North America 300,000 MiX Telematics Global 250,000 SkyBitz North America 240,000 Novatel Wireless/DigiCore Global 220,000 Astrata Asia-Pacific, Europe 200,000 ENDS Europe 200,000 Etrans China ~200,000 Microlise Europe 200,000 Mobiliz Middle East 200,000 NIS Group Europe 200,000 Sascar Latin America 200,000 Orbcomm Global 180,000

Source: Berg Insight

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6.2.3 Insurance and finance drive demand for consumer aftermarket telematics Telematics technology is gradually transforming financial services for private vehicle owners. Insurance telematics such as usage-based insurance (UBI) is a novel concept for motor insurance. Solutions of this type generally enable automotive insurers to improve pricing mechanisms based on actual driving data, gain better control of claims and differentiate their offerings to current and prospective policyholders. Telematics has also become widely adopted for vehicle financing in the US, where car dealers and subprime lenders use the technology to monitor and control mortgaged assets. Altogether, Berg Insight estimates that 15–20 million private vehicles in Europe and North America have telematics solutions used for insurance and financing applications. Octo Telematics and Spireon are the largest turnkey solution providers in the field, managing 3.4 million and 2.1 million subscribers respectively.

Italy and the US are front-running markets in the adoption of insurance telematics with millions of active policies each. The UK, Austria, Canada and South Africa are other examples of countries where insurance telematics has been introduced. Italy is the most advanced market in terms of penetration with around 3.0 million active insurance telematics policies in 2015. Several leading players in the Italian insurance industry have been driving the development of insurance telematics as a response to high claims costs and fraud rates. UnipolSai entered a partnership with Octo Telematics in 2003 and today has over 2.0 million telematics-enabled policies. Generali is the second largest player with around 0.7 million telematics devices from multiple vendors. In the US, Progressive has been a pioneer in UBI with the first commercial product launched in 2004. Today the insurance company has around 2.0 million UBI policies that accounted for US$ 2.6 billion in written premium in 2014. State Farm and Allstate are other major adopters with 0.5–1.0 million UBI policies each.

Telematics technology has also been widely adopted for automotive financing in the US. Around 9.0 million vehicles in the country are financed by subprime loans that generally require close supervision, with the creditor sometimes being forced to repossess the vehicle as a last resort. Dealerships specialising in this segment have for many years installed disablers and payment reminders in vehicles they sell. These systems today typically feature GPS positioning and cellular communication capabilities, enabling the dealer to remotely monitor vehicles financed by subprime loans. Spireon, CalAmp, iMetrik and PassTime are some examples of players in this field.

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6.2.4 Nationwide smart metering rollouts behind growth in the utilities sector Smart grids is a mega-trend in the global electricity industry. One of the main characteristics of a smart grid is that smart meters are deployed to provide real-time data on consumption and other critical grid parameters. Nationwide rollouts of smart meters are planned, underway or completed in a large number of countries, all over the world. The utilities sector is a thoroughly regulated business where national, regional and local governments are frequently involved through public enterprises. Regulatory requirements aimed to improve the efficiency of the energy sector are the number one driver for smart meter rollouts in most parts of the world. In Europe, fifteen countries – including France, Italy, Spain and the UK – had adopted regulatory roadmaps for the full-scale introduction of smart meters before 2023. North America has seen mandatory smart meter rollouts in territories such as Ontario, California and Texas, in parallel with industry driven rollouts by investor-owned as well as municipal and cooperative utilities. China has installed more than 300 million smart meters among the larger part of the population. Japan, South Korea, Australia and New Zealand are other major adopters of smart metering technology in the Asia-Pacific region.

Smart meter rollouts typically drive demand for cellular M2M communication. While the most common model for networking electricity meters is to rely on power-line (PLC) or short-range radio (RF) between the meter and a communication gateway, most of the data traffic is transferred over cellular networks to the central system. State Grid in China has deployed at least 18 million 2G/3G cellular PLC data gateways as part of its smart meter rollout to 300 million customers. Point-to-point cellular communication solutions have also been deployed on a large scale in many countries. Sweden, Finland, Denmark and New Zealand each have installed bases 0.5–1.0 million smart electricity meters with cellular connectivity and there are also some large-scale projects planned in the US. The Netherlands has commenced with the rollout of 8 million smart meters that will have GPRS, CDMA450 and eventually LTE networking capabilities. The UK plans to use point-to-point cellular networking to connect 25 million smart meters in the largest project of its kind that should be completed at the beginning of the next decade.

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6.2.5 POS-terminals is a key application category in emerging markets Electronic payments are the most common means of payment in the world, accounting for more than 50 percent of the total transaction value. Currently there are more than 5 billion cards in circulation worldwide and the number is projected to continue to grow at a high rate as adoption increases from what are still very low levels in emerging economies. Furthermore mobile payment technology enables the integration of card payment applications in smartphones. The installed base of POS-terminals, devices used for processing card payments at a retail location, is estimated to more than 50 million. Secure network communication is a key element in POS-terminal solutions. Traditionally, POS-terminals have relied on fixed line communication for establishing remote connections to financial transaction networks. Wireless networks were supported from an early stage and today models with cellular connectivity are widely available. The highest share of POS-terminals with mobile connectivity is found in regions such as Latin America, the Middle East and Africa. Berg Insight estimates that the global attach rate for cellular connectivity in the POS- terminal segment is in the region of 30–40 percent. This results in a high correlation between the number of M2M subscribers in emerging markets and the adoption of card payments. China surpassed the US in terms of the number of POS-terminals in use but still has half the penetration rate in relation to the population. In Brazil and Turkey, which both have very high POS-terminal penetration, payments is the number one application for cellular M2M. Russia has a strong growth rate from a low starting point, while India still has a massive untapped potential.

Figure 6.12: POS-terminal installed base in key emerging markets (World 2014)

Country POS-terminals Per 1,000 people Growth rate China 15,930,000 12 50 % Brazil 4,970,000 25 13 % Turkey 2,390,000 31 4 % Russia 1,290,000 9 33 % India 1,130,000 1 6 %

Source: Bank of International Settlements

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6.3 Technology trends The wireless M2M/IoT technology landscape is rapidly changing. 2G networks are gradually taken out of service to be replaced by more efficient 4G technology. At the same time, new enhancements are being added to the LTE standard to better accommodate typical M2M use-cases with large numbers of devices and very low data requirements. In a few years, LTE- M wireless modules will be available for the same price as today’s GPRS modules, delivering superior performance using less network resources. A new generation of LPWA technologies hit the market during 2015, offering an alternative roadmap to low cost IoT connectivity outside of the traditional mobile network environment. At the end of the year, the established players in the telecom industry however took back the initiative by agreeing on defining the new NB-IoT standard for lightweight M2M communication based on mobile network infrastructure.

6.3.1 LTE set to become the future network platform for cellular M2M The cellular IoT technology landscape is in a phase of transformation. GSM/GPRS is gradually losing its grip on the market, making way first for 3G and later 4G technologies. WCDMA/HSPA has emerged as a major technology in the past years through a combination of the end of 2G services in markets such as Japan, Australia and the US and the evolution of more bandwidth-demanding applications. In the coming years, Berg Insight however believes that LTE Cat-0/1 will replace WCDMA/HSPA for value applications at the same time as regular LTE takes over in the high-end segment. Furthermore, LTE-M will overcome the cost barrier against migration to 4G even in markets where 2G remains available. Parallel to the demise of GPRS, CDMA will also disappear from the IoT market after a short revival in North America.

Despite the relative decline, Berg Insight believes that annual shipments of GPRS IoT devices will not peak until 2019. By 2017, the market share of GPRS will for the first time drop below 50 percent and by 2020, it is expected to hit 30 percent. WCDMA/HSPA is expected to peak at a market share of 25 percent in 2016, with volumes peaking in 2018. LTE/LTE-M is believed to rapidly increase its market share from 5 percent in 2014 to 45 percent in 2019 when it will become the largest technology for cellular IoT in terms of shipments. LTE-M is intended to reduce the cost of 4G cellular modules to the same level as 2G cellular modules, removing a major barrier against adoption.

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Figure 6.13: Cellular IoT device shipments, by network technology (World 2014–2020)

Millions 2014 2015 2016 2017 2018 2019 2020 GSM/GPRS/EDGE 51.0 54.1 62.0 68.9 71.9 76.9 74.3 CDMA/EVDO 9.6 10.8 11.2 10.7 9.0 6.2 4.8 WCDMA/HSPA 15.1 21.6 30.6 35.2 36.0 31.2 24.0 LTE/LTE-M 4.0 11.8 19.8 38.3 62.9 93.5 136.6 Total 79.7 98.3 123.9 153.2 179.8 207.8 239.7

Source: Berg Insight

6.3.2 Massive interest in emerging LPWA technologies… LPWA has existed for many years as a niche technology for wireless applications. Various proprietary or semi-proprietary LPWA platforms have been deployed for cost-sensitive volume applications such as smart metering and streetlight management. The massive interest in IoT has spawned a number of initiatives aimed at establishing international standards for LPWA to enable broader adoption. Sigfox and LoRa have attracted the most attention and the support of major telecom operator groups. Over the past years there have been numerous trials, pilots and network rollout announcements related to LPWA technologies. Sigfox has secured partners for network deployments across most of Western Europe and parts of the US, which should be followed by expansion in the Middle East & Africa and other world regions from 2016 and onwards. Supported by industrial investors such as NTT Docomo, SK Telecom and Telefónica the company seems to be in the best position to establish a global standard for ultra-narrowband networking. Berg Insight does however not believe that Sigfox, or Ingenu which deploys a similar type of network in the US, will have any major impact on the cellular M2M market as the technology only supports use-cases with extremely low data requirements.

LoRa has been favourably received by traditional telecom operators that see the technology as a potential low-cost complement to cellular M2M. Orange, Bouygues Telecom, KPN, Belgacom and Swisscom have announced plans for nationwide LoRa network rollouts in Europe and FastNet is deploying the technology in South Africa. In addition, LoRa is suitable

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for private networks in limited geographic areas to support smart metering, smart cities and similar applications. There is however also significant competition from proprietary and semi- proprietary technologies based on IEEE 802.15.4 in the segment. For instance, Silver Spring Networks launched a public network version of its smart grid mesh networking in late 2015.

6.3.3 …but will NB-IOT kill the market? The market conditions for the emerging technologies in the LPWA space changed dramatically in September 2015 when the members of the telecommunications association organisation 3GPP announced that they had reached an agreement to include a joint global standard for LPWA in the upcoming LTE release 13. The so called NB-IOT standard is based on technologies developed by Ericsson, Huawei and other leading global telecom vendors. Berg Insight believes that the initiative will become successful in establishing a global standard for lightweight IoT communication on public networks in the next 3–5 years. NB-IOT has good prospects of becoming the dominant technology for LPWA, although other standards will most likely also remain strong in niche segments. Berg Insight believes that LoRa is most exposed to competition from NB-IOT, whereas Sigfox and Ingenu differentiate by being optimised for ultra-low data volumes and power consumption.

6.4 Industry trends The global M2M/IoT communications market is growing at a good steady pace. Two decades after the launch of the first GSM wireless data modules, cellular M2M has become a global multi-billion dollar industry connecting hundreds of millions of devices. During 2015, China Mobile became the first mobile operator group to reach 50 million M2M subscribers and by 2016 there will be more than a dozen players supporting more than 10 million connections. During 2016, Berg Insight also predicts that one or several players for the first time will generate US$ 1 billion in revenues from M2M/IoT. At the same time, the highest company valuations in the industry are found among the M2M managed service providers, which continue to grow internationally and consolidate. In the pursuit of accelerated growth and improved profitability, many mobile operators seek to expand their business models, adding new capabilities and product categories to their traditional portfolio.

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Good progress has been made in the field of international cellular M2M connectivity through the official launch of the GSMA Embedded SIM specifications and the expansion of international M2M alliances. Global SIM solutions based on permanent roaming however remain widely used, despite serious questions over the long-term viability for the model.

Figure 6.14: Top 10 mobile operators by M2M subscriber base (World Q1-2015)

Operator M2M subscribers YoY growth China Mobile 46,200,000 30 % Vodafone 21,500,000 34 % AT&T 21,000,000 23 % China Unicom 14,000,000 35 % Verizon 13,000,000 neg. Telefónica 12,000,000 31 % Softbank/Sprint 10,600,000 35 % Deutsche Telekom 10,000,000 25 % Telenor 8,000,000 15 % America Móvil 8,000,000 15 %

Source: Operators and Berg Insight estimates

6.4.1 M2M/IoT finally becomes a substantial business for mobile operators Berg Insight believes that M2M/IoT has reached a stage of early maturity where a number of players have capitalised on envisioned opportunities to develop substantial new businesses. At the beginning of 2015, the ten largest mobile operators in the M2M market had an estimated combined subscriber base of 164.3 million and year-on-year growth rates of 15–35 percent. China Mobile has an exceptional market position, as the dominant player in the domestic mobile industry. At the end of Q1-2015, the M2M subscriber base was an estimated 46.2 million. Vodafone and AT&T are the top international market players with their respective main bases in Europe and North America. The groups were head-to-head in terms of volume with over 21 million M2M subscribers each. China Unicom has emerged as the world’s fourth

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largest provider of M2M connectivity with an estimated 14 million subscribers at the end of Q1-2015, ahead of Verizon whose customer base has declined during the year as the contract with GM OnStar expired. Telefónica, Softbank/Sprint, Deutsche Telekom, Telenor and America Móvil were other top ten players with 8–12 million M2M subscribers each. A common characteristic for them all is that they are multi-regional operations across Europe, the Americas or Asia-Pacific.

Figure 6.15: Quarterly M2M/IoT revenue estimates for major operators (Q3-2015)

Operator Quarterly M2M/IoT sales AT&T >€ 200 million Verizon € 150–200 million Vodafone € 150 million Telefónica € 46 million Telstra € 20 million Telenor Connexion € 15–20 million

Source: Financial reports and Berg Insight estimates

Another sign of maturity in the M2M/IoT industry is the release of revenue figures from some telecom operator groups. Verizon and Vodafone reported quarterly M2M/IoT revenues of in the range of € 150–200 million each in the first half of 2015 and could be on track to reach € 1 billion on an annual basis within a few years’ time. Both groups have substantial telematics businesses, established through acquisitions. Besides traditional connectivity and professional services, they generate a considerable share of their sales from automotive products, driver assistance services and connected automotive applications. Berg Insight believes that AT&T’s M2M business is even larger, generating € 200 million per quarter or more. Telefónica reported M2M sales reaching € 46 million in Q3-2015, while Telenor Connexion was in the range of €_15–20 million based on historical financial data. Telstra generated € 76 million in M2M sales during the financial year ending 2015. The definition of M2M/IoT revenues vary between operators and thus figures are not fully comparable.

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6.4.2 M2M managed service providers continue to grow and consolidate M2M managed service providers have a unique position in the M2M/IoT ecosystem through their capability to aggregate multiple cellular networks on a unified platform. The leading players in the category – Aeris, KORE Telematics and Wyless in the US and Wireless Logic in Europe – have been growing consistently at a very high rate for multiple years and achieved some of the highest valuations of any company in the M2M industry. Including Numerex and smaller players such as Sierra Wireless and Telit, the players in the segment have nearly 20 million M2M connections under management. Over the past years, there has been a series of mergers and acquisitions, which are expected to continue in 2016. KORE Telematics acquired RACO Wireless in the US and Sierra Wireless entered the M2M managed connectivity market through the acquisitions of Wireless Maingate and MobiquiThings in Europe. Wireless Logic was sold to CVC Capital partners for £ 232 million (€ 322 million) and later acquired SimService in Denmark. Rivalling many large mobile operators in sales with good profitability and a dedicated focus on M2M/IoT, the leading M2M managed service providers are a force to be reckoned with in the industry. Berg Insight expects that the leading players will continue with geographic expansion beyond their core Western markets. Ultimately there is a good rationale for further consolidation and the formation of one or a few global players in the segment, which would be able to operate independently of telecom operators across all world regions.

Figure 6.16: Top 5 M2M managed service providers by subscriber base (Q4-2015)

Operator M2M subscribers Aeris 6,000,000 KORE Telematics 4,000,000 Wyless 3,000,000 Wireless Logic 2,500,000 Numerex 2,000,000

Source: Berg Insight

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6.4.3 Operators in search for an optimal business model for M2M/IoT Communication providers play a critical role in the M2M/IoT value chain. How to best capitalise on this position is one of the major questions for business leaders in the telecom industry today. The proposed answers come out of an even larger debate around how telecom operators should best position themselves for the future – as traditional network operators, as end-to-end solution providers or something in between? Mobile operators around the world are implementing widely different strategies with different results, often dependant on local market conditions. At the same time, M2M managed service providers continue to prove that many customers are best served through the aggregation of multiple cellular networks by a third party.

A key consideration for mobile operators in M2M/IoT is to find the right balance between horizontal and vertical value offerings. Most players offer a combination of the two, providing both traditional networking services and more comprehensive solutions for selected vertical segments. Horizontal portfolios typically comprise everything from wholesale network access to managed connectivity and application enablement services. In addition, some operators also provide cloud hosting, data management and analytics. Vertical portfolios typically focus on selected volume applications such as fleet and asset management or complex data intensive applications that require the scale of a large ICT organisation.

The main strategic rationales for creating value propositions for vertical markets are to drive revenue growth, leverage existing sales channels and exploit local market opportunities related to M2M/IoT. The pursuit of additional revenue streams is in itself a strong driver behind many acquisitions and product innovation projects among mobile operators. Vodafone, Verizon and Orange have all entered the telematics market through acquisitions of

established industry players in the space. Telefónica O2 UK and Telekom Austria are two examples of mobile operators that have successfully addressed domestic market opportunities in smart metering with tailored solution platforms. Mobile operators with strong B2B sales channels are well positioned to sell fleet management solutions and similar products to their customer base. Sprint has been highly successful with its strategy to leverage its existing B2B sales organisation to market selected vertical solutions from application partners.

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While vertical integration can be rewarding through increasing revenues, the strategy is also associated with higher risks. In most cases, the competitors in any given vertical market segment are either established players from the industry or dedicated solution providers with a strong market focus. Historically it has been difficult for telecom operators to become successful in the role as end-to-end solution providers. Berg Insight believes that the best strategy in most cases is to focus on strategic partnerships with leading solution providers in key verticals.

6.4.4 Market co-opetition requires carefully balanced strategies The M2M/IoT ecosystem is characterised by a high degree of co-opetition, e.g. industry players that at the same time partner with and compete against each other. Whenever a mobile operator introduces an end-to-end solution offering for a vertical market, it will most likely compete against existing network connectivity customers. Managed connectivity providers sometimes compete against the B2B sales organisation of the mobile operator who is a strategic wholesale network access partner. Foreign mobile operators may offer global SIMs supported by a roaming agreement with a competing domestic mobile operator. These undesirable situations will frequently occur in a co-opetive market environment and require careful attention from top management. Especially large international mobile operator groups would benefit from better strategic alignment of international wholesale and domestic B2B offerings for the M2M market. The not too uncommon situation of an independent M2M reseller competing with a local M2M sales team, offering access to the same group’s mobile network is damaging for business and confusing for end customers.

6.4.5 International cellular M2M connectivity remains a challenge International cellular M2M connectivity is a complex issue for communication providers. Many M2M customers have network footprint requirements that do not match any mobile operator. Permanently roaming domestic SIMs can be a practical solution for small-scale deployments and global SIM solutions can offer highly competitive pricing with the ability to scale. There are however a number of constraints for the permanent roaming model. Even the most competitive roaming data rates are more expensive than domestic rates, which can translate into a significant added cost for large-scale deployments. Limitations in the availability of technical support is another weakness whenever devices are deployed outside of the hosting

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mobile operator’s network. Last but not least, there are regulatory barriers against permanent roaming. Some countries such as China and Brazil prohibit the practice and many more are sceptical. Governments often have a strong interest in protecting and controlling the domestic telecom industry to serve national interests. The highly publicised case in Nigeria where the government demands a US$ 3.4 billion fine from MTN for not deactivating unregistered mobile subscribers could have massive implications for the M2M industry if regulators turn their attention to unregistered roaming M2M devices. The prospect of having millions of foreign mobile devices controlled by a foreign entity beyond the control of the national government also has severe security implications that in the longer term could lead to much stricter regulatory regime in countries all over the world. Even if global roaming solutions are working today and will remain in use over a long period of time, Berg Insight believes that other solutions are better for most customers and the industry as a whole.

The main alternatives to roaming are local sourcing of SIMs and remote SIM provisioning. Local sourcing, either on a country-by-country or regional basis, is a viable strategy for large- scale deployments in selected markets. Remote SIM provisioning is based on the concept that the SIM is provisioned on the network when the M2M device arrives at its final destination. There are a number of technical solutions and commercial frameworks to enable this process. Some of the largest international mobile operator groups were early to integrate remote provisioning capabilities in their M2M platforms that enable OTA activation of SIMs on a domestic mobile network operated by the group or its partners. International M2M managed service providers have developed similar capabilities combined with the ability to source SIMs from multiple network partners. The emerging global M2M mobile operator alliances are developing multi-domestic SIM solutions, enabling end-customers to provision a device on any of the participating members’ local networks. The GSMA Embedded SIM Specification has defined an open industry standard for this process that is gradually becoming adopted around the world. Particularly the automotive industry has a strong interest in the technology to enable telematics services on a global basis.

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Appendix Glossary

3G Third Generation. Generic term for third generation mobile communication technologies such as WCDMA and HSPA.

4G Fourth Generation. Generic term for third generation mobile communication technologies such as LTE.

802.11x Set of standards for wireless local area networks (WLANs).

ASIC Application Specific Integrated Circuit.

AMI Advanced Metering Infrastructure.

AMM Automated Meter Management.

API Application Program Interface.

ARC Alarm Receiving Centre.

AVL Automatic Vehicle Location.

Bluetooth Open industry standard for short-range transmission of data between mobile phones, PCs and other electronic devices using the 2.4 GHz frequency band.

BGA Ball Grid Array. Surface-mount packaging of integrated circuits.

BSS Business Support Systems.

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CDMA Code Division Multiple Access.

EDGE Enhanced Data rates for GSM/Global Evolution. 3G mobile communication technology based on GSM.

EVDO Evolution Data Optimized.

GPRS General Packet Radio Services.

GPS Global Positioning System.

GSM Global System for Mobile communication. The world’s dominant standard for mobile telecommunication networks.

HSPA General term for WCDMA 3G evolution technologies (HSDPA/HSUPA).

IoT Internet of Things.

Kbps Kilobits per second.

LAN .

LEO Low-Earth Orbit.

LGA Land Grid Array. Surface-mount packaging of integrated circuits.

M2M Machine to Machine.

Mbps Megabits per second.

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MSS Mobile Satellite Service.

OEM Original Equipment Manufacturer.

OSS Operations Support Systems.

OTA Over the Air.

PAYD Pay-as-you-drive.

PLC Power Line Carrier.

POS-terminal Point Of Sale terminal.

PSTN Public Switched Telephony Network.

RF Radio Frequency.

RFID Radio Frequency Identification.

RTOS Real-Time Operating System.

SAAS Software-as-a-service.

SI System Integrator.

SIM Subscriber Identity Module.

SMD Surface Mount Device.

SMS Short Message Service. Text message service for mobile phones.

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UHF Ultra High Frequency (300 MHz–3 GHz).

UICC Universal Integrated Circuit Card.

VAR Value Added Reseller.

VHF Very High Frequency (30 MHz–300 MHz).

VPN Virtual Private Network.

Wi-Fi Popular term for a high-frequency wireless local area network based on the 802.11x standard.

WLL Wireless Local Loop.

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