IoT ARPU, subscriber growth and telecom revenue trends

Cellular IoT subscribers forecast
IoT business revenue is set to grow despite an anticipated drop in ARPU in a challenging market for global telecom operators.

Analyst firm Berg Insight said the monthly ARPU of cellular IoT is expected to drop to €0.65. The report did not cite reasons for the decline in ARPU.

Berg Insight expects that at least three operator groups – AT&T, Verizon and Vodafone – will generate more than $1 billion in revenues from IoT business in 2018.

Cellular IoT network revenues are expected to grow at a compound annual growth rate (CAGR) of 27.3 percent from €6.3 billion in 2017 to €21.2 billion in 2022.

Comparing with mobile ARPU, IoT ARPU is significantly low. T-Mobile US announced NB-IoT plan for $6 per year up to 12 MB per connected device for a limited time. T-Mobile’s NB-IoT is suitable for applications that require low bandwidth, long battery life and large numbers of sensors, like asset tracking, smart city applications, smart agriculture and more.

AT&T, Verizon and Vodafone generate revenue of €1 billion in sales from IoT. Overall, the share of mobile operator revenues from IoT is in the range of 1 percent. This is consistent with IoT’s share of total mobile data traffic reported by telecom regulators in Scandinavia.

China Mobile is believed to have reached 200 million cellular IoT connections at the end of 2017.

“Chinese mobile operators achieved tremendous volume growth in 2017, driven by accelerating uptake of cellular IoT in the domestic market,” said Tobias Ryberg, senior analyst at Berg Insight and author of the report.

Vodafone and AT&T are consolidating their positions as regional market leaders in Europe and North America respectively, serving multinational clients on a global basis.

T-Mobile plans to support the full ecosystem of LTE technologies for IoT to meet the differing needs of customers. The Un-carrier currently offers Cat-1 IoT Access Packs for applications that require more bandwidth and voice, and T-Mobile expects to launch Cat-M nationwide shortly after NB-IoT is available.

IoT market

The number of cellular IoT subscribers rose 56 percent in 2017 to 647.5 million.

The number of cellular IoT subscribers is expected to grow at a compound annual growth rate (CAGR) of 33.1 percent to reach 2,700 million in 2022.

According to a report published by Marketsandmarkets, the Internet of Things (IoT) market size is expected to grow from $170.57 billion in 2017 to $561.04 billion by 2022, at a compound annual growth rate of 26.9 percent.

Berg Insights said the cellular IoT market is going through a change, driven by China government’s policies for accelerating adoption. China has set the goal of reaching 600 million NB-IoT connections in 2020, three years after the launch of the first commercial networks.

China has embarked on the world’s largest digital infrastructure projects that will result in billions of new connected devices in the coming five years. The effort will be a catalyst for reducing the price of cellular IoT chipsets and modules below $2 and driving the global transition from 2G to 4G networks.

China’s decision to select NB-IoT as the country’s preferred LPWA technology will elevate the emerging standard to global dominance. It will also change the structure of the global cellular IoT subscriber base.

Cellular IoT adoption is focused on new vertical segments like smart cities and infrastructure, smart industrial supply chains and connected consumer products.

Top operators in IoT

China Mobile had 150 million IoT subscribers and achieved year-on-year growth of 87 percent in Q2 2017.

Vodafone has 59 million IoT subscribers after achieving 43 percent growth.

China Unicom has 50 million IoT subscribers.

AT&T has 36 million IoT subscribers.

China Telecom grew 250 percent to achieve 28 million cellular IoT subscribers.

Deutsche Telecom, Softbank/Sprint, Verizon and Telefonica have in the range of 15–20 million cellular IoT subscribers, which are growing at yearly rates of 15–30 percent.

Telenor has approximately 12 million cellular IoT subscribers.

“We expect the next half billion IoT cellular connections to be added by 2020. The dual-mode modules supporting both LTE-M and NB-IoT will further drive LPWA connections, and we will see a decline in legacy connections, as most of the earlier M2M type applications will migrate to LPWA networks,” Peter Richardson, research director at CounterPoint Research, said

Operators such as Vodafone will be able to accelerate the NB-IoT roll-outs across multiple countries, leveraging global scale to accelerate the cellular LPWA adoption internationally.

Berg Insight said Verizon, Vodafone and others have made significant acquisitions in the connected vehicle space to extend their product portfolios.

AT&T and Deutsche Telekom develop dedicated practices for smart cities and many operators seek to play leading roles in national projects in areas like smart metering and electronic road charging.

Baburajan K