Telematics starts driving telecom operator revenue

M2M and IoT chart
ABI Research is predicting huge revenue growth for the global telematics segment — indicating revenue streams for telecom operators.

The number of telematics subscribers will reach 59 million, while fleet management system revenue will cross $22 billion by 2021, said ABI Research.

ALSO READ: ABI Research’s Commercial Telematics

Verizon Wireless’s IoT revenues, led by telematics, increased 24 percent in the third quarter of 2016 to $217 million. Verizon said all other postpaid net additions were 257,000 in Q3 2016, mainly due to sales of hum, the telematics device from Verizon.

Auto drives telematics

Automobile giant GM says OnStar 20, which was launched 20 years ago, is today the market leader worldwide with more than 7 million paying subscribers and 10 million active users in total, according to Berg Insight.

Automobile major BMW includes telematics hardware as a standard feature on all its cars sold in 43 markets and has the second largest user base with 3.4 million equipped vehicles. PSA is in third place and manages 1.8 million connected vehicles in Europe.

“Carmakers and car owners are starting to see the benefits of connected car services as a growing number of new vehicles are equipped with the technology,” said Jonas Wennermark, IoT/M2M Analyst at Berg Insight.

Berg Insight said the number of telematics service subscribers using embedded systems will grow at a compound annual growth rate (CAGR) of 36.4 percent to 170.2 million subscribers in 2021 from 26.5 million subscribers in 2015.

Berg Insight forecasts that shipments of embedded car OEM telematics systems worldwide will grow from almost 13.8 million units in 2015 at a CAGR of over 25.1 percent to reach 52.8 million units in 2021.

Telecoms’ role in telematics

Telecom operators such as AT&T, Vodafone, Verizon and Deutsche Telekom have set up dedicated practices to support automotive OEMs in the development of connected car solutions for the global market.

Verizon Wireless and Vodafone made strategic acquisitions of telematics businesses to accelerate their strategies, while AT&T and Deutsche Telekom developed their platforms in close cooperation with customers.

The global telematics market has seen acquisitions in the telematics field by Continental and Verizon reflecting the significant growth opportunities for commercial telematics.

German supplier Continental has agreed to buy U.S. smart fleet management technology provider Zonar to expand its mobility services and strengthen its position in the U.S. German car and truck maker Daimler would keep its 19 percent stake.

ABI Research says the increase in telematics subscribers will see fleet management hardware and recurring commercial telematics subscription revenues across many regions and businesses, like last mile deliveries.

“The regulatory environment and strong ROI combined with driver retention and shortages are all factors leading to rapid adoption of fleet management solutions from companies like Verizon, Trimble and TomTom Telematics,” said Susan Beardslee, senior analyst at ABI Research.

Fleet management penetration is expected to rise over the next five years with a global CAGR of over 11 percent as commercial telematics innovations drive new business models.

Connected Car Infotainment and Telematics Services will account for 98 percent of M2M data traffic by 2021, said Juniper Research. New in-vehicle infotainment services such as Apple CarPlay and Android Auto will generate large amounts of new cellular M2M data traffic. Over the next five years, this will account for up to 98 percent of all M2M data traffic.

Telematics in Asia

Commercial telematics is gaining traction in Asia, specifically in China and India. Fueling this growth is cargo theft, economic development, increased awareness, infrastructure readiness, road fatalities, and government policies that mandate the installation of track and trace devices onto commercial vehicles.

ABI Research says commercial telematics in Asia will grow with a CAGR of 19 percent to $8.5 billion in 2021. Local delivery fleets lead the market, followed by public and private transportation.

“Technology vendors’ investments in commercial telematics will ultimately lead to better routing and streamlined dispatching to help businesses to deliver goods on time,” said Raquel Artes, industry analyst at ABI Research.

Telematics allows companies to remotely monitor in-transit shipments, as well as receive real-time alerts concerning whether or not the shipments reached their final destinations in a timely manner, were stolen, or experienced any counterfeit attack. Economic development will further enhance the rapid motorization of this technology in Asia.

The number of commercial telematics subscribers will reach more than 7.5 million in China and 1.4 million in India by 2021, ABI Research forecasts.

Worldwide, ABI Research expects the number of commercial telematics subscribers, excluding trailer tracking, will near 75 million by 2021 with a CAGR of 17 percent.

FleetBoard (Daimler), Ford, General Motors, Iveco, Scania, and Tata Motor are installing telematics into their vehicles and offering fleet management solutions like emergency call, remote diagnostics, and vehicle tracking.

New cellular network technologies will reduce connectivity costs and contribute to adoption spikes with vehicle tracking solutions migrating either to EC-GSM or the more network-efficient LPWA LTE technologies in LTE Category 1, LTE Category M1 and LTE Category M2.

IoT driven by telematics

Mobile operator revenues from the Internet of Things reached €11 billion in 2016, according to a new research report from the analyst firm Berg Insight.

In Q3 2016, Vodafone and Verizon generated around €200 million each in direct sales from IoT connectivity, solutions and applications. Next year, Berg Insight predicts that a handful of operator groups will generate more than €1 billion each from the Internet of Things.

“Wireless connectivity is now near ubiquitous and there will be half a billion cellular IoT connections in 2017, but revenues are still relatively small,” said Tobias Ryberg, senior analyst, Berg Insight and author of the report.

Berg Insight estimates that the global monthly ARPU for cellular IoT devices was €1.40 in 2016. This means telecom operators need to expand their investment in telematics business and reach more benefits.

Baburajan K
editor@telecomlead.com