More
    HomeInsightsTelia Sonera going horizontal in M2M

    Telia Sonera going horizontal in M2M

    -

    Telia Sonera made the news this week with an announcement that it is deploying Ericsson’s M2M platform.

    Mobile Europe spoke, last week, to Hans Dahlberg, Head of Teliasonera Global M2M Services and to Tech Mahindra, a partner of the operator*.
     
    When we asked about the platform approach, Dahlberg said he couldn’t really talk about that side of things but to stay tuned. Clearly he was referring to the pending announcement with Ericsson.
     
    So, now that Telia Sonera has made its choice of platform provider public, what does the head of M2M strategy at Telia Sonera make of the market opportunity, and how the operator should address it? 
     
    Dahlberg:
    “I think we have to do a sanity check on growth in the M2M arena. The most famous number is Ericsson’s 50 billion by 2020 and I think that’s talking about all kinds of connected devices. When it comes to mobile network operators we need to do a calculation around how many connections will be connected by our cellular-based network.”
     
    “We’ve done some big calculations and think that around 10% of all connections will be cellular based — meaning that of that 50 billion there will be 5 billion cellular based connections.”
     
    “And then to continue that sanity check: we have had for the last three years a double digit growth every year for Nordic Baltics, mainly because we have had quite a few electricity meters being connected but also in alarms and payments. We have 10 million mobile connections in Sweden, and of that two million today are M2M.”

    Challenges and relationships

    “But it is quite a fast growing market and one problem we foresee is that we are actually used to handling one subscription per one customer per one terminal – and we’re very good at provisioning on that model. The challenge is maintaining smooth operation for 100 subscriptions being deployed in a machine, having systems across retail and the end customer to handle that kind of production environment. That’s why operators must develop special production areas to support these sort of deployments.”
     
    “Another thing is where to be in the value chain when it comes to the IoT or M2M. If you go very vertical you may have better top line revenue but you are taking on the full value chain so have more open and capex requirements, meaning margins decrease. And almost as importantly, the risk is higher as well because you are providing a full SLA for your vertical. That is where partnerships, as with Tech Mahindra, come in.”
     
    “The other relationships we need are to support IoT as a global growth area – hence the relationships we have Orange and DT. That in short is our strategy – horizontal services with a vertical approach via partners, such as Tech Mahindra, creating a best of breed in every vertical instead of there being lots of competencies in-house.”

    What’s required to support the horizontal approach?

    “The hygiene factors to do that are: adaptive subscription, not just in terms of supporting national but international roaming, and the need to have centralised production when it comes to provisioning, to billing, and for APIs and self-service portals.” 
     
    “Then it’s about whether you build your own solutions, or also to some extent outsource, eg with Jasper or Ericsson.”
     
    “There’s a few messages, it’s very important not to build yourself into a corner, meaning that if you are building your own solutions you need to have a clear understanding of investment over time. The market is developing rapidly and you need to adapt your services accordingly. You need also to have a very clear strategy for going into different alliances between other operators, understand what your common platform functionalities are so you could build services on that. If you are going with a Jasper or an Ericson it could be that you also maybe build something on top of that, on the device connection platforms you have.”
     
    Growth targets and business models
    “We have a clear double digit growth target for a number of years ahead. When it comes to ARPUs we see ARPU is quite small in comparison to mobile broadband but the upside on this is that we have very low churn. Growth is increasing dramatically, combined with having centralised production with low costs that is giving us quite a good profitable business over time”
     
    “There will be a number of different business logics with M2M. For example with Pay as you drive where an insurance company has different business logic and that sets demands on us as a carrier as well, we need different business models for connectivity and the services connected to that.” 
     
    *We’re going to pick up on Tech Mahindra’s comments in a later post, exploring how partners like Tech Mahindra get vertical on top of an operator’s horizontal strategy.