Now Reading
M2M cellular connections to exceed 450m by 2018 as profit margins are squeezed, says ABI Research
0

M2M cellular connections to exceed 450m by 2018 as profit margins are squeezed, says ABI Research

Posted by Jeremy CowanAugust 5, 2013

Oyster Bay, NY, USA (Business Wire) — Global cellular machine-to-machine connections are set to reach over 450 million by 2018, according to ABI Research in an update to its M2M Market Data report. Europe dragged down worldwide connection growth in 2011 and 2012 to the high teens percent but, with improving world economics, connection growth will accelerate to a CAGR* of 26% by 2018.

However, recent connection growth has come in the face of declining connection ARPUs. “The market for M2M connections can be classified as very competitive to hyper-competitive depending on the country,” comments practice director, Dan Shey. “As a result, connection ARPUs have declined dramatically over the last two years as operators fight for M2M business.”

Contributing to the pain of declining ARPUs has been slower than expected migration to 3G and 4G technologies which offer better margins per megabit of traffic. Over 70% of cellular M2M connections were on 2G networks in 2012. Connection traffic and application needs have not grown enough to require 3G and 4G connections. But another reason is disparity in M2M module pricing – 3G and 4G cellular modules are between two and six times more expensive than 2G modules, respectively.

But connection revenues are not where the money is says Shey: “While connection revenues are important, the money in the M2M market is in value-added services – applications, systems integration, big data and analytics. Operators dedicated to the M2M market are aggressively moving up the stack and either adding services or partnering to grow their share of the M2M pie.”

The Market Data set, “Cellular M2M Connectivity Services”, provides total connections and connection revenues segmented by region, application, and air interface technology. ABI Research recently added segmentation across 12 countries and 10 vertical markets. These findings are part of the company’s M2M Services and Modules Research Service which includes research analysis, market data, insights, and competitive assessments.

* Key:
ARPU = Average Revenue Per User
CAGR = Compound Annual Growth Rate

About The Author
Jeremy Cowan

Leave a Response