Cellular M2M Connections

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1 T H E M A T I C R E P O R T Cellular M2M Connections An Analysis of Growth Drivers, Market Segments and Operator Approaches January 2013

2 Cellular M2M Connections An Analysis of Growth Drivers, Market Segments and Operator Approaches Author: Jan ten Sythoff Analyst at large Editor: Guy Zibi Head of Consulting CLIENT CONFIDENTIAL. All rights reserved. No material contained in this report may be reproduced in whole or in part without the prior written permission of the publisher. Neither the information nor the opinions expressed in the report should be construed as a recommendation for the purchase or sale of any security. The information contained in this report has been obtained from sources we believe to be reliable, but neither its completeness nor accuracy can be guaranteed. Opinions expressed are based on our interpretation of the available information, and are subject to change. Pyramid Research

Neither the information nor the opinions expressed in the report should be construed as a recommendation for the purchase or sale of any security.

3 CELLULAR M2M CONNECTIONS: AN ANALYSIS OF GROWTH DRIVERS, MARKET SEGMENTS AND OPERATOR APPROACHES 3 Table of contents Table of exhibits... 4 Companies mentioned... 5 Executive summary... 7 Section 1: Market overview and background Definitions and overview Application overview Technology trends G, 3G and 4G Module pricing trends Section 2: M2M value chain and MNO positioning Overview M2M value chain MNOs in the value chain Operator approaches in emerging markets Section 3: Examining cellular M2M market drivers, challenges and forecasts M2M growth drivers and challenges Regulations Competing technologies The impact of mobile data tethering Global forecast Global forecast breakdown by region Global forecast breakdown by applications Country- and regional-level forecasts North American forecast Europe forecast Asia-Pacific forecast Latin America forecast Africa & Middle East forecast Application-level forecasts Utilities forecast Telematics forecast Fleet management forecast Consumer electronics forecast Other applications forecast Section 4: Case studies Brazil China India Russia South Africa Related resources... 63

.. 19 Section 2: M2M value chain and MNO positioning... 21 2.1 Overview... 21 2.2 M2M value chain... 21 2.3 MNOs in the value chain... 23 2.4 Operator approaches in emerging markets.

4 CELLULAR M2M CONNECTIONS: AN ANALYSIS OF GROWTH DRIVERS, MARKET SEGMENTS AND OPERATOR APPROACHES 4 Table of exhibits Exhibit 1.1: Report segmentation Exhibit 1.2: Japanese and US operator network discontinuation plans Exhibit 1.3: NTT DoCoMo M2M DoPa and FOMA subscriptions, Exhibit 1.4: Cellular M2M subscriptions by network generation, Exhibit 1.5: Average price, M2M modules, Exhibit 2.1: M2M value chain Exhibit 2.2: MNO positioning in the value chain Exhibit 3.1: Impact of drivers and challenges over time Exhibit 3.2: M2M subscriptions breakout by connection technology, Exhibit 3.3: Global cellular subscription and revenue forecast, Exhibit 3.4: Global cellular M2M subscriptions breakout by region, Exhibit 3.5: Global cellular M2M subscriptions breakout by application, Exhibit 3.6: Global cellular M2M revenue breakout by application, Exhibit 3.7: Country-level cellular M2M subscriptions, 2012 and Exhibit 3.8: North American cellular M2M subscription and revenue forecast, Exhibit 3.9: European cellular M2M subscription and revenue forecast, Exhibit 3.10: Asia-Pacific cellular M2M subscription and revenue forecast, Exhibit 3.11: Latin American cellular M2M subscription and revenue forecast, Exhibit 3.12: Africa & Middle East cellular M2M subscription and revenue forecast, Exhibit 3.13: Cellular M2M subscription and revenue forecast for utilities applications, Exhibit 3.14: Cellular M2M subscription and revenue forecast for telematics applications, Exhibit 3.15: Cellular M2M subscription and revenue forecast for fleet management applications, Exhibit 3.16: Cellular M2M subscription and revenue forecast for consumer electronics applications, Exhibit 3.17: Cellular M2M subscription and revenue forecast for other applications, Exhibit 4.1: Brazilian M2M forecast, Exhibit 4.2: China M2M forecast, Exhibit 4.3: India M2M forecast, Exhibit 4.4: Russia M2M forecast, Exhibit 4.5: South Africa M2M forecast,

4: Cellular M2M subscriptions by network generation, 2008-2017... 19 Exhibit 1.5: Average price, M2M modules, 2010-2017... 20 Exhibit 2.1: M2M value chain... 22 Exhibit 2.

5 CELLULAR M2M CONNECTIONS: AN ANALYSIS OF GROWTH DRIVERS, MARKET SEGMENTS AND OPERATOR APPROACHES 5 Companies mentioned 3 Amazon AT&T China Mobile China Unicom Cinterion Claro Datora Jasper Wireless KDDI KT Megafon Mobily MTN MTS NTT Pacific Controls PCCW Porto Seguro Sierra Wireless Softbank Sprint Telefonica Telit Tesa Telecom TIM T-Mobile Verizon Vimplecom Vivo Vodacom Vodafone

Jasper Wireless KDDI KT Megafon Mobily MTN MTS NTT Pacific Controls PCCW Porto Seguro Sierra

6 CELLULAR M2M CONNECTIONS: AN ANALYSIS OF GROWTH DRIVERS, MARKET SEGMENTS AND OPERATOR APPROACHES 6 Acronyms and abbreviations Acronym CDMA CPC CPM CTR GPRS GPS MMS PLC PND PPC ROM SMS TD-SCDMA WCDMA Definition code division multiple access cost per click cost per thousand impressions click through rate General Packet Radio Service Global Positioning System Multimedia Messaging Service powerline cables personal navigation device pay per call Read-only memory short messaging service Time Division Synchronous Code Division Multiple Access Wideband Code Division Multiple Access

click through rate General Packet Radio Service Global Positioning System Multimedia Messaging Service powerline cables personal navigation

7 CELLULAR M2M CONNECTIONS: AN ANALYSIS OF GROWTH DRIVERS, MARKET SEGMENTS AND OPERATOR APPROACHES 7 Executive summary The cellular machine-to-machine opportunity is diverse, dynamic and growing fast. It provides connectivity for a huge variety of different devices and machines including utility meters Telematics regulations will be the strongest. Smart meter regulations are also an important Powerline cables are a very important alternative technology. We expect that tethering andwi-ficonnectivity will be increasingly popular 2G technologies will continue to dominate the M2M market. Asia-Pacific became the largest region for cellular M2M subscriptions in 2011.

It provides connectivity for a huge variety of different devices and machines including utility meters Telematics regulations will be the strongest.

8 CELLULAR M2M CONNECTIONS: AN ANALYSIS OF GROWTH DRIVERS, MARKET SEGMENTS AND OPERATOR APPROACHES 8 Section 1: Market overview and background 1.1 Definitions and overview Exhibit 1.1: Report segmentation Africa & Middle East Asia-Pacific Europe Latin America North America Exhibit 1.2: Japanese and US operator network discontinuation plans Operator Network discontinuation details Comments

1: Report segmentation Africa & Middle East Asia-Pacific Europe Latin America North America

9 CELLULAR M2M CONNECTIONS: AN ANALYSIS OF GROWTH DRIVERS, MARKET SEGMENTS AND OPERATOR APPROACHES 9 Exhibit 1.3 shows how M2M subscriptions migrated from mova to FOMA (3G). Exhibit 1.3: NTT DoCoMo M2M DoPa and FOMA subscriptions, Source: NTT DoCoMo Exhibit 1.4: Cellular M2M subscriptions by network generation,

3 shows how M2M subscriptions migrated from mova to FOMA (3G). Exhibit 1.

10 CELLULAR M2M CONNECTIONS: AN ANALYSIS OF GROWTH DRIVERS, MARKET SEGMENTS AND OPERATOR APPROACHES 10 Section 2: M2M value chain and MNO positioning 2.1 Overview Exhibit 2.2: MNO positioning in the value chain

Section 2: M2M value chain and MNO positioning 2.

11 CELLULAR M2M CONNECTIONS: AN ANALYSIS OF GROWTH DRIVERS, MARKET SEGMENTS AND OPERATOR APPROACHES 11 Section 3: Examining cellular M2M market drivers, challenges and forecasts 3.1 M2M growth drivers and challenges Exhibit 3.1: Impact of drivers and challenges over time Exhibit 3.2: M2M subscriptions breakout by connection technology, A number of other technologies are also available, but typically do not have the price/performance that cellular brings.

1: Impact of drivers and challenges over time 2012-2013 2014-2015 2016-2017 2018 + Exhibit 3.

12 CELLULAR M2M CONNECTIONS: AN ANALYSIS OF GROWTH DRIVERS, MARKET SEGMENTS AND OPERATOR APPROACHES 12 Exhibit 3.15: Cellular M2M subscription and revenue forecast for fleet management applications, Fleet management is one of the most mature applications for cellular M2M and, like in telematics applications, there are no real alternative technologies other than satellite.

15: Cellular M2M subscription and revenue forecast for fleet management applications, 2010-2017

Cellular M2M Connections: An Analysis of Growth Drivers, Market Segments and Operator Approaches

Cellular M2M Connections: An Analysis of Growth Drivers, Market Segments and Operator Approaches Cellular M2M Connections: An Analysis of Growth Drivers, Market Segments and Operator Approaches Sector