Saturday, September 9, 2023

Will IoT Revenues Move the Needle for Telcos or Mobile Operators?

It likely still is too early to know whether explosive revenue growth for mobile and telco connectivity providers will be produced by internet of things use cases. 


A large part of the issue is that even exponential growth of IoT devices is not the same thing as direct connectivity using mobile or fixed networks. Perhaps most of the connections will use wireless networks such as Wi-Fi, Bluetooth or other alternatives. 


source: IoT Analytics 


So “devices” in use does not necessarily tell us very much about how markets for IoT connectivity provided by mobile operators or telcos could develop. 


source: IoT Analytics 


All that noted, it is possible that IoT revenues earned by mobile and fixed network operators could be significant by 2030, “significant” using a benchmark of at least $1 billion in annual revenue for any single supplier. 


“Connectivity” will continue to be the big revenue contributor, though some amount of system integration or bundled device sales also will be part of the overall revenue stream. 


Year

Connectivity Revenue ($billion)

System Integration Revenue ($billion)

Device Sales Revenue ($billion)

2022

10.8

2.5

1.5

2023

12.0

3.0

1.7

2024

13.5

3.5

2.0

2025

15.0

4.0

2.2

2026

16.5

4.5

2.5

2027

18.0

5.0

2.7

2028

19.5

5.5

3.0

2029

21.0

6.0

3.2

2030

22.5

6.5

3.5


By way of comparison, if global service provider revenue is at least $1.5 trillion, then IoT revenues might represent about one percent of total revenues in 2022. If global revenue grows about two percent per year to 2030, then 2030 global revenue will be $1.76 trillion. 


Then IoT might represent nearly two percent of total revenue. That of course is based on a far-higher expected growth rate for IoT revenues, compared to total industry revenue growth. 


Global Region

2021 Revenue

2022 Revenue

22/21

Growth

Americas

$572

$580

1.4%

Asia/Pacific

$467

$481

3.0%

EMEA

$438

$449

2.4%

Grand Total

$1,478

$1,510

2.2%


Of course, skeptics or realists might note that, by 2030, mobile operator and telco revenue sources will still rely mostly on mobile subscriptions (60 percent of total revenue) and home broadband (20 percent of total revenue), with all voice services driving about 15 percent of revenue and everything else at about five percent.


Revenue Source

Percent of Total Revenue

Consumer mobile revenues

35%

Business mobile revenues

25%

Home broadband

20%

Voice services

15%

Other revenue sources (IoT, cloud, and enterprise services)

5%


The point, of course, is that even if IoT revenues grow as many expect, they are not likely to drive mobile or telco financial performance. Market share or average revenue per account changes are going to have the greatest impact for individual firms, in nearly all cases.


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