Global and Russian M2M/IoT Market: Structure, Dynamics, Successful Strategies, Business Models, Monetization and Recommendations

July 2015

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Analytical Report (full version)

Global and Russian M2M/IoT Market: Structure, Dynamics, Successful Strategies, Business Models, Monetization and Recommendations
Global and Russian M2M/IoT Market:  Structure, Dynamics, Successful Strategies, Business Models, Monetization and Recommendations
July 2015

Global and Russian M2M/IoT Market: Structure, Dynamics, Successful Strategies, Business Models, Monetization and Recommendations

July 2015

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J’son & Partners Consulting: the communication industry is on the doorstep of the technological, organizational and business-transformation, which can result in the increasing efficiency of “2.0 telecom operators” and the growth of its capitalization . The research of Global and Russian M2M/IOT Market: Structure, Dynamics, Successful Strategies, Business Models, Monetization and Recommendationsis the second report in the series of researches regarding main aspects of this transformation.


Key Questions of the Research


  • How M2M and IoT market is developing in Russia and abroad?
  • What monetization methods can operators use on M2M and IoT market?
  • What strategies and opportunities are being presented on the M2M/IoT market for cellular operators and its partners?


Attention was paid to the detailed analysis of Russian and global M2M/IoT market state and development perspectives, business cases of the largest operators – market leaders, its business models and monetization methods, operators strategies in the sphere of cooperation with partners (incl. MVNO) and analysis of main examples of such agreements.


Practical Value of the Research


  • For operators – recommended schemes how to cooperate with partners and principles how to organize communication networks;
  • For partners – recommended perspective models how to cooperate with networks and IT infrastructure providers.


Target Audience


The research is aimed at cellular and fixed communication operators, M2M/IoT platforms’ developers, hardware manufacturers, apps developers, system integrators, venture and investment funds, start-ups and research agencies.



M2M/IoT Market and Operators’ Transformation in the World


M2M and IoT market is one of the key growth spheres for cellular operators and ICT industry in general, which require transformation of technological approaches and operators’ business-models in the nearest future.


Estimations and forecasts by various analytical agencies and vendors by number of connected devices can differ – from 3.8 bln till 16 bln in 2014 (Gartner and ABI Research accordingly) and from 25 bln till 50 bln by 2020 (Gartner and Ericsson accordingly). In accordance with conservative and optimistic forecasts by made GSMA Intelligence, by 2020 the number of mobile M2M-connections will be from 1 bln till 2 bln.


The key market players on the global M2M market are: China Mobile, AT&T, Vodafone, China Unicom, Telefónica, Verizon Wireless, Deutsche Telekom, Sprint, Orange France and Telenor. Half of M2M-connections in the world belong to these operators and share of M2M-commections in the total subscriber base among market leaders is close or even more than 10%. Meanwhile, in 2014 the share of revenue from M2M in the general revenue structure of such operators as Telefonica, Telenor and Verizon was only 0.5–0.7 %. Major part of operators’ revenue in the M2M segment (not less than 80–85 %) is the provision of the channel to transfer data, the rest revenue – from consulting, integrated incomes from partnerships with vendors and software developers is very low.



It is expected that operators will transfer its business-models in the sphere of M2M: from delivery of data transfer channels to the delivery of additional services. Analysys Mason’s forecast: share of average revenue per 1 M2M-connection, received from the services, not connected with tariffs on data transfer, will increase from 21% till 53% for 2013 - 2016.


The necessity in operators’ technological and business transformation is explained by the low share of revenue from M2M, while the penetration of M2M SIM-cards is high. The problem can be sold differently, starting from the operators’ transformation into the “smart pipe” that will help operators to tariff not only the traffic volume by M2M/IoT devices but also manage quality characteristics, such as guaranteed availability of the necessary channel’s capacity with opportunity of dynamic changes, hold the signal, jitter and others.


M2M/IoT Market in Russia


Growth rates of mobile M2M-connections are still relatively high in Russia, it means the market is still on the first stage of its development and has high potential. For example, in 2014 M2M subscriber base VimpelCom increased for 51 %, Megafon – 152.6%.


MTS is the market leader in M2M B2B segment with 50% market share by number of SIM-cards. The most capacious segment is the monitoring of transport – 40% of corporate M2M connections. Share of private segment in the total M2M-connections can be not less than 50%.


For example, Megafon – 2.5 mln SIM cards, implemented in the devices that use cellular communication for data transfer by automated platforms, only 1.2 mln of them represent corporate segment. Market structure is changing – in 2012 the share of consumer electronics (satellite navigators, trackers etc) – had only around 10% of the Russian M2M-connections market, in 2014 this indicator decreased – less than 1%.


In the most massive segment M2M B2C – satellite navigators market – there is a replacement of these devices by apps available from the universal (software) users devices, such as smartphones and tablets. In 2014, sales of satellite navigators decreased approximately for 30%. On the other hand, IoT segment develops very fast, such as smart wearable devices. In accordance with preliminary J’son & Partners Consulting’s data, the market of high-technological wearable devices in Russia in 2014 increased twice fold and reached around 0,3 mln.devices, forecast for 2018 – 2 mln.devices. In average by the industry, Russian operators’ revenue is from 50 – 200 RUB per month per 1 M2M SIM-card (depending on the industry, where it is used. 


J’son & Partners Consulting: There had been around 6 mln. M2M-connections (SIM-cards) in Russia in 2014, corporate sector, which is 15% higher than the indicator in 2013. Share of private segment in general M2M-connections can be around 50%, and this is one of the most perspective market segments, together with utility & housing sector and intellectual energy.


Business-Models, Operators’ Strategies and Opportunities for New Players



The increased activity on the fast growing M2M/IoT market is already an opportunity for operators from the point of its revenue diversification in terms of traditional cellular communication market’s stagnation, but it requires a clear strategy of positioning.


In the commercial cooperation between M2M-platform suppliers, wireless modules’ manufacturers and technological vendors, integrators and distributors, specialized MVNO-operators - the cellular (mobile) operator remains one of the key segments in the value added M2M chain.


Significant barrier on the way of massive M2M/IoT market development in Russia and in the world is the conservatism of market participants, where expensive proprietary solutions dominate, not providing enough flexibility and scalability, and also networks, which cannot provide the enough quality of data transfer channel (throughput capacity, signal hold, security etc,) depending on the type of IoT apps. In the future, one of scenarios for mobile operators in the IoT ecosystem includes its transformation into the smart pipe, in order to provide the secured data transfer channel with required QoS depending on the type of service or app. This is why, there is a necessity to tariff not only the volume of traffic but also other networks QoS metrics, which are important for each service or IoT app and management of such metrics.


The effective problem solution in the sphere of IoT monetization on the network level for operators and service-providers can become a software-defined network (SDN/NFV). In this case apps will communicate via open APE, and forming the ecosystem for cooperation of services, which create added value.


Such approach is being used, for example, by American operator AT&T, which fulfilled a massive operational transformation; it helped to safe $159 mln on operational and capital costs, thanks to the new Service Realization Excellence platform. This transformation helps AT&T to increase operational speed, efficiency and productivity. It will help to increase the service quality and to cut time to launch the service on the market for 21% by 2017.



For the last several years there is a tendency on the Russian market – the distribution of operators’ interest in the participation in all value chain steps on M2M market. But market players admit that business-model drained itself and cannot develop in the current state and require the changes in the operators’ strategies in the sphere of M2M/IoT and transformation of its business.


The detailed analysis of operators’ strategies in regard to M2M/IoT and business-models are presented in the full version of the report.


M2M solutions market is a perspective model for OTT-services. According to analysts’ forecasts, over 50 bln M2M devices will be connected to the Network by 2020. Other words, it will be possible to communicate via the network for more devices than people on the planet. And it is possible to say that the devices’ traffic will be higher than the number of people in many times. The most perspective for M2M OTT markets are intellectual energy systems (Smart Grid), solutions for oil and gas on pipelines, cloud video monitoring systems and also in many other spheres.


M2M in Russia is a new trend, while in the rest of the world this technology is very popular. Same as abroad, in Russia it is developing in the sphere of transport monitoring, utility & housing segment, banking sphere and telemedicine. The highest potential for mid-term perspective have M2M-services, which use speed data transfer networks. It will allow not only to collect telemetrics data, but also to make video recording in online mode, where speed transfer is a crucial factor.


Currently, the monitoring of transport is fulfilled based on the satellite GLONASS navigation system, implemented with the help of 24 satellites based on dynamic asynchronous orbits. The accuracy in definition of land marks is around 5 meters and it is not decreasing when the vehicle is moving. The weather conditions and landscape do not create any deterrents to the positioning.


Today and in the coming years the M2M development in Russia will be focused in B2B sphere, on corporate clients oriented on current and future M2M-projects by Megafon. At the moment the total number of SIM-cards in M2M-solution Megafon is close to 2.5 mln; 1.2 mln. subscribers at the moment are in B2B segment.


M2M for Megafon is the way to monetize infrastructure of data transfer and increase the number of services, available for subscribers.


Important notice, in accordance with Federal Law 152 about Personal Data, which will take into force starting 1st September 2015, companies will be obliged to store, processed in the internet, personal data of Russian citizens on servers, which will be based on the territory of Russian Federation. Our subscribers can sleep well, as M2M platform by Megafon was developed and is situated on the Russian territory.





The base for M2M market growth is government initiatives and regulations, also in the sphere of technologies’ development based on Glonass and corporate solutions in Russia. For the last 5 years, M2M market didn’t enter the massive segment, while global tendencies say that technologies and market in general are growing not only in B2B segment, but also in B2C. In Russia, M2M is currently developing only in corporate business. Unfortunately, the worsening of economic situation lead to the partial decrease of services for B2B growth rates. It is important to mention that now we are observing a historical moment, when currently operating M2M services and business model drained itself and cannot develop in the same way. Main perspectives for further growth, first of all we pay attention to the car industry, and in particular, on development of Connected Car services, new technologies and new services for massive consumption.


M2M technologies are already a habit for us, while only 5 years ago it was something fantastic. Today, via the app on the phone we can start the car engine, turn-on the electricity in the house, to diagnose any object or even people. In fact, the cooperation of IoT solutions, geolocation and navigation is a base for creation of the new-level solutions. No one is impressed with an opportunity to track online the movement of the bus on the interactive city map. For those, who don’t have smartphone or tablet, the information is being placed on electronic screens on the public transport spots. Exactly such end services present perspective technologies. And it is difficult to imagine, how our life can change even only by using the basic blocks with GPS/Glonass and SIM-card.


Service model. It will not only allow consumers receive end services but also manufacturers to keep clients and revenue from margin service market. All other business-models have high risks and very unstable.

Asof the results of 2014, 230 mln M2M-connections were fixed in cellular networks, which is around 3% of all mobile connections. High demand from car industry, energy (smart meters) and utility & housing segment facilitates the growth together with development of LTE and modernization of GSM/EDGE networks. Nowadays, the most available by price devices are M2M-modules for GSM networks, major part of apps for such devices have high requirements to the networks throughput capacity. New apps, which require lower network hold, will appear when prices on LTE-modems will drop and recharges with over 10 years expiry term will appear on the market. By 2016 major active M2M-devices will be connected to the 3G/4G networks. In 2019 the M2M-devices penetration level in LTE networks will increase from the current 1% to the more than 20%. 40% of supplied M2M-devices will support LTE. The deployment of 5G network will help the appearances of the new apps for massive M2M-market. In 2020, the total number of connected to cellular network devices will reach 26 bln with further growth till 50 bln in the mid-term perspective.


Russian M2M market is on early stage of its development, although the number of connections increases yearly. According to estimations, the total number of M2M-connections in Russia in 2014 was over 5 mln. This tendency presents also on the global M2M-services market.


Ericsson data: 75% of companies show interest to the implementation of technological solutions in the sphere of IoT. Ericsson’s researches also prove that 94% of global companies are sure that Internet of things will have more influence on global markets and industries during the next three years. Major influence on the development of this segment has the participation of government-administrative structures. For example, the law about obligatory equipment of all new cars with e-call system, made the “push” on the development of transport solutions market. In accordance with analysts’ estimations, only in Europe will be connected not less than 10 mln. cars.


Classical ICT business-model with focus on software and hardware provision, and also equipment installation should be transformed same as many other industries. Data transfer and BBA provide unique opportunities to people, things and cars to communicate on all communication levels. In order to provide the correct level of services, which correspond to the changeable global necessities, operators will have not only implement new technologies, but change business-models – to increase cooperation with all market players. For example, the establishment of alliances, groups or partnerships between operators and equipment manufacturers, electronics or energy companies, is possible.


From the point of end users, smart technologies, first of all, help to make solid decisions based on modern information, and the most perspective apps of such technologies are navigation services, medicine and government services. People react positively on such types of solutions. In accordance with ConsumerLab research, 70% population of megapolises consider that by 2020 smartphones apps that help to estimate the water quality or to track the use of electricity will be in a mass use, and 1/3 of respondents sure that they will use it weekly.


Global and Russian M2M/IOT Market: Structure and Dynamics, Successful Strategies and Business Models, Monetization, Recommendations




  1.             Introduction: Definition ofM2M andIoT

1.1.         What Do IoT Means. IoT and M2M –Common Features and Differences

1.2.         Industry’s Landscape, Main Insutrial Segments

1.3.         The Participants of M2M and IoT Added Value

1.3.1.      Equipment Manufacturers

1.3.2.      Solutions Suppliers

1.3.3.      System Integrators

1.3.4.      Service Providers

1.3.5.     Telecom Operators

  1.             Global M2M Market

2.1.         Current Market State and Market Forecast, $ and pcs., 2015–2019

2.2.         Massive Market

2.2.1.     Massive Market State, $ and pcs.

2.2.2.     The Analysis of Main Tendencies

2.3.         Corporate M2M/IoT Market Structure by Industry

2.3.1.     Corporate M2M/IoT Market by pcs. (the Number of M2M/IoT Devices by Industry)

2.3.2.     Corporate M2M/IoT Market by $ (by Industry)

2.3.3.     The Analysis of Main Industry Tendencies

2.4.         Industrial Solutions

2.4.1.     Transport and Telematics

2.4.2.     Payment Systems and Retail

2.4.3.     Medicine

2.4.4.     House Utility Sector and Energy

2.4.5.     Production Industry

2.4.6.     Security System

2.4.7.     Agriculture

2.4.8.     Consumer M2M/IoT Segment   Wearables   Smart Home   Connected Car

2.4.9.     Electronic Government

2.4.10.   Other

2.5.         The Analysis of the Current Business Models and Communication Operators’ Strategies in the Sphere of M2M/IoT

2.5.1.     AT&T

2.5.2.     DeutscheTelekom

2.5.3.     Telefónica

2.5.4.     Telenor

2.5.5.     VerizonWireless

2.5.6.     Vodafone

2.5.7.     Orange

2.5.8.     China Mobile

2.5.9.     Other Operators

2.6.         The Analysis of the Current Business Models and Strategies of Other Participants of Added Value Chain in the M2M/IoT Sphere



2.6.1.    Service providers
2.6.2. System Integrators
2.6.3.   Solution Providers
2.6.4.     Equipment Manufacturers

  1. Russian M2M/IoT Market

3.1.         The Overview of the Legal Base in Russian Federation

3.2.         Russian M2M/IoT Market Tendencies and Development Forecasts

3.3.         Russian M2M/IoT Market , $ and pcs. Estimations

3.4.         Massive Market

3.4.1.     MassiveMarket,$ and pcs.

3.4.2.     The Analysis of Main Market Tendencies

3.5.         Corporate M2M/IoT Market Structure by Industry

3.5.1.     Corporate M2M/IoT Market by pcs. (the Number of M2M/IoT Devices by Industry)

3.5.2.     Corporate M2M/IoT Market by $ (by Industry)

3.5.3.     The Analysis of Key Industry Tendencies

3.6.         The Analysis of Market Competition and Offers by Main Market Players

3.6.1.     MTS   Services and Solutions   Tariffs

3.6.2.     Megafon   Services and Solutions   Tariffs

3.6.3.     VimpelCom   Services and Solutions   Tariffs   Tele2   Services and Solutions   Tariffs

3.6.4.     Other Operators   Services and Solutions   Tariffs

3.7.         The Analysis of M2M/IoT Market by Main Industry Segments

3.7.1.     Solutions for Transport, Monitoring of Movable Objects, Logistic

3.7.2.     Payment Systems and Retail

3.7.3.     Security Systems

3.7.4.     Industry, Monitoring and Objects Management

3.7.5.     Consumer Segment   Wearables   Smart Home   Connected Car

3.7.6.     Healthcare and Telemedicine

3.7.7.     Electric-Power Industry

3.7.8.     Housing and Utility Sector

3.7.9.     Other

3.8.         The Position of M2M/IoT Market Participants in the Added Value Chain

3.8.1.     Cellular Operators and MVNO

3.8.2.     Apps Developers

3.8.3.     Equipment Manufacturers

3.8.4.     Devices Manufacturers

3.8.5.     System Integrators


4. Recommendations on the Strategy Development in M2M/IoT Sphere

4.1. New opportunities for monetization
4.2. Optimal business models choice
4.3. Positioning

4.4. Financial and Economic Effect


This Information Note is Prepared by J’son & Partners Consulting, We strive to provide factual and prognostic data that fully reflect the situation and are available to us before issuing the material. J’son & Partners Consulting reserves the right to revise the data after publication of new official information by the market players.



J’son & Partners Consulting: the communication industry is on the doorstep of the technological, organizational and business-transformation, which can result in the increasing efficiency of “2.0 telecom operators” and the growth of its capitalization . The research of Global and Russian M2M/IOT Market: Structure, Dynamics, Successful Strategies, Business Models, Monetization and Recommendationsis the second report in the series of researches regarding main aspects of this transformation.