If MNOs aren’t agile and resourceful enough to respond to the changing dynamics, their worst fears about the new age of the eSIM will come to pass, according to a report by Strategy&.
The telecom industry doesn’t seem to like cords much; what had started with the advent of cordless phones, and mobile phones, has now gone as far as the SIM cards. The disappearance of physical SIM cards accompanied with simultaneous liberation of consumers will produce ripple effects for the industry as a whole. With the shift towards eSIM, consumers will have the liberty to choose an operator, a price plan and will connect to the telco network in a similar way to how we connect to WiFi now.
As the Strategy& report Cutting the last cord says: “For the big mobile network operators, SIM cards have served as golden handcuffs, tethering most consumers to them in lucrative, long-term ways. Now, as software starts to replace the cards, those handcuffs will be coming off.”
Needless to say, the transition to eSIM is definitely not going to be an overnight affair. While the first eSIMs made their appearance in 2015, it would possibly take couple more years for the trend to pick up in a big way. In spite of coming with its pertinent risks, the eSIM technology also has the potential to open up new vistas for the telecom operators, if they act with agility.
According to Strategy&, eSIM offers a tremendous upside in providing bundled subscriptions for multiple connected devices. The new eSIM world could potentially give operators an even stronger lock-in with consumers than they have now.
In the run up to the widespread adoption of eSIM, operators would need to prepare for the next phase in connectivity. Strategy& recommends operators to begin by embracing the new technology. Fulfilment processes must be developed on the back end, where business and operations support systems will have to be reconfigured for provisioning eSIM.
Secondly, the operators need to revise their contract structures. They should offer full connectivity packages for multiple devices. And instead of usage based pricing, pay-per-device models should be implemented.
Third, as part of the contractual changes, the payment model will also need to be transformed into a financing scheme to cover multiple devices.
Down the lane, Strategy& foresees three possible paths taking shape- the actual path will be determined by the relative levels of agility of the various stakeholders in the connectivity ecosystem.
Scenario 1: Evolving status quo
It is a logical evolution of today’s three- and four-play offers, in which telcos provide service bundles that contain landlines, mobile, broadband Wi-Fi, and television. With the number of devices per user increasing with time, the telcos would position themselves managers of connectivity for multiple devices and providers of new value-added services.
On the B2B side, telcos can differentiate through improved provisioning of equipment and the rollout of self-service processes. This scenario would be biased towards telcos and would imply improved customer retention just with the adoption of multiservice financing models.
Scenario 2: Partnership
The OEMs might not want the buyers to depend on a telco for the connectivity, and might prefer to provide devices pre-equipped with connectivity. A number of smaller phone operators and MVNOs will join manufacturers in partnerships to provide that connectivity.
Scenario 3: Free for all model
Scenario 2 if successfully executed will pave the way for a market in which all the device manufacturers might prefer to also play the role of MVNOs and lock the customers instead of making them depend on a telco carrier. That would automatically imply a widening gap between the consumers and the operators, hence reducing the role of telcos to merely B2B connectivity providers.
One thing is clear- if operators want to retain their strategically central, customer centric position in the value chain, along with maintaining a strong differentiation over OEMs, service diversification is going to be the key. They have to build an extremely strong service portfolio that ensures they stay stronger than cable companies, OTT and OEM players. Competition is going to be tough; however, the operators need to leverage the strong relationships they have built with customers all these years, and ramp up efforts when it comes to personalisation. The whole meaning of digital transformation might have just got a new level of importance; and only the fittest shall survive.