After years or decades of disappointing growth, Wide-Area IoT connections – including cellular and non-cellular technologies – increased nearly 70% in 2018, growing at a much faster pace than expected. With global Wide-Area IoT connections on track to surpass 4 billion connections by 2023, the time is right to analyze the revenue implications: What does this ostensibly exciting IoT connection forecast really mean – can billions of connections change the trajectory for the mobile infrastructure suppliers and the operators?
As we have communicated for some time now, we envision there are multiple reasons to be optimistic about the supply and demand side opportunities beyond the smartphone, with the pickup in IoT being one of the more probable growth engines. But at the same time, future growth prospects will vary greatly depending on the type of connection. After all, the connected mousetrap will most likely not consume the same amount of traffic or generate as much revenue as the connected vehicle.
With the connected car projected to comprise a single-digit share of the 2023 Wide-Area IoT installed base and Massive IoT expected to consume the lion's share of the connection growth, revenue per connection pressures, normalized for the vastly different traffic and revenue profiles across the various IoT domains, could be a drag on the upside.
Global growth for Wide-Area IoT, cellular and non-cellular, is projected to add about $130 billion of incremental mobile infrastructure and service provider revenue over the next five years.
Since the last update, we have revised our IoT related mobile infrastructure – RAN and Core – revenue projections slightly upward, to reflect new feedback from operators about the infrastructure equipment capex in the initial LTE-M and NB-IoT upgrade phase. We also adjusted the connection projections upward, driven primarily by stronger than expected acceleration and improving market sentiment in China. At the same time, surging connection growth in China has not translated into a large pickup in revenue growth as revenue per connection is trending below expectations resulting in relatively minor changes to the aggregate IoT service provider revenue forecast. The baseline estimates assume service provider IoT revenues will grow at a robust pace or about ~2x to 2.5x over the forecast period, implying there is tangible upside with IoT over the near-term for both the suppliers and operators.
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