Yankee: M2M MVNOs to “feel the squeeze” from Tier 1 operators in 2013

MVNOs profiting from the M2M opportunity are set to feel the squeeze this year as Tier 1 operators start to get serious about the so-called ‘internet of things’.

That is the prediction of market-research firm Yankee Group in a new report forecasting a number of major developments in mobility markets in 2013.

While network operators have predominantly acted as M2M connectivity providers – happy to partner with specialized MVNOs that provide additional platform, application and integration services – most will look to play a bigger role this year.

MVNOs profiting from the M2M opportunity are set to feel the squeeze this year as Tier 1 operators start to get serious about the so-called ‘internet of things’.

That is the prediction of market-research firm Yankee Group in a new report forecasting a number of major developments in mobility markets in 2013.

While network operators have predominantly acted as M2M connectivity providers – happy to partner with specialized MVNOs that provide additional platform, application and integration services – most will look to play a bigger role this year.

Driving this development will be a 22% increase in the number of M2M cellular connections between 2012 and 2013, spurred by falling M2M device costs, ubiquitous and affordable wireless connectivity and government mandates in areas like smart metering.

This bodes ill for MVNOs like Wyless (Lawrence, USA), M2M DataSmart (Del Mar, USA), Numerex (Atlanta, USA), Aeris Communications (Santa Clara, USA) and Kore Telematics (Alpharetta, USA), which have – until now – been able to peacefully coexist with the network operators.

According to Yankee Group, the new challenge from Tier 1 operators does not necessarily represent “an MVNO death sentence”, but it will force MVNOs to make additional investments in value-added services and pricing flexibility if they are to remain competitive.

The market-research company also expects MVNOs to become attractive M&A targets for operators seeking inorganic growth and M2M experience.

Urging network operators to take advantage of this opportunity, it singles out M2M DataSmart as an example of an MVNO with attractive key performance indicators and proven expertise targeting smaller installations, and Aeris Communications as one that is well-established in a particular geography.

Yankee Group describes AT&T (Dallas, USA), Deutsche Telekom (Bonn, Germany), Sprint (Overland Park, USA), Orange (Paris, France), Vodafone (Newbury, UK), China Mobile (Beijing, China) and Telefonica (Madrid, Spain) as the ‘winners’ from this development.

The question may be whether such companies can be as agile and innovative as their MVNO rivals.

RACO Wireless (Cincinnati, USA), an MVNO partner of Deutsche Telekom subsidiary T-Mobile USA (Bellevue Park, USA), takes pride in its efficiency and flexibility and reckons the big network operators will be unable to match its proposition in future.

“No one can do what we do. No one can create new rate plans and new business models in just 24 hours,” said John Horn, the company’s president, in a conversation with M2M Zone in October last year.

Telit (Rome, Italy), an M2M module maker that has an MVNO arrangement with Telefonica, is similarly disparaging about competition from mobile network operators (MNOs).

“In our business, MNOs have a very good understanding of networks but very little understanding at the level of the customer application, and 99% of problems that M2M customers face are related to the application,” Telit’s Dan Amir told M2M Zone in December.

Even so, pressure elsewhere may force network operators to up their M2M game this year.

Among the other predictions made by Yankee Group is that operators will collectively lose $1 billion a month in revenues from voice and messaging services in 2013, as ‘over-the-top’ services provided by the likes of Facebook (Menlo Park, USA) and Skype (Luxembourg City, Luxembourg) become increasingly popular.