Insights: Adapting to the age of the eSIM
Here’s why telecom companies must act swiftly to adapt, improve customer journeys, and diversify their services to stay competitive in a changing market
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Imagine Apple becoming the undisputed market leader of local telecom markets through new eSIM-enabled business models. Apple can meet all customer needs, including device and mobile phone purchases, data plans, and streaming games and shows. This scenario would decimate mobile revenues and
bring unprecedented disruption to the telecom industry. The catalyst? The rise of eSIMs — tiny digitally embedded SIM cards that accommodate multiple profiles.
To stay competitive, telecom executives must act quickly. eSIMs have been around for over a decade, but only recently gained traction. Kaleido Intelligence estimates that in the Middle East and North Africa region, active smartphone eSIM connections will skyrocket from five million in 2023 to 135 million by 2028.
This rapid rise is driven by growth in eSIM-only smartphones, savvy customers, and an increase in remote authentication.
Today, the UAE government offers the UAE Pass, allowing users to create a digital identity and signature, removing the physical authentication requirements needed to acquire an eSIM.
Opportunities for eSIM aggregators
These trends are creating an opportunity for eSIM aggregators, such as Airalo, Holafly, and Nomad, to buy wholesale from operators worldwide and develop retail packages that challenge telecom operators on roaming. Soon, they could move into telecom operators’ home markets.
eSIM growth is concerning for telecom executives as the telecom industry has historically struggled to recover from business model disruptions. Case in point: the rise of WhatsApp made SMS and voice services relics, obliterating SMS services worldwide and wiping out billions of dollars in revenue for telecom operators. Although eSIM aggregators are focused only on roaming for now, they are already eroding operators’ revenues. Currently, roaming fees represent approximately 3 to 4 per cent of total mobile network operator (MNO) revenues.
In a scenario where physical SIMs become obsolete, regulatory restrictions are removed, digital authentication prevails, and global giants such as Apple and Google could dominate telecom through new business models, new types of licenses, and wholesale deals. Companies like Google Fi could use eSIM to scale globally. Customers could easily order eSIM-only smartphones online, activate plans with a swipe, and access a wealth of lifestyle and financial services. Domestic operators would likely struggle against global players’ superior digital journeys, brand equity, and one-stop digital shops.
Three measures to help telco operators
To solidify their grip on the entire customer journey and capture long-term growth opportunities, telecom operators must pursue three measures.
First, telecom operators should abandon legacy go-to-market methods, as eSIM’s format will change how they bring products and services to customers. Operators should provide smooth customer journeys that can compete with leading digital service providers such as eSIM aggregators or Amazon, Apple, and Netflix.
As customers increasingly turn to digital channels to buy and recharge their eSIMs, traditional retail and distribution assets could become obsolete. However, operators could turn their abandoned physical retail and distribution locations into logistics or retail-as-a-service hubs. eSIM is also evolving the concept of a subscriber as one customer. Customers can run many eSIMs concurrently on one device becoming “multiple subscribers”. As a result, operators must adopt a dynamic customer base and performance management approaches.
Second, telecom operators should build customer relationships beyond the initial purchase so they can capture and retain mobile connectivity customers. For example, operators can provide value-added services that strengthen the relationship, such as device renewal, financing plans, insurance, and repairs.
Third, telecom operators must think beyond telecommunications and reposition themselves as full-service providers to compete with Amazon, Apple, and Google. They can begin by providing customers with an ecosystem of relevant offerings, including device purchase, connectivity, e-commerce, entertainment, education, financial services, insurance, and wellness.
Strategic partnerships, joint ventures, or acquisitions can be advantageous, allowing operators to augment their offerings without building them independently (and help move away from legacy go-to-market strategies). For example, Jio, an Indian telecom operator, partnered with several content providers to enhance its services across entertainment, food delivery, and its branded apps, such as JioTV and JioCloud. However, operators should own the customer relationship in full.
Telecom operators must also distinguish themselves from the numerous service providers delivering enticing digital ecosystems by providing a seamless, integrated offering. They should adopt a centralised approach to managing customer journeys, products and services. By acting quickly, telecom operators can use eSIM to reimagine their businesses and capture the opportunities the technology affords.
Jad El Mir, Hicham Fadel, Johnny Yaacoub are partners, and Ramzi Kanaan is a principal at Strategy& Middle East.
