The number of cellular M2M connections worldwide is forecast to grow from 205 million in 2014 to over 1.3 billion in 2025 (see Figure 1). This increase will be driven by the continued growth of embedded and aftermarket connectivity in the automotive and transport sector during the period 2014–2025. However, we have lowered our growth forecast for this sector compared to our previous forecast. Reported declines in car sales in Brazil, China and Russia due to an uncertain macroeconomic climate will lengthen car replacement cycles and result in slower adoption. The heavy weighting of automotive and transport in cellular M2M means that our overall forecast is lower than our previous forecast.
Figure 1: Cellular M2M connections forecast by vertical, worldwide, 2014–2025
Despite this slowdown, growth in the number of M2M cellular connections in the automotive and transport sector remains strong. The sector will account for over 60% of total cellular M2M connections throughout the period and the number of connections will grow at a CAGR of 20% to reach 900 million by 2025. Most of these connections comprise embedded connectivity in passenger vehicles, the number of which will be boosted by the eCall mandate in Western Europe as well as strong competition in the automotive market as vehicle manufacturers seek to differentiate and 'servitise' their products. Aftermarket solutions, including stolen vehicle location and usage-based insurance, will also continue to grow significantly. Aftermarket device connections will grow at 9% CAGR over the forecast period. In addition, the number of fleet management connections will grow at 11% CAGR.
Cellular M2M connectivity revenue is forecast to grow from below USD5 billion in 2014 to USD23.6 billion in 2025
We expect that revenue from connectivity will continue to grow over the forecast period at a CAGR of 16%. The revenue generated from automotive and transport correlates closely to its share of connections, accounting for over 60% of total cellular M2M revenue. This is in contrast to some other sectors. For example, the share of revenue in the healthcare and retail segments is higher than their share of connections. Healthcare will account for around 5% of connections in 2025, but this segment will generate 10% of revenue because of the higher average revenue per connection (ARPC) associated with the applications. Similarly, digital signage in the retail segment contributes to a higher revenue weighting.
ARPC will decline sharply in the first few years of the forecast period from USD2.1 per month in 2014 to USD1.6 per month in 2025. We assume that the decline in connectivity ARPC will stabilise from 2020 onwards, due to the mix of applications, and slower price erosion in a maturing M2M market. ARPC for the automotive and transport segment is forecast to decline from USD2.2 per month to USD1.6 per month between 2014 and 2025, which represents a year-on-year decline of 3%.
M2M will contribute to connection and revenue growth in a maturing telecoms market
When compared to Analysys Mason's total mobile forecast which covers the period 2014–2020, cellular M2M represents a small but strong growth area. By 2020, cellular M2M will account for almost 8% of total mobile connections, up from 3% in 2014. Cellular M2M represents a strong growth category when compared to handset and mobile broadband growth.
On aggregate, cellular M2M will add less than 1% to overall CAGR between 2014 and 2020. Total mobile connections including cellular M2M will grow at a CAGR of 4.8% compared to 4.0% excluding cellular M2M. Overall cellular M2M connectivity revenue1 will grow at a CAGR of 19% between 2014 and 2020 compared to 1.3% for total mobile retail revenue. Cellular M2M connectivity revenue will comprise 1.3% of total mobile retail revenue and will contribute less than 0.5% to overall revenue growth because M2M ARPC is significantly lower than handset ARPC. This seems small, but is significant in a mature market where new growth areas are important and new revenue streams are challenging to identify.
Cellular M2M device connections and revenue: worldwide trends and forecasts 2015–2025 is one of our key deliverables in Analysys Mason's IoT and M2M Solutions research programme, which identifies and examines the Internet of Things (IoT) segments that will offer the best market opportunities. It also identifies the key players and the ecosystems that will support these segments. Our research helps operators, vendors and software developers identify key market, partner and competitor opportunities in specific IoT market sectors. See more at: www.analysysmason.com/Services/Research/Digital-economy/IoTandM2M.
1 Cellular M2M revenue includes connectivity and connectivity management revenue only. Total mobile revenue may include other service and application revenue. Total revenue for mobile services excluding termination (interconnection and roaming-in) revenue also excludes revenue from direct equipment sales. It includes roaming-out revenue, i.e. retail revenue coming from subscribers roaming out of the home country. Includes only revenue billed for by operators (or their service provider and MVNO partners) and excludes mobile retail revenue that is billed for separately by third parties, such as content providers.