The impact of eSIM-only on mobile operators — risks, opportunities and disintermediation dilemmas
Following the launch of the iPhone 14 as eSIM-only in the US, Apple continues to embrace eSIM technology. Recent reports indicate that the iPhone 15 will also be eSIM-only, this time in Europe. This move will further reinforce the company’s commitment to leading the charge in consumer eSIM adoption and set a precedent for other device manufacturers. Here, Hamish White, founder and CEO of eSIM as a Service provider Mobilise, explains the impact of this latest development.
The iPhone 15’s eSIM-only approach will have far-reaching consequences for the telecoms industry, as there is now little doubt about the direction the industry is going when it comes to the physical SIM card. The plastic SIM is on the way out, and operators must adapt to stay competitive in the evolving market.
In September, I made several predictions regarding the industry’s future following the launch of the eSIM-only iPhone 14 in the US. However, surprisingly, many global operators were still unaware of the full competitive consequences of such an eSIM-only scenario.
For operators outside the US, that first eSIM-only iPhone launch was a clear indication of what’s coming to mobile operators everywhere, sooner rather than later. US operators were forced to move quicker with their eSIM plans and no longer have the indulgence of waiting out the eSIM market; they’ve had to deal with the eSIM-only iPhone 14, whether they like it or not. Some are arguably better prepared than others, but many smaller local operators and MVNOs face a frantic rush to catch up.
We expect that catch-up to happen quickly. For operators, nothing motivates more than a clear churn risk, and an inability to adequately support a new generation of iPhone 14 buyers is a customer experience disaster waiting to happen. But, as with the development of any disruptive technology, there are both opportunities and threats for operators, and it will be interesting to see how operators now respond to the challenge.
Accelerating the Shift to Digital-First Services
With the iPhone 15 and its eSIM-only approach, the telecoms industry must prioritise digital-first services to meet the needs of an increasingly connected world. As a result, operators must invest in digital infrastructure, including user-friendly mobile apps and digital platforms that facilitate plan selection, activation, account management and easy cross-sell of third-party digital products and services. This shift will help telecoms operators reduce their reliance on physical retail stores, leading to potential cost savings and increased operational efficiency.
eSIM and the Risk of Disintermediation for Mobile Operators
While eSIM technology offers numerous advantages for consumers and telecoms operators alike, it also presents certain risks for the industry. One significant concern is the potential for disintermediation of mobile operators, which could decrease their influence and control over the customer relationship. This disintermediation could occur in several ways.
It could be down to the emergence of new market entrants. The adoption of eSIM technology lowers the barriers to entry for new market players, such as mobile virtual network operators (MVNOs) and digital-only providers through embedded connectivity. These new entrants can offer competitive plans and services without the need for significant infrastructure investments, further intensifying competition and potentially undermining the position of traditional mobile operators.
Alternatively, it could occur due to reduced customer touchpoints. eSIM technology diminishes the need for physical retail stores and customer service interactions, which have historically been essential touchpoints for mobile operators to build relationships with their customers. With the rise of eSIM, consumers may increasingly interact with device manufacturers, app stores, and other digital platforms for their connectivity needs.
The reduced barriers to entry that eSIM offers give opportunities for non-telco players such as banks, big tech or insurance companies to provide connectivity as an add-on service to an existing core suite of products. This means mobile plans can be sold at much lower margins or even as a loss leader in order to create a sticker bundle of products and services with a higher CLV. This will potentially overshadow traditional mobile operators and leave them with greater competition and fewer opportunities to engage and retain customers.
The final potential cause is device manufacturer dominance. As eSIM technology becomes more prevalent, device manufacturers like Apple and Samsung could gain increased control over the customer experience. By embedding eSIMs in their devices and managing the activation process, these companies could establish direct relationships with consumers, potentially relegating mobile operators to a more commoditised role as mere connectivity providers.
Mitigating the Risks of Disintermediation
To counter the risks of disintermediation, mobile operators must adapt their strategies to remain competitive and relevant in the eSIM era.
One potential approach is to focus on differentiation and innovation. Mobile operators can differentiate themselves by offering unique services, such as personalised plans, exclusive content, brand partnerships and enhanced network quality. By focusing on innovation, operators can create compelling reasons for consumers to choose their services over those of competitors.
Another approach is to strengthen customer relationships. Operators should prioritise enhancing the customer experience by developing user-friendly digital platforms, providing exceptional customer service, and offering personalised offers and promotions to strengthen customer relationships and increase loyalty.
Finally, there’s the approach of developing strategic partnerships. By collaborating with device manufacturers, content providers, and other stakeholders, mobile operators can create synergies that enhance the customer experience and help maintain their relevance in an evolving market.
The rise of consumer eSIM technology is transforming the telecoms industry, offering numerous benefits to both operators and users. But as with any technology shift, there are risks. Operators can mitigate these risks by adapting their strategies, focusing on innovation, and strengthening customer relationships.
Apple’s decision to launch the iPhone 14 as eSIM-only in the US is a testament to the growing importance of this technology. With recent reports of the iPhone 15 in Europe being eSIM-only, this trend is set to continue. As we move towards a more connected and sustainable future, eSIM is undoubtedly a key player in driving innovation and enhancing the customer experience in the world of telecommunications. But only for those that are appropriately prepared.
Mobilise is a leading provider of SaaS solutions to the telecommunications industry. Focused on delivering highly engaging digital-first service propositions with excellent customer experience, Mobilise has a proven track record, deep industry knowledge and a team of specialists to support clients to building and executing transformational strategies.
Clients range from large corporate organisations with over 100,000 employees to small enterprises with under 20 employees. Mobilise has a deep knowledge of the telecoms business model and our experience includes working with over 40 service providers across eight markets for brands including Virgin, Dixon’s Carphone, Red Bull Mobile, Manx Telecom and Freenet.
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