eSIM – Digital Disruption in Telecom (by Mobilise)

Hamish White, CEO of Mobilise

The global telecoms industry rose to the challenges that the pandemic created, facilitating communication for work, school, healthcare and social life throughout multiple lockdowns. But what does telecoms’ future hold post COVID-19?

A recent McKinsey report argues that an industry-wide reinvention is just what’s required, with increased focus on digital solutions over physical assets. In this article, we will explore how the telecoms industry can adopt digitalisation, what the main challenges are and what the role of eSIM is in this process.

Digital Operations

The decreasing popularity of retail stores isn’t anything new, but the events of 2020 have certainly accelerated the decline. A 2020 study by Capgemini Research Institute revealed that 59 per cent of consumers worldwide said they had high levels of interaction with physical stores before COVID-19, but just 24 per cent identified the same post-pandemic.

Forced closures for the majority of 2020 meant that e-commerce became the only option for both consumers and retailers. Telcos were left with no choice but to accelerate the digitalisation of their sales operations to offer their customers an alternative way to shop for their telecoms products and services.

The convenience of e-commerce has had a lasting effect on the telecoms industry. In May 2021, electricals retailer Dixons Carphone announced that their Dixons, PC World and Carphone Warehouse brands will disappear from the high streets as part of their rebrand to Currys, reinforcing the idea that consumers rely more and more on digital avenues for devices and mobile plans.

Digital products  

E-commerce and the decline of the high street has digitalised the purchasing process for telecoms customers, but the reach of digital doesn’t end there. A SIM card is an essential piece of kit for any telecoms customer, and ever since the very first mobile networks began offering services, has played a fundamental role in enabling mobile communication. Device authentication has been traditionally enabled through physical SIM cards, which hold a Universal Integrated Circuit Card (UICC) to authenticate a device onto a network. That is, until the arrival of the eSIM.

eSIMs eliminate the need for a physical SIM card — instead, device authentication can be enabled by downloading over the air network authentication credentials that can be permanently embedded into a device. eSIMs have been gaining traction rapidly, and are expected to be used in between two and three billion smartphones by 2025 according to GSMA Intelligence.

For consumers, the move away from a physical component enables remote provisioning, allowing users to set up their devices instantly without needing to visit a store or wait for SIM card delivery. For telcos, this improves their onboarding processes, simplifies logistics and removes the associated costs of supplying and delivering physical SIM cards to customers.

The time to act is now

Telcos however have been reluctant to take up eSIMs. In some ways, who can blame them? After all, removing the physical SIM and embedding eSIM technology into a mobile device removes much of the friction a customer faces when changing service providers, theoretically making it far easier for customers to switch if they’re drawn in by a better deal. Nonetheless, there are many reasons why eSIMs are a telco’s friend, not a foe. And against the current backdrop of remote working, ever-evolving tech and major shifts in the way we do business, now is the time for this reluctance to fade.

Taking flight

No longer is it necessary to purchase plastic SIM cards when travelling to new countries. Thanks to eSIM’s remote provisioning capabilities, all customers need to do to obtain the best network and service in their destination of choice is have access to an eSIM-capable device, install an app, select a network plan and purchase. Most eSIM services will email over a QR code for the user to scan in order to activate the device, although others offer in-app provisioning for an even smoother experience.

Multiple plans can be stored on a single eSIM capable device, and used when required. This isn’t only beneficial for end users — service providers are also able to work more flexibly and present various plan options to customers without the cost of distributing new cards. eSIMs can help providers maintain their competitive advantage, rather than hinder it.

Multiple choice

It’s also worth noting that there are far more eSIM-compatible devices on the market nowadays. eSIM first gained popularity in consumer devices when Apple launched the technology in its iPhone XS in 2019. At the time, the device retailed at around $999, or roughly £720 — placing it at the higher end of mobile device affordability.

Now, just a few years later, mid-range Apple devices such as the iPhone SE and iPhone 12 Mini have been produced with eSIM capabilities. Many of the latest Android phones also support eSIM, including the Samsung Galaxy S20 and 21 and multiple generations of the Google Pixel, to suit all customer preferences.

According to GSMA Intelligence, the definitive source of data and analysis for the mobile industry, 110 eSIM consumer devices were launched as of December 2020.

5G ready

eSIMs will also help mobile users make the most of other trending technologies, such as 5G. It’s clear to see that 5G still faces a rather lethargic rollout across the globe, and there are still hurdles to overcome before we see its complete adoption. But mass use of eSIMs could help to change this.

Embedded SIMs still play the same integral role in 5G networks as their nano, micro, mini and full-size SIM card predecessors — identifying and connecting devices to the Mobile Network. However, fully integrated, 5G-capable eSIM propositions offer a level of digital reach older SIM technology cannot. A device owner will be able to switch cellular carriers without having to switch SIMs or visit a provider and, when traveling abroad, eSIMs will use international mobile networks seamlessly.

For businesses that use the mobile connectivity to stay connected, the eSIM will help them manage their networked assets wherever they are in the world, and with more agility. As we continue working towards a complete 5G rollout, eSIMs could be key in offering seamless adoption to those who want to profit from the technology.

Consequences of missing out

eSIM, like any other emerging technology, is surrounded by a certain level of ambiguity. Providers struggle to assess the real opportunities and challenges involved in deploying the new technology. The consequences of missing out, however, can be disastrous.

One of the companies that neglected big trends and fell behind the industry leaders is Nokia. During the late 1990s and early 2000s, Nokia was the world leader in mobile technology. It became the best-selling mobile phone in the world and was famous for its top-quality hardware powered by its in-house OS Symbian.

In 2007 Apple introduced iPhone. Consumer needs started changing and app-based software started spreading in the phone industry. In 2008 Google entered the market and many soon-to-be bestsellers – Samsung, Motorola and Huawei – changed their operating systems to Android.

When Nokia finally decided to take the leap in 2011, they partnered with Microsoft to implement Windows Phone as Nokia’s primary operating system. They decided to stick to Windows operating system even after noticing its inability to compete with Android and iPhone. This move proved to be catastrophic for the company – in just six years, the market value of Nokia declined by roughly 90%. This decline culminated in the now infamous Burning Platform Memo shared by then CEO, Stephen Elop. Designed to rally the troops, the memo now gives rare insights into the behaviours of company that finds itself on the wrong side of a major industry shift. This proves that even the seemingly untouchable corporate giants can fall if they fail to innovate.

Lessons to learn

Nokia is just one example of a company that failed to innovate but history is littered with the ruins of companies with similar stories. At Mobilise, we foresee eSIM as one of the most disruptive technologies in the consumer market. However, the technology’s widespread uptake still largely depends on decision-makers understanding its value. We’ve already discussed eSIM’s flexibility and ease of use for customers, but what’s the business case for service providers?

Advantages for service providers can be divided into cost-saving and revenue-boosting activities. As part of the former, and without the customary process of sending plastic SIM cards to customers, service providers are able to streamline their logistics, reduce costs and drive greater use of digital distribution channels. As an inherent part of this process, relating to the latter benefit, service providers can enhance the customer purchasing process with simple onboarding and streamlined in-app provisioning.

When eSIMs first made it into the consumer realm, digital onboarding often required a QR code that customers needed to scan upon beginning their contract. Now, to make things even simpler, users can download the operator’s mobile app and activate their eSIM profile in just one tap. Mobilise’s latest solution — eSIM as a Service — uses in-app eSIM activation, making the onboarding experience quick and uncomplicated. This option removes the need for visual explanation and step-by-step instructions, so users can focus on the things they want from their service provider, like staying connected.

At Mobilise, we have seen the penetration of eSIM capable devices increase from five per cent twelve months ago to 35 per cent now. Following this trajectory, by the end of 2022, we expect to see 70 to 80 per cent market penetration of eSIM capable devices in Europe. Front runners deploying eSIM early will have the benefit of competitive advantage, while others, before long, will find themselves racing to catch up. Now truly is the era of the eSIM.