IoT generated more than €11bn revenue for operators in 2016

Mobile operators raised more than €11 billion in revenues from the Internet of Things (IoT), according to research from Berg Insight, with 398 million cellular machine-to-machine connections in use by the end of the year.

In 2015, M2M revenues were €6.7 billion, according to the Swedish analysts. 

IoT generated as much as €200 million in quarterly sales for operators such as Vodafone and Verizon, with analysts Berg predicting a handful of operators will generate more than €1 billion in revenue from IoT connectivity, solutions and applications next year.

Overall connection numbers were up 30%, according to Berg’s estimates, making up around 5% of all mobile subscriptions. This will grow to 1.2 billion by 2021, Berg estimates.

Berg identified connected cars as a key market for large operators in vehicle-producing countries.  Telcos such as Vodafone, AT&T, Verizon and Deutsche Telekom have built-up arms specifically aimed at supporting automotive manufacturers developing connected car solutions.

Vodafone has made several acquisitions in this space, including the £115 million takeover of Italian car technology company Cobra in 2014. Verizon has also made strategic acquisitions in this space, buying telematics firm Telogis in June of last year.

IoT is seen as a big growth opportunity for operators due to the volume of connections expected – as many as 75 billion devices by 2020 according to a Morgan Stanley report – but ARPUs are much lower than traditional mobile subscriptions.

Berg found ARPU for cellular IoT was €1.40 I 2016. However there was a wide variation between regions, according to the report, with ARPU of less than €0.30 in emerging markets, and as much as €3.00 in more developed ones.

Until recently, the principal financial metrics for IoT has been projected, not actual, revenues. Now the market has entered a new phase in which hard business facts take precedent over lofty projections,” said Tobias Ryberg, senior analyst, Berg Insight and author of the Global M2M/IoT Communications Market report. 

“Wireless connectivity is now near ubiquitous and there will be half a billion cellular IoT connections in 2017, but revenues are still relatively small.”