1. M2M market trends from Mobile Network
Operator perspective
July, 2010
1 m2m market forecast
1.1 IT and telecommunications market
IT and Telecommunications market went through hard times due to worldwide economic crisis
and the erosion of price and margin level. Overall, the IT and telecommunications market in
Germany has decreased by 2% in 2009 in terms of market value (total revenue). Also the total
mobile market, especially mobile voice, is not the fast growing market of former times any more.
In 2009 and 2010 all market players are facing hard competition, price war and shrinking cus-
tomer loyalty.
Fixed and mobile voice telephony had the same revenue decrease as telephone handsets, CPE
and telecom equipment (3% to 7% revenue decrease p.a.).
Only mobile data and internet access and related services will have a revenue increase. Mobile
data is defined as follows: SMS, MMS, data access, data content without interconnection reve-
nues.
Within the mobile data market, the m2m market is going to play a more and more important role
and is virulent part of the robust mobile data market growth.
IT and Telecommunications market Germany 09/10[1]

2. 1.2 Forecast method
Telegance conducted several projects for mobile operators and m2m end customers in coop-
eration with module manufactures and system integrators in realization projects. For a realistic
forecast, bottom simulation models, expert interviews and m2m project realization expertise
have been combined. We defined the following assumptions for m2m market forecast and used
established secondary market studies:
• Becham Research Worldwide Cellular m2m Service Forecast (non optimistic eCall)
• Berg Insight AB The Global Wireless m2m Market
• Economic crisis (e.g. in automotive sector) was taken into consideration
• simulation models, expert interviews and m2m project cross checks
• No massive smart metering regulation for all households in Germany
1.3 Definition market volume
Definitions of market volumes in the m2m market are not easy to differentiate. Often, we see a
mixture between SIM cards and integrated solutions as well as shipped device modules and
chipsets in the market.
In this survey, we took the specific MNOs' view on the m2m market, which has been defined as
follows:
• As customer base, operators define the volume of m2m connections (SIM cards, integra-tive
solutions) at the end of calendar year.
• MNOs do not focus at the number of hardware terminals, annual hardware shipments or
modules in operation
• MNOs focus on the Average Revenue Per User (ARPU) development of pure m2m con-
nectivity and/or data traffic volume
• ARPU elements : m2m connectivity, Software, System integration
• Not included in ARPU:
- Hardware

3. - Data processing
- Service- und maintenance
1.4 European market volume forecast
In Europe, we estimate a total amount of m2m connections of approximately 18 millions and a
Compound Annual Growth Rate (CAGR) between 20% and 25% until EOY 2015.
m2m connections EU 27+2 (incl. Eastern Europe) in million connections[2]
In Germany we estimate a market volume of approximately 2 million m2m connections EOY
2009 and a current market value of approximately 100 million EUR. The market value is defined
as network operator revenue, offering m2m connectivity. The growth rate forecast will be ap-
proximately 30% CAGR until EOY 2015. German growth rate will be above European average
due to potential in automotive, consumer m2m and other verticals.
1.5 Definition market value
• Service enablement: modules, chipsets, hardware
• Network operator revenues: This is income earned from the provision of data carriage to and
from the mobile device using cellular technology.
• Value added services: specific vertical solution offering by end customers/ clients in in-dividual
vertical including system integration. The m2m services are provided at a layer above the
traditional network layer
1.6 Worldwide market value forecast
The worldwide market forecast shows the different dimensions of service enablement, network
(mostly MNO revenues and Value added services) and value added services.
The absolute growth of the value added services market seems to be very attractive, whereas

4. hardware/service enablement and network revenues are significantly smaller and will not grow in
the same dimension. Reasons for the smaller dimensions of these two specific market seg-ments
could be explained with:
• complex, fragmented market structures in hardware and service enablement business
• growing price pressure on chipsets and module hardware
• Beginning ARPU erosion in the MNOs network revenues.
The big question is: How can we define the value added services? Most current definitions are
cloudy and not precise enough.
m2m revenue forecast worldwide in billion EUR[3]
2 Qualitative trends
2.1 Value added services in IT and telco
Like in other industries, value added services are dominating more and more value generation
and value chains of this industry.
As shown in the exhibit below, telco services and access as well as hardware are becoming more
and more commodities with a decrease of market value. On the other hand software and ICT
services are growing.
Market value IT and telco segments Germany in billion EUR revenues[4]

5. 2.2 Value added services in m2m
In the definition of value added services we can find important elements.
First of all we are talking about special vertical solutions offered and developed by end cus-
tomers or service providers. One example could be automated services, such as automatic me-ter
reading in utility sector. Other examples from the automotive sectors could be call centre
functions, such as driver assistance.
Another aspect is system integration between hardware, modules and MNO. System integra-tion
enables m2m services for the end customers, bridging the gap between their companies IT
systems and m2m systems are hardware. In system integration we can find a huge amount of
m2m companies in Germany with the characterisation of a clear vertical focus.
The next aspect is the vertically specialised m2m consulting sector. A lot of m2m projects can
only be realised with IT and process analysis, project management and IT realisation support
provided by specialised m2m consulting companies. A major share of this business can be con-
tributed to the so called value added service sector.
A big question is where the entire service and maintenance is located. Originally all service,
maintenance, trouble ticketing etc. was located in the hardware, service enablement sector, when
all the m2m projects and solutions have been build in the past. Telegance assumes that this
picture has changed. Now service and maintenance is also a part of the value added ser-vices as

6. far as it is not purely related to m2m hardware.
The last aspect is the m2m software. A growing amount of m2m related software is not pure
access or service enablement; it is to generate business and process improvement at the end
customer's side.
3 Conclusions
3.1 Key verticals of MNOs today
At the moment MNOs have three main customer segments which contribute more than 80-90%
of the entire m2m business.
1. Road charging top accounts like Toll Collect in Germany, ASFINAG in Austria
2. Domestic and roaming connectivity for navigation devices and services
3. Data card services for logistic companies
The current customer base is dominated by a few multinational corporations where we have long
term contracts. But now, with growing price and cost pressure, we see a slow ARPU dilu-tion in
those major contracts.
For these reasons MNOs will have to address other verticals and also smaller customers beside
the multinational key accounts. We think that domestic corporations and bigger SMEs (small and
medium enterprises) will play an important role in MNOs' future sales strategies.
MNOs are reluctant to invest heavily in other m2m verticals where the growth market volume or
ARPU development is not clear in the future. One example is the automotive sector:
Especially eCall and car to car communication solutions will not ramp up earlier than 2014 in the
German market. The deep automotive crisis and cutting down of all product roadmaps of the
Tier1 suppliers leads to a two year delay of market entry of all relevant products. Telegance
forecast the same development for Western and Eastern Europe.
On the other hand, there are several obstacles for MNOs to pursue a more aggressive m2m
approach in the automotive sector, e.g. the creation of necessary alliances in the automotive
market, access to standardization bodies of the car making industry or the heavy investments
required to produce solutions that meet the specific automotive safety regulations.
3.2 Future MNOs m2m approach
In former times, m2m was sold by the regular mobile sales forces without special knowledge.
These times are gone. At the moment we see the following MNO approaches in the classic m2m
market:
• Build up a specialized m2m sales force, with technical capabilities
• MNOs will form global alliances to address highly sophisticated verticals with complex
structures (key verticals: OEM Automotive, M Health)
• MNOs are building huge partner platforms to handle the challenges of big and complex ICT

7. projects
• MNOs need to build partner management platforms for m2m partners (like ICT market)
3.3 MNOs approach to value added services
In terms of customer care and development of value added services in the mobile phone busi-
ness, MNOs have a core competence to develop such services. We assume, that MNOs in-
creasingly think about developing own m2m value added services platforms. However these
m2m services must be aligned with the market entry of MNOs in the ICT market.
• MNOs will enter selected ICT market segments and customers segments, addressing also the
value added services market
• Value added services in the ICT market means managed services, selected system in-tegration
services, selected consulting services
• MNOs will look for synergies between ICT and the m2m business
For further Information please contact:
Telegance Consult GmbH
Ginsheimer Strasse 1
65462 Ginsheim-Gustavsburg
[1] EITO report June 2009
[2] Telegance estimate, market modelling, Beecham, Berg Insight
[3] Telegance estimate, Strategy Analytics 2009
[4] EITO report June 2010, Experton and Telegance estimate