Telcos warm up to internet of things to shore up revenues

Reliance Industries’ (RIL) acquisition of US telecom software firm Radisys underlines the necessity and revenue opportunities for carriers in nextgen services such as Internet of Things (IoT), amarket which could be worth well over $9 billion by 2020 in India.

The telcos are keeping in mind that data tariffs have dropped 90% while voice tariff by about 60% in the past couple of years, resulting in gross revenue falling 8% on-year to Rs 2.6 lakh crore in 2017, and are thus shifting focus from core telecom services to emerging technologies and have begun tapping areas such as IoT and Machine-to-Machine (M2M) more aggressively.

Rohan Dhamija, head, India and the Middle East for consultancy firm Analysys Mason, said that telcos will need to go beyond their comfort zone of offering services beyond connectivity which only forms 20 to 25% of the IoT value chain in terms of revenue.

“There’s a need for an immediate focus to be able to participate in this IoT opportunity. From the experience on OTT (over-the-top, or app) wherein, telcos were late in participating, telcos realize that they have to be aggressive and need to invest now rather than wait for the ecosystem to mature,” he said.

He explained that the requirement for investment and the addressable revenue opportunity will increase as telcos move from connectivity to end-to-end solution provider.

As per consultancy firm Deloitte, the IoT units in India are expected to see a growth of 31 times to reach 1.9 billion in 2020 from its current base of 0.06 billion. In terms of revenue, this opportunity could represent $9 billion by 2020 from $1.3 billion in 2016 — a growth of 700%. Government of India though is aiming to create a $15 billion IoT industry in India by 2020.

Counterpoint's senior analyst Hanish Bhatia said that the key areas in the IoT industry for telcos could be vehicle tracking, smart appliances, smart metering and security & surveillance. "Besides smart cities, telcos also plan to target retail, manufacturing, healthcare and automotive."

RIL’s latest buy will accelerate Reliance Jio's push to build in-house development capabilities for fifthgeneration (5G) technology and IoT. Its bitter rival and leading telco, Bharti Airtel, and Vodafone, on the other hand — as part of their established enterprise businesses — are now offering IoT services. In a major push, Airtel is in advanced talks with US telecom major Verizon for a broad partnership around IoT. It has already initiated several IoT projects at its Manesar network centre, and is establishing a new centre in Bengaluru to work on these technologies.

Vodafone, which is in the process of merging operations with Idea Cellular, has tipped IoT to be one of its fastest growing segments and will bring some global IoT use cases to India, besides launching a narrowband IoT network, mirroring a similar one by Jio.

Jio though appears to be the most aggressive of the telcos in India, having already set up a narrowband IoT network which is commercially active in a few cities, including Mumbai. It has now followed it up with the acquisition of Radisys.

The company’s vice president, Aayush Bhatnagar, who is currently looking after the software development around domains such as 5G networks, IoT platforms, blockchain and SDN/NFV platforms, will be heading the Radisys team.

“The acquisition will help Jio in driving the adoption of open source technologies. In addition, Jio would be able to drive the development of new products — 5G core and radio — and further bolster NFV adoption, paving way for the development for IoT platform and applications,” a person familiar with the matter said.

Dhamija said that Indian telcos see a huge IoT opportunity even in the short to medium term, especially with the arrival of 5G due to low latency and higher capacity benefits. 5G technology, according to analysts, will support billions of connected devices, and digitisation of different sectors such as healthcare, education, agriculture, and smart cities, thereby creating a huge demand for IoT and M2M devices which will be connected by the telco infrastructure.

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