Imagine Apple as the undisputed leader of the telecom business in a market. Apple can meet all customer needs, including device and mobile phone purchases, data plans, and streaming games and shows. For telecom operators, that’s a doomsday scenario that would decimate mobile revenues. Previous disruptions, such as WhatsApp—which made SMS and voice services relics—would pale in comparison.
That’s what the era of eSIMs (tiny digitally embedded SIM cards that can accommodate multiple profiles) could mean for telecom operators. Kaleido Intelligence projects that active smartphone eSIM connections will increase across the Middle East and North Africa (MENA) region from 5 million in 2023 to 135 million in 2028. This acceleration is fueled by growth in eSIM-only smartphones, remote authentication, and more digital-savvy consumers. eSIM aggregators are already using the technology to erode operators’ roaming revenues. Should licensing requirements and regulations change, there could be new competitors in the telecom industry, such as Apple, Samsung, and other over-the-top (OTT) players. These companies could buy bulk capacity from operators and create an ecosystem of digital services, including mobile, making significant inroads into the telecom market.
The journey to the new era
eSIM offers multiple advantages over physical SIMs, advantages that could revolutionize the telecom industry. Users can activate and change mobile plans remotely because the eSIM is digital—there is no need to go into a store. Customers can shop around for the best mobile plan option from different carriers, all from the comfort of their couch. eSIM technology also presents growth opportunities for players along the entire value chain. For example, an eSIM’s small size means it can fit into more devices—including tablets, internet of things (IoT) gadgets, wearables, and car infotainment systems—thereby increasing demand for a mobile connection to a network.
eSIM growth is concerning for telecom operators, as they have historically struggled to recover from business model disruptions. Instant messaging applications such as WhatsApp, for instance, have obliterated SMS services worldwide and wiped out billions of dollars in revenue for telecom operators. Once these companies developed into popular voice over IP (VoIP) apps, they threatened operators’ domestic and international voice revenues. Many telecom operators responded by offering unlimited voice calls in many of their plans because voice was no longer a differentiator.
It could be harder for telecom operators to recover from the rise of eSIM-enabled business models. Competitors offering eSIM already provide activation journeys that are simpler than those on offer from traditional telecom operators. Consider the customer journey available from roaming eSIM aggregators. Customers can move from app log-in to remote eSIM activation, without the need for physical authentication, in just six steps.
In response to the threats outlined above, telecom operators can create long-term growth opportunities and solidify their grip on the entire customer journey by taking the following three measures:
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Abandon legacy go-to-market methodsTelecom operators should abandon legacy go-to-market methods, as eSIM’s format will change how they bring products and services to customers. Operators should provide smooth customer journeys that can compete with leading digital services providers such as eSIM aggregators or Amazon, Apple, and Netflix.
eSIM is also evolving the concept of a subscriber as one customer. Customers can run many eSIMs concurrently on one device becoming "multiple subscribers." As a result, operators must adopt dynamic customer base and performance management approaches. -
Become the go-to provider of smartphonesTelecom operators should focus on customer relationships beyond the initial smartphone transaction to capture and retain mobile connectivity customers. For years, telecom operators have been expanding into smartphone retail and distribution to increase the penetration of these devices among customers and to grow demand for telecom services. However, the focus has been on that initial sale and not the ongoing relationship.
To become the local go-to brand for smartphones, telecom operators can take several steps: Capitalize on the reach of account management applications Offer best-in-class supply chain and customer journey Provide services that build lasting relationships -
Offer access to an ecosystem of cohesive digital servicesTelecom operators must develop beyond the telecommunications business and reposition themselves as comprehensive digital service providers to compete over the long term with one-stop digital shops such as Amazon, Apple, and Google. They can also consider geographic expansion thanks to eSIM technology.
Telecom operators can begin by offering customers access to an ecosystem of services catering to every facet of their digital journey, including device purchase, connectivity, e-commerce, entertainment, education, financial services, insurance, and wellness. Telecom operators can stand out from the numerous service providers that already cater to consumer needs across lifestyle domains by providing a seamless, integrated offering. They should adopt a centralized approach to managing customer journeys by not making different business units or subsidiaries responsible for various products or services within those journeys.
Strategic partnerships, joint ventures, or acquisitions can be advantageous, allowing operators to augment their offerings without building them independently (and help move away from legacy go-to-market strategies).
The proliferation of eSIMs is creating new market and customer dynamics for telecom operators. Although many telecom operators are familiar with this technology, they have yet to grasp its effects at scale. eSIMs are likely to challenge telecom operators to transform their telecom businesses into digital enterprises. Doing so can enable telecom operators to capture the many opportunities eSIM technology affords—reaping greater enterprise value and establishing real staying power.
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