Telecoms analyst and consultant Angel Dobardziev of WhiteBridge Insight discusses the inclusion of eSIMs as standard in Apple’s new phones, and why this marks a significant moment for both consumers and MNOs and how they will interact in the future.

Apple’s new iPhone XS and XS Max models will have dual SIM functionality, including an eSIM. At first sight, this may not seem like much: dual SIM smartphones have been around for a while.

WhiteBridge thinks the actual inclusion of the eSIM in the iPhones is a very significant move for the industry, great news for consumers, but also a mixed blessing for carriers.

Unlike the physical SIM we all know  – the removable piece of plastic with a chip that identifies the mobile carrier which must be pulled out of a phone every time the user wants to change providers – the eSIM technology includes a tiny chip that is soldiered directly into the phone’s circuit board during manufacture.

The eSIM can then be programmed over the air to use or change providers. Smartphone manufacturers’ gain the internal space that would have been taken by the physical SIM, and the related tray and reader – or they can launch dual SIM phones using a tiny fraction of extra space, as Apple has done.

For now Apple’s move is limited: the eSIM technology is enabled by just over a dozen carriers in 10 markets including the US, UK, Germany, Spain and India. But this move matters a lot more for the future. Apple has just made it much easier for other smartphone manufacturers to deploy the eSIM technology into their future smartphone models. While the eSIM was already available with Google’s Pixel 2 phone, most major smartphone manufacturers have so far held back on deploying it to avoid antagonising carriers.

Mobile carriers face the prospect of transformational changes in their relationships with customers. Users with eSIM enabled smartphones will be able to store and switch mobile subscriptions much easier, both at home, and when roaming internationally. They would no longer need to visit a store to get a physical SIM, and may no longer look to buy their smartphone there either.”

The eSIM technology has been viable for years, but many mobile operators have until now pushed back on its deployment in smartphones, as it makes switching providers much easier. It was originally developed for M2M applications, such as smart meters and connected cars where remote programmability is at a real premium. It was recently deployed in wearables such as the Apple Watch and Samsung Gear, which have no space for physical SIMs. Smartphone manufacturers began looking at using the eSIM much more intensely only recently. They need additional gains in internal space, battery life, and water resistance – as well as to cater to the growing consumer demand for dual SIM devices. So it was all but inevitable that the eSIM technology would find its way into smartphones, with Apple at the forefront.

WhiteBridge expects most major smartphone manufactures, including Samsung, Huawei, LG and Xiaomi to follow Apple and include dual SIM devices with eSIM functionality in the next 12-24 months. WhiteBridge believes the market development scenario where the physical SIM completely disappears from new smartphone models over the next five years is the most likely – to be replaced by eSIMs, and possibly iSIMs, a new and even more efficient digital SIM technology that was recently launched by ARM.

The forthcoming migration from physical to digital SIMs – where smartphone users are able to switch between multiple carrier profiles at will – will lead to profound changes in the industry. For a start, it will disrupt the SIM hardware providers such as Gemalto and Giesecke & Dervient who will need to shift their business model from hardware sales to supply of platforms and services such as secure over-the-air subscriber management.

Mobile carriers face the prospect of transformational changes in their relationships with customers. Users with eSIM enabled smartphones will be able to store and switch mobile subscriptions much easier, both at home, and when roaming internationally. They would no longer need to visit a store to get a physical SIM, and may no longer look to buy their smartphone there either.

Indeed, the eSIM-enabled smartphones will almost certainly accelerate a growing trend of users first choosing their smartphone, and only then considering the mobile carrier.

How will mobile usage and revenues change in a market dominated by eSIM smartphones – where users have the ability to easily zigzag between mobile providers? Will it alter the current pre- and post-paid balance if more users shift to multi-profile usage? What will be the new definition of churn? What value, if any, will the carriers’ retail network add in this market?  What could mobile operators do to prepare for this profound market change? And should carrier’s 5G rollout plans be altered as a result of this?

These are just some of the questions mobile operators will need to carefully consider in the coming months to ensure they face a market full of eSIM smartphones fully prepared. Not all of the changes will be negative for mobile carriers, and there will be opportunities for players that adapt, and respond quickly to this changing environment.

WhiteBridge thinks Apple is set to again disrupt the mobile industry with its eSIM enabled iPhones, almost as much as it did with its launch of the first iPhone over a decade ago. Last time the mobile industry took too long to recognise and act on that disruption, and some players paid a big price for it. The industry risks repeating the same mistake at its peril – should it not act faster, and prepare better, this time.

This post also appeared on WhiteBridge Insight and is republished with kind permission of the author.

Angel Dobardziev

Director, WhiteBridge Insight

 

Take part in the MEF discussion of the implications of eSIMs for the mobile ecosystem. Contribute your thoughts and questions on how eSIM will impact payments, personal data and security.  Contact us now.

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