Connecting a continent via eSIM

11 September 2023

eSIMs are big news across the world, shaking up the environment for IoT/M2M and consumer devices alike. But what impact is the technology having in Africa?

Embedded SIMs or eSIMs have been taking the wireless comms world by storm since the first standard was released in 2016. Instead of an integrated circuit on a removable SIM card, eSIMs comprise software installed onto an eUICC chip which is permanently installed on the device. Once active, the eSIM can be reprogrammed remotely with new information, enabling rapid, hands-free carrier switching.

eSIMs hold a great deal of promise across a variety of applications, offering flexibility, convenience, connectivity, and the ability to leverage emerging technologies like IoT/M2M. As eSIM technology continues to mature and MNOs offer broader support for eSIMs, adoption is expected to grow.

Developing demand
Byron Kennedy, executive head of media relations, Vodacom Group, reports that the MNO is seeing rapidly expanding demand on the continent: “from a Vodacom perspective, we have seen an increase in eSIM device sales across our portfolio, with over one million devices eSIM enabled on our base.”

“We are seeing Africa, to some extent, reflecting what we are experiencing in Europe,” says Henrik Aagaard, CTO and co-founder of Onomondo. “In contrast to the US, where you don’t need to switch carriers to serve a market, smaller countries in Africa, like Europe, require the ability to switch carriers as devices cross borders. This is where we are seeing the demand for eSIMs.”

Garron Dace, solution architect sub Saharan Africa, Giesecke+Devrient, concurs: “we see demand from leading operators in sub-Saharan Africa to leverage eSIMs in the wearable and smartphone segment, but the adoption rate is much lower than in other regions such as US or Europe.”

There is genuine demand for eSIMs in Africa today, insists Kenta Yasukawa, cofounder and CTO, Soracom. “Part of that comes from a generational shift in the handset market, where Apple and Samsung have already transitioned to eSIM and most manufacturers are quickly following suit. But it’s also driven by a wave of new connected devices.”

Indeed, the consumer segment is making headlines across the globe – but that’s not to say that it’s the main market on the continent…

“The most obvious case is wearables like smart watches and trackers, where switching to eSIM allows smaller form factors, improves ruggedness, and removes the opportunity for consumer error in SIM installation,” says Yasukawa. “But eSIMs also offer significant advantages in large-scale M2M deployments, where removing the burden of managing individual card-type SIMs across thousands of devices can produce meaningful cost savings.”

“While there are developing regions within Africa, those areas also tend to adopt new technologies the fastest,” says Aagaard. “This can be seen in situations like end users paying via POS systems over mobile phones rather than using older technologies like credit cards. That’s why we are expecting to see the adoption of more technology within IoT and M2M, and here, eSIM is definitely going to play a role.”

Dace, however, warns that “eSIM has entered the market on high end devices, which means there is not such a broad market appeal. Additionally, the recent chip shortage has seen fewer handsets enter the market in the developing world. We think that demand will increase as users get their hands on devices and become familiar with the technology.”

Talking business
The business case for adopting eSIM technology varies from one MNO to another, depending on customer base, market position and business objectives. Nevertheless, eSIMs have a lot to offer. They enable MNOs to explore new revenue streams, in areas like value added services (VAS), connected cars, smart homes and buildings, and IoT/M2M applications. With eSIMs, Africa’s MNOs can leverage emerging markets and industries to expand their customer base and grow revenues.

For wearables, for example, eSIMs enable solutions like Vodacom OneNumber, explains Kennedy. “Vodacom OneNumber allows a customer to receive messages and calls anywhere on their eSIM wearable (watch) without the need to carry the primary connected handheld smartphone. Additionally, smartphone users who travel abroad can try a network quality, and then make a decision on the basis of the quality of the network they receive. Another practical example is the elimination of packaging which contributes positively to saving the planet as well as the cost saving associated with logistics – stock ordering and transportation, etc.”

Indeed, the use of eSIMs enables MNOs to sell their connectivity more efficiently without having to worry about customer relations or support. Remote SIM provisioning and management simplifies device onboarding and reduces support costs, while enhancing overall operational efficiency. By bypassing traditional physical SIM card distribution and remotely activating eSIMs, significant cost savings can be achieved, particularly in remote or rural areas.

“The use of eSIMs in everyday devices is becoming increasingly popular, representing a major opportunity for companies in this market,” says Lemberg. “As digitisation continues, the number of available IoT/M2M devices will increase significantly. Even though profit margins are lower in the IoT/M2M space, eSIMs still provide an opportunity to improve connectivity services, reduce fees and reduce manual effort.”

Adopting eSIMs can also help MNOs stand out from the crowd in competitive markets. By offering more flexible options to consumers like seamless switching and innovative services, operators can attract customers that value flexibility and convenience.

Yasukawa believes that for MNOs in Africa in particular, eSIM support offers an opportunity to grow market share while competitors lag behind. “Ultimately, we can expect that eSIMs will effectively replace card-type SIMs in most applications. This transition is already happening, and MNOs who fail to adapt will be left behind by more aggressive and opportunistic competitors. Because eSIMs are associated with the newest and highest-end devices, there is a secondary opportunity to position the MNO brand around technical leadership and capability.”

From an MNO standpoint, eUICC might even be considered crucial, opines Michael Karlsen, CEO and Co-Founder of Onomondo, as it protects the network dynamics.

“An eUICC solution is essentially a patchwork of agreements and a technology that enables those agreements in the field,” says Karlsen. “eUICC allows seamless switching between local identities, ensuring proper functionality. It enables MNOs to retain control over customer connectivity, as the device virtually belongs to them when used on their network. This control establishes a sense of security for MNOs as they can monitor the use of these solutions, individually price them, or develop business cases.”

However, using the traditional UICC in a wholesale model aggregates an MNO’s network into a single solution, leading to the loss of fine-tuning dynamics on pricing.

“Although this might be difficult for MNOs to appreciate, it provides access to a larger scale and fosters a partnership model, contrasting with eUICC’s B2B sales model,” says Karlsen. “Ultimately, MNOs must weigh the opportunity cost of engaging in wholesale agreements against the expenses involved in establishing and maintaining individual relationships for eUICC.”

Managing connectivity
The rise of eSIMs is expected to have a significant impact on the demand for connectivity management platforms (CMPs), which play a crucial role in managing the lifecycle of eSIMs, enabling remote provisioning, activation, and management of eSIM profiles.

“Efficiently managing the lifecycle of eSIMs is critical for enterprises,” agrees Lemberg. “Using automation and AI in connectivity management platforms will be crucial for optimising costs by analysing past behaviour from SIMs and making suggestions. It is also important that all CMPs support APIs that simplify the process for IoT companies when switching telecom profiles to eSIMs.”

For MNOs, CMPs deliver the tools to manage multiple network profiles, enabling users to choose the most suitable network based on factors like coverage, pricing, and quality of service (QoS). The new level of complexity in managing device connectivity for devices means that demand for CMPs will expand quickly. Moreover, CMPs will be more needed than ever to deliver lifecycle management, real-time monitoring, data analytics, and billing integration, all essential components for IoT.

“Even with card-type SIMs, multi-IMSI capability is already a valuable feature, especially in IoT/M2M use cases where devices may be located in remote areas or may travel frequently,” adds Yasukawa. “Because the eSIM is soldered to the device and cannot be swapped physically, increased eSIM adoption will necessarily drive increased demand for CMPs. For IoT/M2M in particular, we are already seeing growing demand for flexible, scalable connectivity management with the ability to aggregate multiple profiles and integrate with different hyperscaler platforms, like Amazon Web Services and Microsoft Azure.”

Further, eSIMs require robust security measures to ensure the integrity and authentication of profiles. CMPs play a crucial role in managing secure connections, enforcing authentication protocols, and providing encryption mechanisms. “Service providers will insist on tight control of connectivity management. Not only from a risk perspective, but for QoS monitoring as well,” adds Dace.

IoT vs consumer
In Africa, the adoption of eSIMs for IoT/M2M applications is expected to be significant due to the specific requirements and scalability of deployments in sectors like agriculture, energy, transportation, and healthcare. eSIMs are particularly well-suited for IoT/M2M applications due to their ability to enable seamless connectivity and remote management of devices, ideal for large-scale IoT deployments.

eSIM uptake for consumer devices like smartphones, wearables, and tablets is also rampant; however, on the continent, factors like low smartphone penetration rates, affordability, and digital skills play a significant role in market adoption. Nonetheless, with so many projects currently aiming to address these challenges, and with manufacturers increasingly incorporating eSIM support in their devices, the adoption of eSIMs in consumer devices is likely to increase rapidly.

New data from Juniper Research reports that the global number of IoT connection using eSIM technology will reach 195 million by 2026, up from 22 million this year. Only 2% of all eSIMs will be attributable to the IoT sector in 2023; however, with the increased adoption of eSIM tools, the growth of eSIM IoT connections will outpace the consumer sector over the next three years. By 2026, 6% of global eSIMs will be attributable to the IoT sector. eSIM-enabled IoT devices will grow 780% globally over the next three years, with two key areas benefitting: logistics and oil & gas. By 2026, it forecasts that these two markets will account for 75% of eSIMs in use globally.

However, our jury is out on which use case – IoT or consumer - will ultimately take the lead.

About 70% of eSIM connections today are M2M, but the consumer device share of the eSIM market is growing fast, reports Yasukawa.

“This is driven in part by IoT cases like smart home and wearables, but primarily by the transition to consumer eUICC spec by manufacturers of mid-range Android handsets following the lead of Samsung and Huawei,” says Yasukawa. “We expect that consumer devices will ultimately overtake IoT/M2M devices in terms of total eSIM market share, but for now both markets are growing quickly.”

“Currently, we see a bigger trend in consumer devices, due to watches and wearables use cases, as well as iconic smartphones,” adds Kennedy. “We believe the IoT/M2M trend will start as soon as eSIM reaches greater economies of scale.”

In contrast, Karlsen expects IoT/M2M use cases - specifically for eSIM and eUICC - will rapidly outgrow consumer devices.

“By the sheer dynamics of a human-to-machine ratio, IoT/M2M solutions are bound to exceed the number of people in African countries,” said Karlsen. “In the IoT/M2M market, there often becomes a need for international roaming and traveling activities. This is where eUICC has been able to make an impact. This is a trend we are seeing in Africa and southern Asia, as well as in Europe and North America.”

However, when considering the prominence of eSIMs versus traditional UICCs, it becomes more nuanced: “the scale at which solutions are implemented plays a vital role in determining the preference for eSIMs or UICCs,” says Karlsen. “Both technologies offer advantages, and their suitability depends on specific use cases and implementation scenarios. One of the biggest factors is how the MVNO or MNO deploys the solution.”

“IoT/M2M may take some time to develop as there is huge application scope,” agrees Dace. “However, there is a dependency on infrastructure to deploy and utilise these kinds of devices. It is likely that IoT/M2M will overtake consumer volume in the long term.”

Ultimately, the uptake in both use cases depends heavily upon regulatory support, infrastructure development, and partnerships and ecosystem development. With the drive we’re seeing to connect Africa today, eSIMs will necessarily play a significant role in connecting the unconnected, bridging the digital divide, and digitally transforming the entire continent.