Proving the Business Case for the Internet of Things

Australia set to experience high growth in M2M, says Frost & Sullivan

Steve Rogerson
January 21, 2015
The Australian M2M market is set to grow at 18.1 per cent CAGR from 2013, doubling in value by 2016, according to a report from Frost & Sullivan. Transportation, logistics, energy, healthcare and industrial automation are the main demand sectors.
The M2M communications market in Australia was measured by the number of M2M sim connections activated. Market revenues were measured by sim activations, including costs of hardware, applications, installation and connectivity. In 2013, the number of sims activated was estimated at 400,000 to 450,000, an increase of 20 per cent from 2012.
The report predicts the market will display high growth rates over the next five years, peaking at over 30 per cent revenue growth by 2016, and doubling its 2013 value. Demand for M2M products from existing markets such as transportation and logistics, as well as new opportunities in energy, healthcare and industrial automation sectors, will keep growth rates over 25 per cent in 2017 and 2018.
Audrey William, head of ICT research for Frost & Sullivan in Australia and New Zealand, said that although the M2M market was at an early stage of growth, it had not yet experienced high growth rates as usage was currently limited to a small number of industries. However, the sustained growth expected over the next five to seven years will largely be due to uptake from a wider market base of industries, and the huge opportunity for connecting a variety of objects with sims and sensors.
Transportation, logistics, energy and utilities are the key markets for M2M adoption, and currently account for the majority of deployments. These sectors have the strongest business case for using M2M to increase efficiency, and as a result have a much higher awareness and understanding of M2M.
"Although other verticals will increase their uptake of M2M solutions, these sectors will remain significant for driving growth,” said William. “However, demand from sectors such as healthcare, retail, agribusiness and banking will increase over the next few years. This will also coincide with the expansion and maturity of the M2M market, where a wider range of industry requirements are addressed."
She said that as the M2M market moved from a nascent stage of growth towards mainstream uptake, it would attract new players, which would increase competition.
“This market commoditisation will put pressure on the lucrative profit margins currently enjoyed,” she said. “Solution providers with a hardware based strategy will find it increasingly challenging to generate growth. Local telcos are already building strong service capabilities to address a wider range of requirements. In the next three to five years, although the average revenue per sim will decline, the telcos will continue to benefit from the larger volumes of deployments."
The competitive landscape of the M2M communications market is highly concentrated. In 2013, the three main telcos – Telstra, Optus and Vodafone Hutchinson – accounted for more than 95 per cent of the market in Australia. Telstra and Optus have a wide breadth of ICT capabilities and their strong networking and infrastructure capabilities enable them to integrate M2M easily with critical backend systems. The established brand name of these telcos in the local market further strengthens their market position and new entrants will find it difficult to overcome these competitive barriers.