eSIMs: Threat or Opportunity for Mobile Network Operators?

The opportunities that could come with eSIMs may invite entry from Big Tech in the supply of mobile network services if they choose to act as MVNOs themselves. Alternatively, they could play a role in the choice of mobile network provider. If the need for a physical sim card is eliminated, consumers could choose their network provider instantaneously when they set up their phone. Much like how goods are strategically positioned on a shelf in a supermarket, the way in which the choice of network provider is presented to consumers (e.g.whether a provider is at the top of list, or if they appear only after a consumer has swiped through several options) could impact consumer choice.

Potential entry from players beyond the world of telecoms and Big Tech has also been reported. Challenger banks, utility companies and even influencers have recently announced plans or are rumouredto be planning on entering the market.

In short, existing business can become digital MVNOs – enabled via eSIMs – and can cross sell connectivity to their customer base thus increasing their stickiness.

Alternatively, new digital connectivity only providers are likely to emerge and potentially capture lucrative connectivity revenues, e.g. roaming by offering simpler eSIM journeys. MVNEs (Mobile Virtual Network Enabling) players can offer eSIM provisioning facilitating new digital retail players. The MVNEs, in turn, can purchase connectivity directly from MNOs acting as MVNAs (Mobile Virtual Network Aggregators). By weakening long-standing industry moats, eSIMs could pave the way for disruptive players and accelerate the disintermediation of Mobile Network Operators.

However, eSIMs may also offer new ways for MNOs to attract new customers and offer differentiated propositions. The ability to multi-home easily could present opportunities. For example, if a customer has good service at home but has poor service at their area of work, they could potentially have two eSIMs on the go. MNOs could offer temporary event passes for large events such as festivals and gigs or “try before you buy” packages to tempt new customers. Indeed, both of thesehave been trialledin the UK by Vodafone. Operators such as Vodafone can also look to use the strength of their global brand and scale to proactively target the roaming market using eSIM-based propositions. Such efforts could focus on enabling simpler digital customer journeys to sign up to travel eSIMs and can proactively target customers who may not necessarily subscribe to the network at home.

That said, the popularity of eSIMs still remains uncertain (see Figure 3). GSMA notes that “contrary to initial ambitions and forecasts, adoption of eSIM in the smartphone market has been slow and mostly driven by the US (where the launch of eSIM-only iPhones in 2022 has boosted adoption to 40%) and travel eSIM (users have grown by 45% in the last 12 months).”2

Whilst the newest iPhone model will only support eSIMs,3 it is not known whether other mobile handset manufacturers will follow suit. Even if that is the case, it may take some time for customers to replace their existing handsets with eSIM-only ones.

Nevertheless, the provision of mobile network services has seen several big shifts, driven by technological advancements over the past decade and this trend may continue. Whilst eSIMs may or may not bring widespread disruption in the near-term, there remain other challenges on the horizon (or coming from space,4 in the form of satellite services) that could further shake up the mobile market.