IoT and its challenges for mobile network operators
The Internet of Things (IoT) market is expanding rapidly, as enterprises prioritise digital transformation, writes Christina Patsioura, the lead analyst for IoT & Enterprise Research at GSMA Intelligence, in this report which has been authored by GSMA Intelligence with support from floLIVE. However, mobile operators are struggling to translate this growth into sustainable revenue, as IoT connectivity alone is becoming increasingly commoditised
Challenges for mobile operators include the following:
- Declining connectivity revenues. Intense competition from mobile virtual network operators (MVNOs), hyperscalers and IoT service providers is driving down margins, making it difficult for mobile operators to differentiate their offerings.
- Enterprise churn and value creation. Operators must evolve beyond basic connectivity as enterprises demand security, integration and multi-country network consistency.
- Complexity of global coverage. With 38% of enterprises requiring IoT deployments across multiple continents, traditional roaming models are insufficient, requiring new connectivity frameworks.
- An investment dilemma around 5G RedCap and legacy support. While enterprises seek future-proof, low- power IoT solutions, many existing IoT connections still rely on legacy 4G, LPWA and even 2G/3G networks.
- Enterprise IoT adoption barriers. Cost of implementation, security concerns and technology integration challenges remain key obstacles hindering IoT deployments at scale.
To capture value beyond connectivity, leading operators are pursuing three core strategies:
- Developing vertical-specific solutions – Focusing on high-growth sectors such as automotive and utilities.
- Deploying cloud-native IoT platforms – Enabling scalable, API-driven integrations for enterprise customers.
- Forming strategic partnerships – Collaborating with hyperscalers, systems integrators and IoT solution providers to enhance service offerings.
The challenges above have created a limited market for operator-led IoT, prompting them to rethink their IoT strategies. To succeed, operators must understand the specific hurdles faced by enterprise adopters. GSMA Intelligence’s Global Digital Transformation Survey highlights the key obstacles among potential adopters: high implementation costs, security concerns, difficulties integrating with existing systems, and a lack of in-house expertise. Operators can play a vital role in helping enterprises overcome these barriers. To do so, operators must have the right talent and business resources, together with a modern, purpose-built, IoT technology stack.
IoT has come a long way
Mobile operators have played a critical role in shaping the IoT landscape, evolving from machine-to-machine (M2M) pioneers to key enablers of the connected world. As IoT adoption accelerates, operators face a growing challenge in delivering seamless, cost-effective and scalable connectivity.
This report delves into the biggest pain points encountered by operators, including global connectivity management, regulatory compliance, security concerns and monetisation strategies. By understanding the challenges, operators can refine their strategies and position themselves for long-term success in the evolving IoT ecosystem.
Evolution to key enablers of the connected world
2000–2010: The M2M era
Mobile operators began their journey by exploring M2M communication, focusing on industrial and telematics applications. In its early days, the potential of M2M communication was not widely recognised. However, several forward-thinking mobile operators invested heavily in developing proprietary platforms to support M2M services, or relied on third-party monolithic platforms, laying the foundation for what would later evolve into IoT.
2010–2019: IoT proliferation
Realising the vast potential of IoT, operators intensified their investments and defined the role of mobile networks in the ecosystem.
This period saw the proliferation of IoT- driven applications, such as telematics powering usage-based insurance, and smart meters modernising national utilities. The convergence of IoT with digital technologies and cloud platforms unlocked new opportunities. IoT became a central pillar of 5G’s future vision.
2020 to present: A dynamic IoT market
As IoT matures, the market is experiencing rapid growth and consolidation, particularly in areas such as connectivity services, equipment, and management platforms. At the same time, operators face challenges in monetising certain IoT use cases. As a result, the total addressable market for operator- led IoT is being constrained – both at the lower end, where smaller use cases struggle to scale profitably, and at the higher end, where cross-border IoT deployments require more advanced solutions. In response, some operators are re-evaluating their IoT strategies, reassessing their role in the value chain and exploring new business models to sustain competitiveness.
New entrants are also entering the IoT space, making use of advancements in technology and the groundwork laid by early adopters to offer innovative solutions and capture emerging market opportunities.
Plans for IoT among mobile operators
Half of operators are looking to re-evaluate plans
Based on GSMA Intelligence tracking of operator plans for IoT, Figure 1 outlines how operators view their future:
- About a third are confident in their strategic choice to be in IoT and intend to keep investing in it in the future.
- Almost half think they should re-evaluate their strategies, despite being confident in their choice to be active in IoT.
- Around one in four appear less confident about continuing to invest in IoT or even continuing to offer it.
IoT challenges for mobile operators
Profitability of IoT connectivity
After about a decade in IoT, just over half of operators globally still offer connectivity-centric IoT. The rest have moved to services beyond connectivity. Overall, average revenue per user (ARPU) from IoT connectivity has been falling, with offerings as low as €1 per year (ARPU levels will depend on the market, application and operator).
Competition from MVNOs and IoT service providers is growing. Combined with typically high levels of network costs for operators, this has led to suppressed profit margins in IoT connectivity. As such, mobile operators offering IoT need to take advantage of any possible efficiencies in their technology stack (which often relies on legacy infrastructure) to bring their cost structure to lower levels.
Growing and retaining customers
While pursuing high-volume connection targets to combat declining ARPU, mobile operators are struggling to effectively serve customers with different needs and profiles. Specifically, their infrastructure and operations are not optimised for small IoT deployments, while a lack of global reach restricts their ability to support large international rollouts of IoT. This misalignment between operator capabilities and the needs of the market can lead to customer dissatisfaction and/or increased churn, ultimately constraining growth of market share.
Providing seamless IoT connectivity wherever needed
Mobile operators have traditionally focused on their home networks. With the rise of modern IoT use cases, operators are struggling to provide the same level of service outside their domestic footprints and in international markets. To service multi-country deployments, operators rely on roaming agreements with partner operators. However, these agreements may fall short in scenarios affected by privacy laws such as GDPR in Europe, or in countries that do not allow permanent roaming, such as Türkiye, Brazil and UAE.
Even in their own markets, operators could struggle to provide nationwide coverage. As an example, use cases in utilities, such as electricity meters, require nationwide coverage – yet most operators cover 80–90% of the required service area. Such limitations create significant challenges for operators aiming to support large-scale IoT deployments that need seamless connectivity.
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