e-SIM: a real threat to operators

For a challenger or an MVNO, it is a new way to shake the market and conquer customers. In addition to an aggressive pricing policy, e-SIM will help make mobile offers more modular.

Florian Jozefowicz

e-SIM can boast indeniable benefits for consumers (read our article on these benefits). On the other side, it will upset operators’ processes and their position in relation to clients. What will be its impacts? How to prepare for them?

e-SIM impact on roaming: risks and opportunities

For the customers going abroad, digitalizing the physical SIM will reinforce the attractiveness of local offers compared to the regular travelling plans offered by operators (we talk about « Roaming Out »). Operators will be able to offer their services from the tourist’s country of origin, via their mobile application for example. Previously the customer would complete this process upon arrival.

Operators must then be proactive in the operation of the e-SIM. They must target the foreign customers entering their country so as to offset the losses made in the Roaming Out.

 A risk of disintermediation

Integrating the connectivity management into the smartphone’s OS itself serves the interest of smartphones manufacturers above all: the more this management is integrated, the less the operator gets its hands on it.

This loss of control on connectivity for the operators impacts three main aspects:

  • customer relationship: before, the consumer was interacting with the operator about everything related to his SIM card management. With the e-SIM, the manufacturer is taking over. Connectivity is by now fully integrated into the OS.  This gives the edge to the manufacturer on building fast and smooth customer experiences which do not need to go through a touch point of the operator.
  • sales of connectivity: with this integration of connectivity into the terminal, the manufacturers may impose new conditions to the operators, for example:
    • take a commission on sales of connectivity
    • impose their conditions in terms of construction of offers
    • monetize the visual place of the operators on the market place.We may also imagine that tomorrow they will prioritize the showcase of their own offers or their exclusive distribution.
  • exploitation of data: integrating connectivity also gives the manufacturers the ability to collect more information on the usage of a mobile plan. This knowledge may be used later for commercial purposes. An undeniable benefit so far reserved for the operators alone.

A technological challenge for operators

 Operators must also technically adapt to the generalization of e-SIM. Going from the distribution of a physical SIM to a virtual e-SIM implies numerous logistic and order flow management changes. Some information systems (IS) are not ready yet to immediately provision access to a mobile line.

Operators must furthermore choose between 2 approaches:

  1. Adapt to the manufacturers’ integrated paths. These paths are generally proprietary. Their advantage is to be very smooth for the users. On the other side, they are hard to replicate between the products of various manufacturers. It is then up to the operator to manage the multiplicity of paths in its processes and its IS.
  2. Design more generic paths. Their advantage is to be simpler for the operator to manage but they offer a more restrictive experience to the customers. For example, activating an e-SIM via QR Code requires two screens.

Nevertheless, e-SIM is a way for operators to differentiate

In face of the risks that e-SIM poses to operators’ business, some benefits nevertheless emerge .

Strategy for a leading operator

In this case, there is a real opportunity to differentiate through experience. It is important to work on smooth and integrated customer journeys.

It is a way for example to reinforce its innovative operator image and, in some cases, to create a “wow” effect on the final customer. The e-SIM completely removes the delay for receiving a physical SIM card by mail. The customer can thus use the line almost instantly.

Strategy for a challenger operator

For a challenger or an MVNO, it is a new way to shake the market and conquer customers. In addition to an aggressive pricing policy, e-SIM will help make mobile offers more modular. As a result, these operators will be in a position to strengthen their core positioning on specific mobile spends (e.g. the cheapest data, free roaming in country X, etc.).

Last but not least, e-SIM is a lever to visibly reduce costs:  the cost of an e-SIM profile is indeed cheaper than that of a physical card. Concerning the mailing costs, they totally disappear.

E-SIM indeniably poses high technological and economic challenges for operators.  It is however an inevitable progression because of the benefits implied for the manufacturers and the clients. It is a source of growth due to its presence in the connected objects of today and tomorrow: watches, tablets, computers, game consoles, cars… The main challenge for operators is to adapt to the changes implied while preserving their mobile revenues. If on top of their monopole on usages the GAFA desintermediate incumbent operators, the latter could be restricted to the position they have always wanted to avoid: simple pipe distributors.


Florian Jozefowicz

Strategic Marketing Consultant