Embedded SIM (eSIM): Why your experience with your Telecommunications provider may be changed forever

October 2018
By Ryan Teoh and Geoffrey Head, Directors with Strategy& Malaysia

Don’t be embarrassed, few people actually know what an embedded SIM is

Cutting straight to the chase (and past the tech), one can think of embedded SIM, or eSIM, as a way of enabling your phone to download and store digital SIM cards. No more replacing SIM cards when you arrive in a different country – just choose a plan you like, download the eSIM, and off you go.

Pushing the concept further, SIMs can be downloaded on devices other than phones. Take for example connected cars, that new drone you’ve always wanted to buy, and wearables that inject information and convenience into your daily life.

But why is it disruptive and game changing? What’s different?

Simply said, it's the biggest sales and distribution discovery in recent times

Though seemingly a simple digitisation of the traditional SIM card, a digitally downloadable SIM makes all current sales and distribution strategies for telecommunications companies seem antique.

But you might be wondering, if a customer no longer needs to walk into a shop or branch to pick up their SIM, why would telecommunications companies even need a distribution network? Wouldn’t it be quicker, and more cost efficient, to let new customers buy a plan online?

Telecommunications companies need to digest this new piece of technology and ask themselves:

If someone needing connectivity no longer needs to walk into a shop or branch, where and when should I engage a new customer?
Where and how will my competitors try to steal customers from me?
If I am able to engage my competitor’s customers digitally, what plans and promotions would increase my brand value, and convince customers to try me?

Suddenly, everyone is a dual-sim phone customer – would you like additional data/promotion/content while keeping your primary phone number?

Major phone device makers (Apple, Samsung, Google, Huawei, Xiaomi) will likely not take the risk of launching a new phone that does not support traditional SIM cards. This means that for a brief period (let’s say, 12-24 months) new phones will be dual SIM-enabled (with one traditional SIM slot, and one eSIM). Yes, finally, you can land in a new country during your holiday, keep your existing SIM card in the phone, and download a new local eSIM. In fact – if airlines have anything to say about it – you could be downloading an eSIM from the plane before arriving at your destination!

Even if you aren’t travelling, imagine if:

You are sitting in a café and craving some entertainment – would you buy an hour’s worth of data and Netflix access for the same price as an additional cup of coffee?
You have just purchased a new Apple Watch, iPad, or Google Slate – would you be willing to buy 5 gigabytes of mobile data immediately for USD 5? Or perhaps an unlimited amount of data for a day at the same price?

Best be ready for “connected by default” devices

The removal of the need to place a SIM in a device opens up a new realm of possibilities in which companies can create connected devices for consumer as well as industrial use.

Imagine purchasing a drone that can upload pictures and videos into a cloud storage space without needing to connect to WiFi. Switching hats to industrial use, imagine being able to purchase a fleet of drones to map out an agricultural piece of land – and opening up a web page to view the results?

What about purchasing a drone that can help you pick up and deliver items from location A to location B? All with a few clicks on your phone. Or being able to view free live video feed as the delivery happens.

Device makers and telecommunications companies are expected to strike deals in the background, so that this connectivity is both affordable and seamless for you as a consumer. It may not be long before you get devices that are connected worldwide, for an affordable monthly connectivity fee that you pay to your device maker (who will make contracts and partnerships with telecommunications companies around the world)

Most importantly, it is a phenomenon that is happening globally, all at once

Since eSIM functionality is being driven by new phone launches (the latest iPhone, Google Pixel, and new model launches going forward), there will no longer be “mature” or “developing” markets. Phone manufacturers have strong global distribution, and as such, we will see market reactions and breakthrough innovations occur in real time, globally, as this technology becomes mainstream over the next 12-24 months.

This is the first of a two-part blog series. We will be releasing a second blog post discussing eSIM’s potential impact on telecommunications service providers, as well as the strategies that might come into play. If this post has got you intrigued, look out for our next blog to continue the conversation.

_{We would like to acknowledge the contributions from Anand Markande (Senior Associate, Strategy& Singapore), Lim Khai Wern (Senior Associate, Strategy& Malaysia), Juliyan Somasundram (Associate, Strategy& Malaysia), and Vitchawat Chan (Associate, Strategy& Thailand) all of whom have helped develop Strategy&’s point of view on “Preparing for an eSIM Future”}