Menu

M2M FEATURE NEWS

Brazil: Latin America's Largest M2M Market

By Tara Seals July 30, 2015

Machine-to-machine connections are expected to make up a significant portion of overall Internet of Things (IoT)-related wireless connections going forward, and in boom markets like Brazil in Latin America, the opportunities for operators are starting to take shape.

GSMA Intelligence estimates M2M growth will be strong throughout Latin America over the next few years, at a compound annual growth rate (CAGR) of 25 percent over the period to 2020, by which date the total number of connections will have reached 62 million. Applications are myriad, of course, but the sectors the furthest along in terms of deployment include retail and payments, the automotive/connected car arena and smart grid.

The industry association noted that there were 16.1 million cellular M2M connections in Latin America at the end of last year, making it the fourth-largest region worldwide for this technology wave, after Asia Pacific, Europe and Northern America. Across the region, M2M accounts for only around 2 percent of all connections, but this is forecast to rise to 7 percent by 2020.

Out of that, Brazil is the largest market in Latin America in terms of number of M2M connections. As of Q4 2014 the country had 9.9 million cellular M2M connections, accounting for 61 percent of the total cellular M2M connections in the Latin American region. Most notably, M2M connections have grown at a CAGR of 48 percent over the last four years.

M2M as a share of total connections is an indicator of M2M market maturity. As of Q4 2014, cellular M2M connections in Brazil accounted for 3.5 percent of total connections in Brazil, slightly above the global average of 3.3 percent; but below China (5.1 percent), South Africa (5.5 percent) and the U.S. (11.3 percent).

“This suggests that there is potential for growth, assuming that certain market conditions are met,” said  Sylwia Kechiche, GSMA Intelligence analyst and author of the research. She said that Brazil could take a page from other markets in terms of how to make the most of this opportunity.

“Public-private partnerships, supportive government policy and the engagement of operators all play an in important role in creating a M2M ecosystem,” she said. “Chinese operators [for instance] are developing sophisticated M2M service propositions that go far beyond the provision of basic connectivity. Through partnerships with ecosystem players, they are moving towards providing end-to-end solutions, supported by systems integration, cheaper modules and dedicated charging policies.”

A Look at Developing Use Cases

Image via Shutterstock

In Brazil, M2M so far has been mainly driven by point of sale (PoS) terminals connected via GPRS, the migration of payment cards to the EMV (Europay, MasterCard and Visa) standard, GSMA Intelligence noted. But, utilities and the automotive sector are starting to take off as operators get involved.

First, there’s the smart-grid opportunity. According to Telefónica, the addressable opportunity in utilities in Brazil is very sizeable: There are 100 million endpoints, taking into account energy, water and gas services, with smart metering, prepayment and meter-to-cash applications already in use.

As such, Telefónica’s Vivo will provide M2M connectivity solutions for a smart grid and smart metering project in development for Brazil’s state-run power group Eletrobras. The operator was selected by a consortium formed by Siemens, Telemont and Itron, which won a public tender to develop a smart grid project for the state-owned utility. In addition to providing M2M technology, Vivo will be responsible for transferring data from all the meters to a control center in Brasilia, and connecting it back to the regional centers of the six Eletrobras subsidiaries.

Another large addressable opportunity is the automotive market - according to the International Organization of Motor Vehicle Manufacturers, there are 40 million-plus vehicles in use in Brazil, with a vast potential for aftermarket applications.

For instance, insurance company Porto Seguro has partnered with Datora Telecom and TIM Brasil to launch an M2M offering as an MVNO. This MVNO provides an aftermarket telematics service, allowing it to track and monitor the driving habits of its customers. Safe drivers get better rates. It’s been popular: Porto Seguro ended April 2014 with almost 100,000 M2M connections, a 50-fold increase over its initial 2,000 customer base at the time of launch in 2012.

Also, there were 3.5 million cars sold in the country in 2014, with potential for OEM embedded connectivity and applications.

Operators are already working to tap into this market opportunity, Kechiche pointed out. For example, in October 2014, Vodafone Brazil announced a contract with BMW Group for M2M services for the BMW i3. A Vodafone SIM card supports the Connected Drive technology within the vehicle, which allows access to the Internet on a wide screen on the dashboard and interaction with smartphones from various applications and GPS navigation.

The government has also set the scene for the adoption of M2M in automotive sector by creating the stolen vehicle-tracking mandate SIMRAV Project (‘Sistema Integrado de Monitoramento e Registro Automático de Veículos’), otherwise known as CONTRAN 245/07 legislation. This requires that all new vehicles be fitted with the capability to be tracked and disabled in case of theft.

“Despite the fact that the mandate has not so far been enforced, our discussions with operators in Latin America indicate that it has had spillover effects, serving to boost public awareness of telematics services in Brazil while also facilitating the creation of an ecosystem for hardware and devices,” Kechiche said.

Kechiche also pointed out that there are some nascent opportunities as well, in home and business security and surveillance. This segment, which historically has been served by PSTN lines, is ripe for cellular M2M is fixed-line disconnections advance.

The Impact of Regulation

In May 2014, the Brazilian government passed new regulations approving tax breaks for M2M connections. The decree approved two tax reductions, which both translated into a tax reduction of approximately 80 percent overall.

Before this, the Brazilian Government’s tax policy did not distinguish between M2M SIMs and traditional SIMs used by consumers for voice and data services. Because M2M connections generate a lower average revenue per unit (ARPU), this was severely impacting operator business models.

“M2M connectivity ARPU typically ranges between $2 to $5,” explained Kechiche. “Thus, a year-one fee of $12.57 on an annual ARPU of $21.08 poses a significant burden on an operator’s M2M business model and serves as a major barrier to adoption.”

While it is still early days, there are initial encouraging signs that the new tax regime has been effective in removing barriers to M2M growth. Between August 2014 and January 2015, special M2M device connections benefiting from the tax reduction have grown by 26 percent, while standard M2M devices have grown only by 7 percent. Hence special M2M as a share of total M2M connections has increased from 12 percent to 14 percent at the same time.

The change in taxation policy is also making new applications more attractive.

“Additionally, we expect the lower taxes to reduce the total cost of service, hence allowing for further penetration of M2M services, while boosting the business case for innovative M2M services, targeting smaller, more cost-conscious enterprises, and low margin industries such as farming and social services,” Kechiche concluded. 




Edited by Dominick Sorrentino
Get stories like this delivered straight to your inbox. [Free eNews Subscription]

Contributing Writer

SHARE THIS ARTICLE
Related Articles

Beyond the Closet, Connecting to IoT

By: Gary Audin    11/11/2020

Two challenges arise when considering cable based IoT.

Read More

Banyan Security Enhances Secure Remote Access for Engineering Resources

By: Ken Briodagh    10/27/2020

Banyan's Continuous Authorization Can Grant or Revoke Access to Sensitive Engineering Environments and Applications in Real-time Based on TrustScore

Read More

Senet Eyes RAN Partnerships as Key to Delivering Network Services for Massive IoT

By: Arti Loftus    10/21/2020

To meet the challenges that come with providing network connectivity for IoT solutions, Senet is executing a strategy for massive IoT that will be bui…

Read More

mimik Selected by 5G Open Innovation Lab to Drive Early Adoption of 5G

By: Ken Briodagh    10/15/2020

mimik's patented Hybrid Edge Cloud platform will boost the performance and reduce the cost of 5G Networks

Read More

5G Sets New Standards for Vertical Industries' IoT Connectivity

By: Special Guest    10/13/2020

As 5G rolls out across the world, vertical industries across IoT are working on additional standards to make the technology suitable for their industr…

Read More