Policies, mobile network coverage sees machine-to-machine technology gaining traction

Supportive government policies, as well as improved mobile network coverage in Nigeria, are proving to be beneficial, particularly in respect to the deployment of machine-to-machine (M2M) energy, utility, and security services according to global ICT consulting firm International Data Corporation (IDC).

Nigeria, South Africa and Kenya are currently leading the charge, with M2M technology being used in their transportation and retail verticals to deliver services such as fleet management, asset tracking, retail point of sale (POS), and pay-as-you-go insurance.

M2M solutions can connect millions of devices via a network, like vending machines, heart monitors, trucks, appliances and buildings — nearly anything with sensors or software agents that can report device-specific information back to other devices or applications.

The conceptually an M2M network is simple. It uses a sensor or other type of device to monitor activity or a status change, such as inventory levels or even an increase in radiation. The captured data is sent via an IP network (e.g. LAN, WAN, hybrid) to another device or application, which in turn can analyze the event and take further action.

African governments that have establish regulations enforcing smart monitoring of electricity and water meters have the potential to drive usage of M2M in the energy and utility sectors, as has been the case in both Brazil and China. Significant potential for growth exists across the African continent, particularly across the more mature markets of Nigeria, South Africa and Kenya.

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Critical growth drivers identified by IDC include improved mobile network coverage and bandwidth availability, increased usage of smart devices, and supportive government policies, with the latter proving particularly beneficial in Nigeria and Kenya.

M2M technology is no longer a new concept – the technology is already a $24 billion market and predicted to reach nearly $86 billion by 2017 and the seemingly sudden emergence of M2M has been accelerated by a confluence of low-cost, low-power and fast technologies like worldwide IP networks, sensors, wireless technology and cloud applications.

According to Oluwole Babatope, a telecommunications and networking research analyst at IDC West Africa, “M2M technology is clearly gaining traction in Africa, albeit at a slower rate than seen in the world’s more developed markets,”

“And while consumer applications for M2M technology undoubtedly exist, enterprises will be the main customers for such services, and thus the main drivers of growth. Fleet management, vehicle tracking, and pay-as you-go insurance will be the key service areas in the short term, but as connectivity in Africa improves, growth is expected in M2M energy, utility, and security services”, Babatope added.

IDC expects M2M markets in the African continent to witness some form of growth over the next five years as mass-market consumer applications for the technology remain few and far between. But as the market matures, IDC however expects a turnaround from providing solutions to developing service-delivery models.

“In order to maximize the revenue potential of M2M, mobile network operators (MNOs) need to develop end-to-end solutions and avoid relying on revenue from connectivity alone,” advises Babatope. “African MNOs also need to develop a robust portfolio of value-added services. This can be achieved by engaging in strategic partnerships with stakeholders along the M2M value chain”, Babatope added.

The continent’s increasingly mobile-centric telephony landscape means that the primary mode of connectivity for services will be wireless, chiefly 2G GSM. This is because the services currently taken up typically require low bandwidth, meaning 2G connectivity will suffice. However, as mission-critical services relying on low-latency packet delivery grow (e.g., video surveillance), 3G connectivity will become more significant.

“Due to the low average revenue per device (ARPD), there will be a need to generate recurrent revenue from services,” concludes Babatope. “The profitability of MNOs in delivering solutions and services will, in future, hinge on how service-oriented they become; a greater focus on services will likely deliver improved profit margins.”

DAN OJABO