MTS can increase its market share only by investing in new technologies and following new trends, that is why it should take advantage of growing M2M sector Heavy competition in GSM market limits further growth
GSM market is oversaturated
Machine to machine interaction allows machines to communicate information between each other
Subscriber base in Moscow
SIM cards penetration amounts to 150%
Russian market of M2M services
MTS should develop new trends to increase profits considerably
18.5M SIM cards
2013 2014 2015F 2016F 2017F
• Offers vast capabilities • Provides solutions in many different spheres • Based on current mobile networks and SIM cards • Requires high quality mobile connection • Grows rapidly • Proves to be the basis of a smart city, according to foreign experience
Although MTS has already developed some solutions for M2M markets, it needs to expand aggressively to retain leadership and strike highest returns from developing the new trend in full.
In terms of heavy competition in the data transfer market MTS needs to strike accurately and decisively to keep leading positions Target
Solution
Growing M2M market in Russia requires a complex strategy to retain MTS leadership in this industry
To concentrate on the market segments in which MTS has distinct competitive advantage, and expand aggressively
RUR 11B (2019) Social impact M2M-based solutions will make Moscow a better place to live in.
Transport tracking
Public Utilities
Healthcare
Wide ERA-GLONASS introduction should be used to build a massive base of MTS commercial services subscribers.
Critical condition of the current systems and need for their maintenance and renewal will create demand for our M2M solutions
Shortage of physicians in rural areas provides unique opportunity for M2M deployment
MTS revenue from suggested strategy
RUR 11B
Implementation in Moscow will take 5 years and serve as an example for applying successful solutions to all the other Russian regions and multiply revenue this way.
Transport 2014
MTS revenue
2015F
2016F
2017F
2018F
2019F
Although Russian market generally conforms to global M2M development trends, it has some peculiarities Dynamic mobile networks structure shows the definite priority for MTS to invest in 3G and 4G networks
Russia 2,3B 4G
Rest China
3G
2013
However, Russian market specifics limit M2M services variety
2G 2020
Germa ny
From the predicted world M2M demand structure we can infer that Russian market has large growth potential
Japan
Electro cars infrastructure development.
won’t grow significantly within 5 years
Disaster tracking
not topical in Moscow
Electronic government
low demand for M2M solutions
The traffic portion of M2M revenues constantly decreases It indicates the importance of hardware and software developing, which is used by large mobile network companies, who started acquiring equipment developers: Verizon + Hughes Telematics AT&T + Xanboo Vodafone + Zelitron
This trend is confirmed by recent acquisition of M2M Telematica – one of the largest companies in Russian M2M market – by MTS. MTS should concentrate on developing complex M2M solutions with high quality equipment, network and complementary services.
Criterial analysis has shown that ITS & tracking, public utilities and healthcare are the best industries for MTS to invest in M2M development Criteria weights:
Devices and traffic
Demand
Growth potential
MTS base Competition Costs
ITSHealthcare & tracking
Public Public utilities utilities
ITS Healthcare & tracking Security
potentially most profitable
ATMs Smart houses It is impossible to develop new market efficiently in all Russian regions within 5 years, that is why we will analyze Moscow as a test region and then extrapolate the most successful projects to all Russian regions Source: team analysis, case materials, JSON Consultants, Cnews.ru, kommersant.ru,
Transport tracking is a leader in current M2M market, and MTS should take advantage of the huge demand for some services
Insurance
Tracking • Courier services • Company cars • Public transport • Public services cars
driver surveillance • to determine insurance cost • to investigate into insured loss • to make precautions
Saving money
Increasing safety
Choosing efficient routes
Anti-theft module • car tracking • driver surveillance • distant car control
Saving time
+ Minor incoming traffic services • Real-time location information
RUR 25B
MTS should take advantage of the growing opportunity and equip ERAGLONASS transmitters with its SIM cards to provide demanded services
Transmitter ERA-GLONASS
• Local points of interest • Current weather forecasts
public services cars
MTS services
• ITS elements information (electronic
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
road signs, traffic flow distribution) • Specific public services information
Mandatory equipment for new cars
2014
• Real-time traffic jams information
Smart insurance market growth (forecast)
2015
controlling commercial transport driver efficiency and safety
ERA-GLONASS
MTS has experience working with Renaissance Insurance since 2013
2014
Tachograph
GSM service for emergency calls
2017 all the cars sold in Russia
Sends a message with current location when a car accident occurs
Running an aggressive marketing campaign will help reduce some risks and this way decrease costs and secure profits from transport segment. Experience • Automatic system of satellite tracking of over 1000 company cars of “Bashkirenergo”
Active marketing campaign will boost new services introduction and will be based on bundle packaging.
4 Mighty competitors development (minimized through taking measures as quickly as possible)
High Medium
2016
3 1 4 2
Low
3 GLONASS program cancellation
Significance of consequences
2 User distrust (minimized through vast marketing campaign)
Only ERA-GLONASS subscribers
(without additional services) MTS services subscribers 2015
Risks 1 NP GLONASS market monopolization
MTS will attract a large portion of ERA-GLONASS subscribers
Low Medium High Probability of consequences
2017
1M
Bundle packaging MTS will offer service packages with discounts on complementary services such as insurance and security solutions
2.2M
• Tracking system of 300 public services cars of traffic police in Chelyabinsk region and Krasnoyarsk Krai
Marketing
2018
Seizing the opportunity to raise MTS customer base will drive revenues from M2M transport solutions up to
RUR 3.7B and also provide competitive advantage for future products.
Difficult healthcare situation in Russia implies vague prospects. Although healthcare segment is potentially the most profitable, considerable risks should be taken into account Issues Solution Satisfaction with healthcare system
• • • •
Install sensor and M2M transmitter into Blood pressure meters Thermometers Sugar level meters CT scanners
MTS experience
Dissatisfied
Equipping 500 mobile cardiographs with SIM cards to provide data transmission from distant settlements to cardiological centers of Sverdlovsk region.
Of which Russia will have 3% or RUR 5B
Transmit data of patient records to medical staff and hospitals to keep their health condition under control
Risks: • Older people wouldn’t want to learn new stuff or overpay for M2M • Manufacturers don’t really need this
MNOs
• Medical services won’t agree to cooperate
Public utilities is a perspective investment object due to large number of households Issues Integration Methods Old buildings and pipeline defects are discovered too late
• Public services transport and equipment coordination
Electricity supply network maintenance
Inefficient utilization schemes
• Resource allocation planning and organization
Smart utilization scheme
Inefficient resources allocation
• Performance measuring scheme
Repair works Smart energy and water supply
Realization
5
Cooperation with utilization services to elaborate new smart utilization systems
6
Introduction of LTE networks into the terminals
High
Smart synchronization and reallocation schemes development
Medium
4
2 Public services unwillingness to cooperate
2
1
Low
system into new buildings pipelines
1 Unstable LTE networks (investing in LTE networks development) Significance of consequences
1 GSM terminals development 2 Data processing centers development 3 Reaching agreements on installing M2M
Low Medium High Probability of consequences
MTS public services sector development will bring about not only further monetization prospects, but also significant social improvements to the city MTS experience Foreign experience Providing SIM cards for “Smolenskoblgas” to automatically monitor gas consumption in the region
Monetization
According to the experience of San-Paolo, Melbourne, Toronto and many other developed cities, smart public utilities systems produce positive impact on the whole city infrastructure
Economy
Traffic tariffing
• Car run decrease by 10% • Idle time decrease by 20% • Car accidents decrease by 50%
Individual strategies development
Management
SIM cards and GSM-terminals sale
Consulting services: •M2M courses for users •M2M introduction advisory for organizations •Hot line and technical support
• Automatic public services quality control • Overall control simplification • Forecast accuracy increase
Safety • Environmental safety maintenance due to more efficient utilization processes
In the future M2M solutions will become the basis of the mobile networks market and the main information and service transmitting channel Introduction of M2M services will lead to developing whole smart houses.
All the connections provided by MTS M2M services
With gained customer base and experience MTS will lead these dramatic changes. Buildings will be united into a system with efficient resource relocation and city planning
Public utilities
Architecture agency
Directions
Efficient relocation will rely on constant information exchange through cloud technologies.
Data analysis conclusions
Corrections for future constructions
Data analysis conclusions
Future market size Sports and healthcare
Entertainment
Smart house
Localization
Smart buildings
Advanced bracelets monitor life systems readings and send them to remote analytic centers Individual valuation of training programs Prediction of diseases and health hazards
Remote access to content stored in cloud Services customized by users’ activity
Remote control of household utilities Enhanced security
Quick location of property Locating points of interest nearby
RUR 1430B
RUR 900B
RUR 720B
RUR 360B
RUR 180B
M2M, along with other innovative technologies, will make Moscow a smart city, convenient for its businesses and citizens.
Moscow position in Innovation Cities Index:
Sustainable
74 2014
Comfortable
40 2019
Safe
Smart metering, which turns on energy-intensive device during lowconsumption period
Processed navigation system data from sensors provides detailed information about the city
Route optimization systems decrease emergency response time from 20 to 15 minutes
Water leakage prevention system saves natural resources
Smart parking allows people to make informed decisions
Health condition of people with serious diseases is monitored 24/7 through wearable sensors
Automation detection of all trash cans filling level enables to empty them right in time
Intellectual transportation system reduces congestion and make public transport convenient
Information from cameras all around the city is analyzed to prevent crime
Conclusion Adhering to the proposed strategy will enable MTS to preserve leadership in M2M segment as well as gain significant market power in developing fields Concentrating on 3 basic segments will let us get RUR 36B revenue in 5 years with annual growth of 38% The progress will be accelerated by the ERA-GLONASS program, medical professionals loyalty and advantage in supply of smart meters
The whole campaign will contribute to the image of Moscow and make it a better place to live
Appendix 1. Transport tracking traffic sizing
We estimate that location data amounts to 4 bytes, whereas speed, acceleration, noise level and general condition data amounts to 6 bytes Tracking traffic
Insurance
Tachograph
Incoming service
4 bytes every second
6 bytes every 1 seconds
2 bytes every 1 seconds
10 bytes every 1 seconds
129600 bytes every 9-hour day
194400 bytes every 9-hour day
64800 bytes every 9-hour day
324000 bytes every 9-hour day
3.8 MB monthly
5.6 MB monthly
1.9 MB monthly
9.3 MB monthly
Average consumer pack amounts to 9.4 MB, which will cost RUR 10 Premium: 18.7 MB, i.e. RUR 20
Average corporate pack amounts to 257.5 MB, which will cost RUR 300
Appendix 2. Transport tracking revenue sizing Traffic Monthly consumer pack: RUR 10
Consumer pack demand: 800000
2M ERA-GLONASS subscribers in Moscow
40% will install MTS services
Monthly corporate pack (25 cars): RUR 300
Corporate pack demand: 4000
Additional incoming service pack: RUR 20
Additional service demand: 100000
+ public services demand: 1000
Devices Consumer pack tracking device
Corporate pack tracking device
Additional incoming service modules
Pre-installed tracking module: RUR 3000
Pre-installed tracking module: RUR 10000
Additional modules RUR 2000
Demand:
Demand:
Demand:
800000
100000
300000
Overall tracking device revenue RUR 2.4B
Overall tracking device revenue RUR 1B
Overall tracking device revenue RUR 600M
RUR 480M annually
RUR 200M annually
RUR 120M annually
Monthly traffic revenue RUR 8000000
RUR 96M annually
Monthly traffic revenue RUR 1500000
RUR 18M annually
Monthly traffic revenue RUR 2000000
RUR 24M annually
MTS will get 5% or 100 RUR from anti-theft fees Demand:
800000
Additional services monthly fee RUR 500
Demand:
RUR 960M annually
RUR 1.8B annually
300000
RUR 3.698B annually
Appendix 3. Healthcare market sizing
We estimate that each customer sends 10 SMS reports every day, each priced at 0,2 RUR Traffic
Equipment
4,6M pensioners in Moscow
40% share prediction
1,84M customers
10 SMS 0,2 RUR each, 365 days
RUR 3,68B annually
2000 RUR for 1 set of equipment
RUR 1,34B totally
Appendix 3. Utilization revenue market sizing
GSM terminal: RUR 1500 Terminal installation: RUR 300 Rubbish bin traffic: 1 sms (60 bytes) each time gets full Equipped bins quantity: 70 Waste collecting rides: 2 daily Bins equipment cost: 1800*70000 = RUR 105M Traffic revenue: 2*70000*30*0.2 = 840000 monthly