The rise of eSIM technology, especially in the travel sector, has sparked a debate on whether it will disrupt traditional mobile network operators (MNOs) by ‘cannibalising’ their revenues. Travel eSIMs offer a seamless and flexible alternative to roaming and traditional SIM cards, allowing travellers to switch between networks and connectivity plans without the need to physically change their SIM cards. This convenience is driving adoption, but the question remains: will travel eSIMs threaten roaming revenues for mobile operators, or do they represent a new opportunity?
Nitin Bhas, Chief Analyst, Kaleido Intelligence explores further.
The shift in traveller behaviour
Kaleido Intelligence’s latest travel survey provides valuable insights into how travellers are changing their connectivity habits.
Notably, a significant portion of global travellers — termed ‘silent roamers’ — are either avoiding mobile usage altogether while abroad or relying solely on Wi-Fi. The primary reason for this is the high cost of traditional roaming services, which many travellers perceive as unjustifiable, especially with the availability of cheaper and easier alternatives like local SIM cards and Wi-Fi.
The survey reveals that a substantial 70% of these silent roamers are likely to adopt roaming alternatives if they are accessible, underscoring the potential for travel eSIMs to capture this market segment.
Travel eSIMs: A competitive edge?
The rapid adoption of travel eSIMs, particularly in regions like Asia-Pacific, where digital solutions are increasingly embraced and travel SIM adoption has traditionally been high, suggests a growing shift in how travellers approach mobile connectivity.
By 2028, it is expected that nearly 4 billion smartphones worldwide will support eSIM technology, with a significant proportion of travel connectivity shifting from physical travel SIMs to eSIM-based solutions. This migration is not just a threat but an opportunity for MNOs to innovate and capture new revenue streams.
eSIMs allow for quick and easy activation of temporary connectivity plans tailored to specific needs, such as regional data packages or short-term voice and SMS services. This flexibility is particularly appealing to tech-savvy travellers who prioritise convenience and cost-effectiveness. The ability to offer these services through apps, often pre-activated before the traveller even leaves their home country, further enhances the appeal of travel eSIMs.
The revenue dilemma for mobile operators
The critical question is whether eSIMs will erode traditional roaming revenues. On the surface, it appears that by offering lower-cost, flexible alternatives, travel eSIMs could indeed cannibalise some of the high-margin revenue that MNOs currently enjoy from roaming charges. However, the reality may be more nuanced.
For one, travel eSIM providers rely on wholesale roaming agreements with traditional operators or sponsor aggregators to deliver their services. This means that while the retail price to consumers may be lower, MNOs still have the opportunity to capture a portion of the traffic and revenues through wholesale deals.
Moreover, as eSIM adoption grows, MNOs can leverage this technology to offer their own branded or co-branded travel eSIM solutions, targeting new customers, thus retaining a share of the market that might otherwise be not available.
Additionally, travel eSIMs could open up new revenue streams by converting their own silent roamers into paying customers across key corridors. By offering cost-effective, easy-to-use travel eSIM packages, MNOs can tap into a previously underserved market segment. This approach could potentially increase it by broadening the customer base.
Strategic opportunities for MNOs
To fully capitalise on the eSIM opportunity, MNOs need to embrace a multi-pronged strategy. This includes developing and marketing their own eSIM offerings, either directly or through partnerships with travel-related businesses such as airlines, travel agencies, insurance providers, social media and booking websites. By creating tailored eSIM packages that address the specific needs of travellers, such as high-speed data plans or regional bundles, MNOs can position themselves as leaders in the travel connectivity space.
Moreover, operators should focus on enhancing the customer experience by simplifying the activation process, ensuring transparency in pricing, and offering robust customer support. Competitive pricing will remain crucial, but the ability to provide a seamless, reliable service will be a key differentiator in attracting and retaining customers.
Cannibalisation or evolution?
The rise of travel eSIMs does pose a challenge to traditional roaming revenues, but it also presents a significant opportunity for MNOs willing to adapt. Rather than viewing eSIMs as a threat, MNOs should see them as a catalyst for innovation, enabling them to offer more competitive and consumer-friendly services. By embracing eSIM technology and integrating it into their service offerings, MNOs can not only protect but potentially grow their revenue in the evolving travel connectivity market.
The key will be in education and awareness — both for consumers and within the industry. As travellers become more informed about the benefits of eSIMs, and as MNOs refine their retail roaming offerings, the market is likely to see a shift towards a more dynamic, customer-centric model of travel connectivity. In this sense, eSIMs are not so much cannibalising MNO revenues as they are evolving them, paving the way for a new era of global mobile connectivity.
Author: Nitin Bhas, Chief Analyst, Kaleido Intelligence
This article originally appeared in the October 24 magazine issue of IoT Insider.
