Russian Operators Oppose Introduction of eSIMs

Russian Operators Oppose Introduction of eSIMs

Russian mobile operators MTS, Megafon and Beeline are opposing the introduction of eSIMs in the country according to a news report. The operators object to eSIMs, which are used by the latest smartphones from Apple and Samsung, on the grounds that they could lead to price wars and that they do not support Russian encryption standards.

The operators expressed their position during a meeting with representatives of the government and the federal security service FSB. Representatives of the FSB were also opposed to the eSIM technology.

Tarifica’s Take

The eSIM technology, which is becoming more and more widespread, brings various benefits to users, but from the  point of view of the established operators in the mobile market, the advantages are less clear. Certainly, we can understand why MNOs might even think there are no advantages.

For one thing, with embedded eSIMs, changes of service provider can be made seamlessly, without changing devices and even without needing to obtain a new SIM card. This would increase churn by making it easier for consumers to switch from the services of one operator to those of a rival. And the rivals that would most benefit from this process are likely to be the more disruptive ones, the budget-oriented and narrowly targeted MVNOs. It is also possible that eSIMs would facilitate the entry of foreign telecoms into the Russian market. Therefore it is completely understandable why Russia’s MNOs would oppose the introduction of eSIMs.

However, we feel that despite the existence of these theoretical objections to eSIMs, in the real world of today’s markets, they are not very likely to have a significant negative impact on MNOs’ business. The major operators have a good deal of momentum in their markets, with a long-established customer base, and in most cases it will likely take more than just the ease of using eSIMs to cause users give up their accustomed service in numbers that can harm the operators. In fact, eSIMs could even save MNOs money, in that their use will eliminate certain costs such as the creation, distribution and support of various formats of physical SIMs. Of course, operators do need to be vigilant about maintaining their customer base and keeping their network service competitive, but we doubt that eSIMs are a game-changer, and so MTS, Megafon and Beeline probably do not need to be so concerned. (As to the question of encryption, we cannot comment at this time because we do not sufficient information about Russian encryption standards.)

In addition, there are actually tangible advantages for MNOs in eSIMs, outside the realm of traditional mobile services. In the emerging realms of IoT and M2M, eSIMs enable a wide range of applications that stand to bring large amounts of revenue to operators that embrace them. If the Russian operators, took this route rather than lobbying to keep eSIMs out, they could put themselves on a path of growth not only of revenue but of possibilities.