The Internet of Things (IoT) landscape in Brazil is changing. Total mobile machine-to-machine (M2M) connections grew 8% between May 2015 and May 2016 to account for 4.6% of total mobile subscriptions. Lower activation taxes now benefit 36% of M2M connections, as opposed to 18% in May 2015.
Since TechPolis last looked at M2M in Brazil, total M2M connections grew from 10.86 million in May 2015 to 11.72 million in May 2016. In spite of robust growth driven by lower taxes, M2M connections in Brazil could be doing a lot better. The remaining taxes on M2M are still restraining expansion of the Internet of Things (IoT) in Brazil. TechPolis believes that zero activation charges on all M2M connections would unlock the full potential of IoT and create an economic boon across all M2M verticals and related sectors in Brazil.
In August 2014, Brazil telecoms regulator, Anatel, began classifying M2M services as standard (”padrão”) and special (”especial”). Special M2M services cover what are deemed to be pure M2M applications, those with no human component and considered to be the backbone of the Internet of Things (IoT). Special M2M services are eligible to receive an 80% tax reduction in the initial activation fee from $11.57 to $2.33.
In our July 2015 report, we projected significant growth to 50 million M2M connections by the beginning of 2018. We now project 20 million connections by Q1 2018. The reasons for this are declining numbers of standard M2M connections, the sharp economic downturn of 2015/2016, and the remaining tax on M2M chips. Brazil remains one of the few countries in the world to levy an activation tax on new SIMs, coupled with an ongoing annual fee.
Due to growing demand for these services coupled with lower connection costs, sales of special M2M devices have grown dramatically (+117%), from the 552,516 activated as of August 2014, when measurement of ‘special’ M2M began, to 4,290,298 by May 2016. As a share of total M2M connections, special M2M grew from 18% in May 2015 to 36% in May 2016, which means more connections are benefiting from the tax break. We expect special M2M connections to outnumber standard M2M from Q1 2017 onward.
Many standard connections have moved to the special category. As a result, standard M2M connections have experienced a 16% decline since May 2015. Point-of-Sale (PoS) terminals make up the bulk of standard M2M connections. Smart-car applications like emergency calling and geo-location are mistakenly, in TechPolis’ opinion, included in the definition of standard M2M. Regulator Anatel has defined “standard” M2M chips to require human initiation of the application—which smart car features do not usually require. Reclassifying smart-car connectivity to the special M2M category is a measure the government could undertake to spur growth in this important segment.
Within the last four months, mobile operator Vivo has emerged as a new leader in M2M, surpassing Claro in February 2016 in total M2M connections. Currently Vivo holds 38.6% market share and Claro 36.5% of M2M in Brazil.