Masarra Mohamad
Masarra Mohamad (Research Analyst, European 5G Enterprise Strategies)

On Sunday, February 25, we hosted our brunch event to kick off IDC’s Mobile World Congress (MWC) activities in Barcelona. Key executives and decision makers from leading companies in the telecoms and technology sectors attended.

We delivered presentations addressing key transformations underway in the telecoms sector. A panel discussion was held in which senior industry executives shared their perspectives on the future.

Key Overarching Challenges Across the Industry

The telecoms market is massive, with annual worldwide telco services spending of around $1.6 trillion, according to IDC’s Telecoms Services Tracker. The industry, which is showing growth after an anaemic period, makes up 27% of the overall ICT market and employs 4.5 million people globally.

The market is a critical component of the global economy, as well as a key element of public safety. This was underlined last week in the United States, when millions of people in several large states were unable to dial through to the 911 emergency system because of a telecoms issue.

Telco SPs annually invest over $330 billion to build their communication networks. These investments are made to meet several corporate strategies, including driving new network performance efficiencies and creating platforms for future revenue growth.

Given the size of these capex investments, it is important for telcos to monetize their investments and cut costs in order to compete as vigorously as possible. This has led to a wave of M&A activity across the world, especially in Europe, with massive multibillion deals involving Orange, Masmovil, Colt, Lumen, Vodafone, and others.

At the same time, we’re seeing the entry of new types of players, including satellite companies such as Starlink, making an already complex ecosystem even more so.

Value Propositions Beyond the Pipe

Understanding the multifaceted opportunities for monetization is key to thriving in the telecom industry. We identify three levels of connectivity monetization: 

  1. Network Infrastructure Enhancement: Leveraging technologies like network slicing and multi-access edge computing (MEC), and optimizing bandwidth and latency for diverse use cases
  2. Service Innovation: Offering tailored solutions such as fixed wireless access (FWA), private networks, and unified communications and collaboration (UC&C)
  3. Solution Development: Exploring avenues in automation, robotics, and the Internet of Things (IoT) for transformative business solutions

However, telecom features, services, and solutions must solve business issues to deliver material revenue gains. IDC’s 2023 Future of Connectedness Survey, conducted in June 2023, found that 42% of organizations prioritize enhanced access to critical business applications both on premises and in the cloud as their top metric for evaluating connectivity initiatives.

Following closely, 39% prioritize faster data throughput, while 36% emphasize increased levels of automation. This underscores the importance of aligning telecom offerings with the core objectives of businesses to drive meaningful value and performance.

We identify four essential strategies for elevating connectivity:

  1. Network APIs fuel successful revenue opportunities across all three levels.
  2. External partnerships are critical to integrating diverse technology sets into comprehensive solutions.
  3. Utilize differentiated, dynamic pricing models to increase adoption of connectivity-enabled solutions.
  4. Focus on business outcomes, not technologies, to court customer trust and validate meaningful ROI analysis.

Telcos Walking the Walk: Transform Internally to Lead Externally

In 2024, the transformation of telecom operators will encompass internal initiatives, such as cost optimization and the pursuit of new revenue streams through the integration of cloud data and intelligence. Externally, transformation responds to shifting customer expectations and the erosion of traditional core business models.

To navigate these changes effectively, operators are adapting to evolving partner ecosystems, leveraging synergy and agility to remain competitive in a dynamic marketplace.

The journey toward the telco cloud continues unabated. Almost three-quarters (73%) of respondents to IDC’s EMEA Telco Transformation Survey confirmed the deployment of BSS workloads in cloud environments. Similarly, 65% of respondents have already migrated OSS workloads to the cloud. Among the 150 sampled telcos, 37% have taken the significant step of transferring core workloads to cloud platforms.

The hypothesis of “telco wait-and-see” is now obsolete. We believe the success factors for telecom companies are:

  • Connectivity Diversity: Overhauling traditional business models to enable a broader range and higher volume of new services
  • Profitability: Boosting customer loyalty, generating new revenue streams, and enhancing operational efficiency
  • Automation: Adopting advanced technologies and refining processes for innovation and competitiveness

Telcos are gearing up for a transformative era of digital services and mobile applications through the deployment of open network APIs. Demonstrating a strong commitment to this evolution, telcos are actively engaged in the development of telco API standards, with 29 companies already enlisted in the GSMA’s Open Gateway initiative.

As these initiatives mature, attention naturally shifts toward monetization strategies, including the establishment of API marketplaces, and fostering engagement with a wider array of third-party developer communities.

More than half (53%) of our survey respondents indicated their primary focus for API investment lies in developing network APIs capable of being commercialized both internally and by third parties, thereby facilitating transformative changes within their business operations. An effective go-to-market strategy for exposing network APIs will hinge on factors such as segment type, specific use cases, and geographical reach. 

In conclusion, the telco industry stands at a pivotal juncture. It is undergoing a profound transformation that will shape its trajectory for the next 15–20 years. The convergence of culture, technology, internal operations, and customer experience underscores the hyper-complexity of the current landscape.

As we navigate these changes, it’s crucial to recognize that the stakes are high: There will be winners and losers, and the status quo is being redefined. Embracing a mindset of agility and experimentation is paramount.

Don’t hesitate to try and fail fast. Leverage every opportunity to learn collaboratively with your customers. Seek out strategic partnerships to enhance your chances of success in this dynamic environment.

Remember: In such complex scenarios, focus is key. Each player must define their priorities and steadfastly pursue them, recognizing that there’s no one-size-fits-all approach to thriving in the evolving telco ecosystem.

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