Summary Bullets:

• Advancements in technology place telcos in good footing to innovate, as majority of telcos re-engineer operationally, capitalize on their core network strengths, and rationalize portfolio.

• Future telco success will be hampered by the global economic climate (particularly inflation), rising energy costs, increased regulatory pressures, and increased direct and indirect (cloud providers) competition.

Telcos growth ambitions (through a transitioned operationally agile innovative business) will experience several external threats
As 2030 approaches, there is much discussion within the telecommunications industry surrounding how telcos will evolve. Several influencing factors include the maturity of digitalization in consumer and enterprise settings, which potentially could be further accelerated by artificial intelligence (AI), including generative AI. In addition, maturity of cloud and edge computing will continue to spur innovation as telcos further identify industry use cases. However, it will not be clear sailing for telcos.

Analyzing the evolution of telcos toward 2030 requires examining their evolution to date, especially their financial performance. In particular, despite huge capital investments made to keep up with technology advancements and network expansion, telcos’ core businesses have become commoditized with slowed overall growth. For example, looking back at 2015-2023, telcos have generated less than 25-30% of total shareholder returns (TSRs), which by industry standards is quite low. This is also low compared to other segments like healthcare and finance, where TSRS have exceeded 50%. The growth figures are disappointing in light of financial performance and investor growth expectations.

But the reality is as 2030 approaches, telcos will continue to face growing inflation, rising energy costs, increasing regulatory pressures, a continual reduction in prices and profit margins driven by direct and indirect (cloud providers) competition, and more importantly, will need to operate in a competitive environment where constant innovation is required to create new revenue streams and increase shareholder value.

Successfully capitalizing on core network strengths as well as innovating front end within a telco architecture stack will be key
Telcos are quite aware of the state of play and of the external threat factors impacting their core business. In 2018, there was desire to innovate, drive portfolio innovation, and manage OpEx and CapEx – there certainly is greater urgency now.

Carriers are strategizing to become more operationally agile and rationalize their offerings, influenced by advances in AI, cloud, enterprise digitalization, virtualization, telecom convergence, and cybersecurity. Key areas of network evolution that will see greater focus include multi-cloud connectivity and security as well as providing greater trust end-to-end across the network layer. In the consumer space, there will be a continued focus on full-fiber rollout, 5G, convergence, and improving customer experiences. Divestments of underperforming country business units continue, and investment in next-generation networks will pave the way. New skills will set priorities operationally. However, due to wage stagnation, access to the right skills will continue to be difficult.

Considering announcements by several telcos since 2021, there certainly is a big push by carriers in the multi-cloud connectivity segment, excelling in integration, management of networks (i.e., capitalizing on core network strengths), and digital services – security, connectivity, and cloud solutions play a key role in defining the strategy.

Companies such as BT Business continue to focus on the multi-cloud environment by building and delivering a global cloud-centric network, BT Cloud Fabric. BT is taking a platform-centric approach of its future network strategy and working with hyperscalers and cloud providers. Other examples include Telefónica Tech serving customers with next-generation digital services, utilizing automation of communications, cloud, cybersecurity, IoT/big data, blockchain, and AI services. These are offered while providing flexible pre-configured solutions – and its ecosystem of partners will play a key role accelerating this strategy.

Telcos should have in place a robust cloud strategy, entailing a partner (cloud provider) roadmap strategy
Among other factors, the state of the economy as the market moves toward 2030 (influenced by geopolitics and enterprise spend projections), will impact how successful telcos are. The changing competitive landscape will also be influential, in particular the unpredictability of the hyperscalers and cloud platform providers. Considering the hyperscalers, on one end of the spectrum they are beginning to drive strong initiatives with telcos on the network layer and around virtualization, telco network edge, cloud connectivity and privacy/data regulation. As an example, just this year Deutsche Telekom, Ericsson, and Google Cloud collaborated in launching a 5G cloud-native network pilot – supporting Deutsche Telekom’s efforts in building ‘telco as a platform’ as the foundation for customizable cloud services.

Hyperscalers continue to progress with their telco ambitions by ramping up their portfolio of services targeted to the telecom carrier segment. The aim is transitioning networks and connectivity services on the cloud. However, this scenario could potentially yield more power to the hyperscalers in the future to further cannibalize telco revenues through cloudified network services should they wish to do so.

Considerations for success
As a concluding comment, telcos are in transition, and technology advancements offers carriers options to sell beyond connectivity and become operationally agile. However, success will depend on how they maneuver through the future economic climate and address the competitive threats that exist. Below are a set of telco considerations:

– Create operational agility and reduce costs significantly through the use of emerging technologies including AI, virtualization, and cloud-native architectures.
– Taking into consideration over-capacity and changing customer buying patterns, have a robust plan in how connectivity will be sold in the future. Business unit functions promoting agility and inter-business unit working, and portfolio innovation will have to be integrated.
– Set up ‘centers of excellence’ to exploit cloud in the context of wider carrier capabilities.
– Telcos must develop an underlying strategy for cloud that is interlinked across the different business units and portfolio areas. This will enable telcos to gain the scale and agility to operate effectively in future ecosystems as well as lead and set the direction with hyperscalers.