Telcos empower the sustainable development of the economy and society.

At the Mobile World Congress this year, GSMA released its Mobile Economy Report 2022 that underscores the contribution of the global mobile industry to economic growth and addressing social challenges. In 2021, the mobile ecosystem generated 5% of global GDP, a contribution that amounted to $4.5 trillion of economic value-added, and also supported approximately 26 million jobs, according to GSMA. It is expected the economic contribution of the mobile ecosystem will approach $5 trillion by 2025.

The report indicates the critical role telcos play in global economic and social development. The importance of telecom networks has been proven during fighting against the COVID-19. Network connectivity is essential for remote work, remote education, remote health care, etc. An OECD report indicated ‘since the start of the COVID-19 crisis, demand for broadband communication services has soared, with some operators experiencing as much as a 60% increase in Internet traffic compared to before the crisis.’ The network data were also leveraged to assess how well containment was working and reduce the spread of the virus.

In the post-COVID era, ‘Digital transformation’ has become a common term in enterprises across all sectors, as they implement new technologies to develop new solutions, improve service delivery, increase operational efficiency, reduce cost, gain competitive advantage, and meet rising customer expectations. Telecom networks are the fundamental infrastructure of the transformation.

Telcos also contribute to carbon reduction by leveraging advanced network technologies to help their customers to reduce carbon emissions. IoT technologies can help various industries to achieve significant carbon reductions in the next decade.

Therefore, telcos have played a crucial role in economic and social development. They will face more demands in the next decade, with more enterprises joining the digital transformation journey and the net-zero emission becoming a consensus of the world. This means great opportunities for telcos’ business growth but also requires telcos to transform their strategies, networks, services, and business models.

Telcos on the eve of a new era

As economic and social development requires telcos to transform their technologies and business models, telcos themselves also face a changing market landscape.

The 5G development enables telcos to explore new ways of differentiation, such as experience-based tariff plans, and also creates opportunities for Telcos to develop new enterprise services. We expect 5G Standalone Architecture (SA) will bring new broad enterprise services and significant profitable growth in the coming years. As pointed out by our recent report Communications Service Provider (CSP) Growth Opportunities in 2022, the cloud-native 5G SA can bring new services for corporate users – specifically:

• Corporate Network Slicing for security and privacy.
• Intelligent and managed Edge Services – primarily in conjunction with Cloud Hyperscalers.
• Hybrid Public/Private Networks.

However, in their journey to explore new business opportunities, telcos still face challenges in terms of internal capability building and external competition. Internally, telcos need to improve the flexibility and agility of their networks and organizations. They especially need to leverage the automation features to enhance the margin of the new business areas, as many new services are labour-intensive and may impact the overall margin of telcos (see the OBS’ comparison of legacy, transforming, and growth businesses).  

Telcos also need to redefine their competition and cooperation strategies in the changing ecosystem. OTT giants, particularly the public cloud players, are eying the enterprise digital transformation market and even extending cloud infrastructure to the telecom network area. By the end of 2021, Microsoft, Alphabet, and Amazon – the parents of Microsoft Azure, Google Cloud, and Amazon Web Services (AWS), the ‘big three’ – are the second, fourth, and fifth biggest companies worldwide in terms of market capitalization. Only Microsoft’s market cap is about five AT&T’s or ten Deutsche Telekom’s. For the scale of revenue and profit, the hyperscalers are also catching up with and even surpassing telcos. Amazon’s revenue in 2021 has been 2.8 times AT&T’s. Alibaba’s revenue is also approaching China Mobile’s. Now all ‘big three’ have designs on private 5G, as it intersects with their cloud computing interests. The hyperscalers could further influence the development of communications systems, considering their financing power and economic scale. Telcos may have to defend their position in the telecom ecosystem to guarantee their influence on the future technology evolution, such as 6G.  

Telcos need to set the roadmap for the next decade.

Therefore, it is time for telcos to set their strategic plan for the next decade to guarantee long-term competitiveness, support the new businesses, and maintain their influence in the global ICT technology ecosystem.

The plan should cover all network, service, and social responsibility areas:

• In the network aspect, network experience will be a key theme of telcos’ transformation in the next decade to improve service competitiveness and create new revenue streams. Meanwhile, network automation will be the must-have for telcos to be more efficient, flexible, and agile. Telcos need to leverage all available network resources and enhance the synergy between networks and cloud, service platforms, devices, etc. 
• In the service aspect, personalized service experience and flexible enterprise offering will be crucial for telcos to achieve sustainable business growth. Telcos need to improve their in-house R&D capabilities and also build broad partnerships with leading players in the ICT ecosystem to develop a comprehensive and competitive service system.
• In the social responsibility aspect, the next decade will be critical for the journey toward the net-zero emission target. Telcos need to take a holistic approach to reduce their carbon emission and also to support their customers’ carbon reduction. Improving network energy efficiency is an essential element of the holistic approach. The network energy efficiency should become a key performance indicator of telco’s business operation.  

At MWC Barcelona, we saw Huawei’s announcement about its GUIDE business blueprint that looks quite aligned with what I discussed above. The GUIDE vision shows Huawei’s thoughts on the telco’s roadmap for the next decade and provides some clues for future discussion. I will discuss telco’s future evolution from a more detailed perspective in my following blogs.