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Telco 2030: Wait-and-See Is No Longer an Option

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MARCH, 2020

At a Glance
  • Advances in digital technology and the evolving demands of customers will spark a rapid transformation within the telecommunications industry.
  • Three trends will define the sector’s next decade: The reinvention of the asset-light carrier model will generate a new wave of stronger competitors, telcos’ enterprise businesses will rebound, and the liberation of network infrastructure will accelerate and create a range of different business models.
  • Companies that embrace the coming changes and that make audacious investments quickly will lead in this new era.

Borders are irrelevant. Artificial intelligence (AI) and software power everything. Businesses are global but specialized, having shed old strategies and formed new alliances. This is the telecommunications industry of 2030, and it’s time to start preparing for it.

While the sector has never stood still, it also has never been easy to make quick or large-scale adjustments within massive companies that deploy well-established business models and capital-intensive infrastructure to serve hundreds of millions of customers.

But the changes coming over the next decade are different than those in past eras. The next wave of shifts won’t require new network technologies that take 5 years to develop and 10 years to deploy. Most of the impending changes are software-based and require scale that telcos lack in some parts of their businesses. They will happen in a time frame that will feel almost overnight to a traditional telco. AI and other digital technologies are evolving so rapidly that they will actually force telecom carriers to make strategic choices that will reshape their business models, products and services, and workforces.

“The next decade will reshape the industry at lightning speed; to win, be bold..”

While a host of changes will transform the sector over the next decade, three in particular stand out.

  • The reinvention of the asset-light carrier model will generate a new wave of stronger competitors.
  • Telcos’ enterprise businesses will rebound.
  • The liberation of network infrastructure will accelerate and create a range of different business models.

Telcos have critical decisions to make about how to handle these and other shifts, and they still have time to stay a step ahead. But the classic telco wait-and-see approach is likely a losing strategy this time. Companies that move quickly to make bold investments and experiment with new approaches will lead in this new era.

Reinvention of asset-light carriers

By 2030, expect to see a new breed of asset-light carriers that have built more sustainable businesses as technology advances and evolving consumer demands reduce costs across even more facets of their operations. The upshot: The break-even threshold for asset-light carriers will drop from a range of 2.5 percentage points to 5.5 percentage points of market share to as low as 1 percentage point of market share over the next decade, creating opportunities for new competitors to enter the market. The outlook also improves for existing asset-light telcos, which could more than quadruple their historic profit margins, enabling them to achieve operating cash flow margins exceeding 20% (see Figure 1).

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