• Ian West, Partner |
4 min read

Today’s telco industry is faced with multiple challenges and opportunities in a changing world. Consumer revenues are high, but margins have been squeezed by the massive infrastructure investments needed for 5G and to meet the Covid-19 spike in broadband demand. Consumer and business customer expectations have risen. Competition is becoming ever fiercer with a raft of new entrants and specialist newco service providers. And we can’t forget about regulation, compliance and other key areas for maintaining trust – cyber resilience, security and privacy.

It was timely therefore to hold the latest in our ‘Future of’ webinar events for the telco industry, where we considered what all these signals of change mean, and how operators can respond to them. We were delighted to be joined by Andy Linham, Senior Strategy Manager at Vodafone; as well as Diogo Sousa, EMA Telco lead at KPMG; and Rajesh Sennik, partner in KPMG UK’s Digital Infrastructure Transformation practice.

Four emerging business models

We started by reflecting on how telcos are reacting to today’s landscape and the strategic choices they’re making, as explored in detail in KPMG’s recent Future of Telco report. Diogo Sousa, one of the authors of the report, discussed how market players are essentially placing their bets on one or more of four future business models that are currently emerging:

1. Doubling down on network: This involves focusing strongly on core connectivity and network infrastructure. Essentially, it’s about sticking to what made the business great in the first place and delivering connectivity at scale, speed and with high availability. “This is probably the most straightforward path,” Diogo observed.

2. Focusing on digital front-end play: This means focusing on the sales and marketing front end and leaving connectivity and most other services to other players. It’s a ‘Servco’, customer experience- focused model, and can require a significant partnership and alliance ecosystem.

3. Enhancing managed services: This model is about moving up the value chain, offering a complete solution set to clients, especially business customers. Examples include managed security services and managed network services such as Network as a Service (NaaS). This can also be a way of driving increased volume and traffic to networks.

4. Making the telco to techco jump: Finally, we have the most transformative option of all. As Diogo said: “This is about fundamentally reimagining yourself as a technology company and moving away from the traditional branding of network infrastructure provider.” It means leaning into new technologies, products and services, whether that’s private 5G networking systems, edge computing solutions, IoT or AI. It requires partnerships with hyperscalers and others, bundling networks and applications/solutions as the boundaries blur and innovations keep on coming.

Ultimately, perhaps nearly every telco would like to make that last leap and transform into a techco. But regardless of what the end ambition is, our discussion quickly uncovered that there are multiple opportunities across today’s market.

Digital infrastructure growing exponentially

Thinking specifically about networks and digital infrastructure, for example, Rajesh Sennik underlined that this remains key to telco propositions. “Along with data centres and towers, fibre networks are part of the holy trinity of infrastructure,” he said. “Infrastructure, after all, is where the cloud actually resides, allowing the delivery of everything at the service levels expected. There is exponential growth in cloud networks and fibre traffic. Microsoft, for example, plans to add an astronomical 1 terrawatt of new data centre capability every year – that was its entire global capacity going back just six years. There’s massive interest from infrastructure investors too due to the return profiles available.”

The power of partnership

If digital infrastructure remains fundamental, another ubiquitous priority in today’s landscape is partnerships. As Andy Linham explained, Vodafone now has as many as 1,400 partnerships globally. “It’s a complex and highly competitive market, and partnerships have become key. A partnership is not just about price or technical capability anymore – it’s also about cultural fit, ESG, net zero commitments and ambitions. For us, a key question is how we can integrate our platforms into a partnership – that’s where the differentiation will come from. We want capabilities and features we can add into our platforms and make them Vodafone-specific: it’s not just a generic resell proposition.”

New tech, new frontiers

In terms of new technologies, one area that Andy called out specifically was IoT, describing it as a “killer app” given that an end-to-end solution can take so much of the load off a customer. It’s also a powerful commercial opportunity. “Take smart metering,” Andy said. “Connectivity is only about 15% of the proposition. When you add in all the hardware, software and advanced data analytics needed, that’s when it really comes alive.”

AI is also opening up new frontiers. As Rajesh Sennik observed: “AI is a transformation play with low entry barriers. Whether it’s for the wargaming and modelling of A/B testing for network rollouts, resource planning and scheduling, product development, or customer service, it’s creating rich possibilities.”

Seizing the opportunities

Whichever business model players pursue, watchwords are simplicity (making life easy for customers), agility, resilience and trust. The regulatory framework may, as our participants noted, be more complex here than in other jurisdictions such as the US – but there are exciting prospects ahead for telcos that have a clear strategic vision and the determination and boldness to turn that into a reality.