The telecoms industry has changed rapidly in the last couple of years, spurred by a legion of emerging trends. We already covered a few of these recent shifts in our 2023 technology trends whitepaper, such as 5G Core (5GC) reaching mainstream market adoption, the consumerization of network equipment, and 5GC in the three-layered cloud stack not happening. But there are four more telecoms trends that were not covered in that report that have equal impact on Communication Service Providers (CSPs) and Network Equipment Vendors (NEVs). These industry developments are not necessarily borne out of technological advancements, but of current macroeconomic and geopolitical calamities.
More Flexible Telco Business Models
The war in Ukraine, high inflation, rising interest rates, and a COVID-19 resurgence created a challenging macroeconomic/geopolitical environment for the telecommunications sector. These challenges cast doubt in the minds of consumers and enterprises alike, resulting in a more conservative approach to network spending. This current trend is forcing telecommunications providers to offer simpler, budget-friendlier, and lower-risk technology solutions.
To attract price-sensitive customers, telecommunications companies, such as CSPs, are increasingly seeking agile, resilient business models that revolve more around cloud computing-based software (Software-as-a-Service (SaaS)), and less so around hardware Capital Expenditure (CAPEX). ABI Research expects the high demand for these low-complexity, flexible, and cost-effective business models to be a long-term trend about which telcos should be wary.
This type of business model also applies to telco technology suppliers, as CSPs only want to pay for what they use. You can think of this as “tech access” rather than “tech ownership.”
Alliances Abound in the Telecoms Industry
As the global economy has weakened, telecom companies have increasingly joined forces with one another. For example, in the European market, it’s trendy for CSPs to consolidate their complementary businesses, which is remolding the telecommunications sector.
Larger CSPs, such as Orange Spain and MASMOVIL, have been partnering with their competitors to build resilience in uncertain times. These telco alliances bring the benefit of protecting existing revenue streams, promoting a more sustainable business model, and building the capacity to invest in new 5G infrastructure, technology, and talent.
Another trend materializing is technology vendors’ acquisitions of smaller firms. This ensures that they can bulk up their technology capabilities, support new commercial models targeted at CSPs, and offer “closed-loop” automation and 5G service assurance solutions.
Joint Ventures Have Picked Up Steam
At least for the short term, the cost of selling connectivity solutions will be high for telcos (CSPs and tech suppliers), due to high energy prices and an increased cost of components and logistics. To mitigate these issues, many telcos are partaking in joint ventures for 5G network infrastructure usage. Some recent (within the last 2 years or so) examples of mobile operator joint ventures include:
- Telefónica Spain (seller) and American Tower (buyer)
- Telia Sweden (seller) and Brookfield and Alecta (buyer)
- Orange (seller) and Totem Towers (buyer)
- Cellinex Telecom (seller) and Phoenix Tower International (buyer)
- WOM (seller) and Phoenix Tower International (buyer)
- Deutsche Telkom (seller) and DigitalBridge and Brookfield (buyer)
These joint ventures generate new revenue and help telcos acquire greater efficiency. We’ve witnessed some telecom operators creating separate tower units or offloading their network infrastructure to independent companies to retain a slice of the future revenue pie. These joint ventures are just an extension of the more general tendency of telecoms industry players reducing their use of physical assets and leveraging more shared third-party assets.
Emphasis on Business Outcomes
Another telecoms industry trend to be wary of in 2023 is the growing importance of business outcomes in 5G solutions. CSPs no longer want to hear about technology-driven solutions in the face of a volatile macroeconomic situation. Instead, technology suppliers and professional services firms in the telecoms industry are building outcome-based solutions that illustrate real-world benefits. In other words, the conversation is shifting from “What is the technology?” to “What end results can I expect with this telco solution?"
The telco suppliers that can build End-to-End (E2E) products/solutions aimed at digital experiences will find favor among CSPs. Moreover, telecoms professional services firms are expected to have their own personnel be proactive in the production processes to augment existing routines within network operations.
Responding to These Telecoms Industry Trends
If the journey to 5G prosperity were a road, the next steps that the telecoms industry takes would be the asphalt concrete. There are both short-term and long-term considerations that are essential to meeting CSP and NEP organizational goals. In the short term, ABI Research recommends that telcos make the following moves:
- Innovate existing cost structure
- Proactively address supply chain disruption
- Grow core business/greenfield value
- Build for continuity (small-scale “sure thing” projects/processes)
- Become more efficient and productive
More longer-term strategic moves ABI Research recommends include the following:
- Hedge strategic risk
- Reengineer how you do business
- Align technology strategy with competitive circumstances
- Build 5G solutions from the outside in
For a more extensive analysis of these telecoms industry trends and how industry players should respond to them, download ABI Research’s Macroeconomic Effects on the Telco Market and Competitive Landscape presentation. This research is part of the company’s 5G Core & Edge Networks Research Service, which provides analyst insights, our latest reports, and market forecasts to subscribers.
