RESEARCH REPORT
A renaissance for connectivity
How telcos can create new value in the AI economy
5-MINUTE READ
July 30, 2025
In brief
- After years of value erosion, a new tech order offers telcos the chance to change course towards growth and resilience.
- A tech-driven renaissance awaits telcos that reorient their networks, digital core and data operations to meet the demands of AI.
- These enable them to seize new B2B and B2C markets where premium pricing is the prize for advanced services.
After a long period of commoditization, stagnant growth and pressure on margins, the telecoms industry can now create new value at the heart of a reinvigorated and integrated comms-media-tech value chain that is poised to become the backbone of the AI economy.
Leaving behind a period of flat growth and depressed value cycles
Over the last decade the telecoms industry has faced stagnant growth, particularly in mature economies. Global growth between 2019 and 2023 was -0.7% (CAGR) and is expected to reach just +1.5% between 2023 and 2025.
Much of this can be attributed to the fact that connectivity has the dubious distinction of being the only unmetered service among all utilities sectors. Thanks to network overcapacity, telco customers — both B2C and B2B — are now accustomed all-you-can-eat services that have eroded pricing power. This dynamic is also reflected in output pricing: unlike electricity, gas, or water, communications services have not kept pace—highlighting the need for new monetization models.
Lower telco industry output prices reflect rising commoditization
Total shareholder returns – communications vs. other players
Meanwhile, 16% of the industry’s capex-to-revenue ratio exceeds most sectors. Debt levels have risen and margins — at approximately 32% — have remained under pressure, despite efforts to improve cost efficiencies and reduce headcount.
When comparing telcos to adjacent sectors, telcos’ return on invested capital (ROIC) is about one-third that of digital platforms. This has constrained the industry’s capacity for innovation and building new growth models. This performance gap is echoed in total return to shareholders (TRS), where digital platforms and infra players have consistently outpaced telcos—making them more attractive to investors.
Total shareholder returns – communications vs. other players
Telcos will have to shift tactics to increase their future growth potential, justifying the necessary investments. AI marks that turning point.
A renaissance for telcos in a new tech order
A new opportunity beckons for the industry. In the past, telcos’ inherently local business model diminished their role in global value chains dominated by global players. But the AI-driven tech wave puts communications providers at the center of a reinvigorated value chain that is poised to become the digital backbone of the social and economic fabric, that could scale geographically. In this integration of communications and technology the redistribution of value can be exploited by telcos.
The ability to provide local, secure, and reliable connected computing and AI infrastructure and access to AI services is the new currency. As a consequence, telcos’ local business models are now critical in the face of deglobalization trends and government mandates for sovereign AI and data.
Create modern networks by and for the AI era
As networks' value shifts to new areas of enterprise demand, telcos must modify their investments to match.
Moving beyond the past values of speed, coverage and APIs, telcos need to level-up their investments:
- AI-driven autonomous networks with embedded security.
- Sovereign data and cloud – global spending is projected to reach $258.5bn by 2027, three times the level in 2022 (according to IDC).
- Local
compute power – AI-related data-center infrastructure is expected to generate
more than $1 trillion in spending over the next five years (according to
Dell’Oro Group).
Private networks and edge computing – the global market is projected to expand from $1.2bn in 2024 to $21bn by 2030.
Transform business with a digital core that ‘disentangles’ the infrastructure
An AI-operated digital core is the critical technology capability that enables enterprises to continually reinvent.
It allows telcos to treat services like apps and disentangle them from the infrastructure complexity they sit on top of.
- Comprised of a secure, cloud-based architecture, digital platforms and applications, a digital core can improve CX and time-to-market, reduce tech debt and open new business models.
- A digital can use AI as an agent to prompt and extract from old systems what’s needed to enable the new.
- It also can apply AI to reduce the cost of business and operations support systems (BSS and OSS).
Become an AI telco – master AI on the inside to sell AI services outside
As AI becomes the foundational element of any company’s core business and value chain, scaling across the organization is critical.
AI is not another tech upgrade, but decodes what it means to be an AI company and how CSPs can apply it. This means a different strategy than traditional tech rollouts. Customers will be using AI as much as telcos will themselves, so the data structure and so this lens must apply both ways.
Agentic AI – next generation agents that can interact and collaborate – is central to reinvention for AI inside. Intelligent engines and agents at scale:
- Aggregate unstructured data into usable schema for LLMs and SLMs
- Enable autonomous, self-healing networks and operations
- Iteratively evolves responses and learns to address – then intelligently solve - the challenges clients encounter.
Redefine B2C growth models with the power of AI & Consumer marketing
Embrace the new era of marketing driven by the creator economy, while also addressing human needs with AI-powered solutions.
B2C still accounts for between 70% and 90% of telcos’ revenue. Yet telcos struggle to turn high levels of customer trust into loyalty. They are falling short on experience and new, engaging services customers expect.
With AI-enhanced Experience and Engagement, telcos can charge a premium for new services. We see two key opportunities:
- AI aggregation means integrating AI agents into apps, services, and devices to support customers in their daily digital lives. Providing integrated AI services will make consumers’ lives more convenient, secure, and easier to deliver.
- Community networks tap into how people now connect with brands and creators and make purchases. Telcos can offer premium services for the badge effect of associating with these icons and brands.
Become the connected infrastructure platform for B2B
An unprecedented opportunity emerges for CSPs to capture a bigger share in the B2B connectivity-infra-cloud-edge-AI continuum with a metered charging model.
The B2B market for connectivity, infrastructure, cloud, Edge and AI, is being propelled by sovereignty policies and local need for data and compute. Telcos should:
- Become a trusted local partner for cloud migration, ICT, managed services and local tech support, security and data protection.
- Offer low-latency Edge solutions for real-time processing of data close to the source, and enhanced security for enterprises needing GPU capacity to sustain their AI needs.
Transform business and growth by delayering operating models
Releasing trapped value in different business areas by ensuring a specialized strategy for each entity.
New market growth demands greater levels of competitiveness when facing a tide of new entrants. But telcos’ current vertically integrated operating models hold them back, preventing each part of the business from performing optimally.
Telcos can unlock this trapped value by creating autonomous layers of the business: ServCo, PlatformCo, NetCo, InfrastructureCo, and SupportCo. With specialized strategy, talent and operations, each layer can:
- Perform with greater agility to innovate, build and implement
- Lift EV / EBITDA multiples
The new tech order will drive the new AI economy
From a cycle of value erosion to a renaissance of connectivity telcos can stand in the center of the AI revolution. With this unparalleled opportunity to change their business outlook, telcos will have to be AI-inside if that want to sell AI-outside. By reinventing processes, networks and technology with automation and using AI to open new growth markets, the telecoms sector has the potential to enter a new era of higher growth and stronger margins.