Are leaders ready for the telco of tomorrow?

Network quality leadership: a defensive North Star

Industry growth expectations are also accompanied by a strategic North Star that tends to favor network quality. When asked which strategic persona most accurately reflects their organization’s long-term positioning, network quality leader (48%) emerges as the most popular choice, followed by full digital services provider (37%). Both have premium connectivity as a foundation: the key difference between the two personas pivots on the breadth of the service portfolio. Other potential North Stars — the data utility that focuses on value-driven, basic connectivity and the digital InfraCo that wholesales connectivity — rank much further back.

The preferred positioning as network quality leader does come with caveats attached. Many senior executives highlighted that network performance gaps between competitors are eroding as infrastructure coverage and speed levels become more uniform within markets. As one CEO underlined: “Today, everybody has the same network. We all say we have the best network, but the customer experience between a good and bad network is imperceptible to the end user.”

Others pointed to previous failures to monetize new digital services as reasons for prioritizing network quality, underlining its role in a fundamentally defensive strategic mindset. Tellingly, network modernization itself ranks only fifth out of nine near-term strategic priorities overall, suggesting that network upgrades are not actually top of mind as a route to competitive advantage.

Widening competitive and compliance landscapes signal long-term risks to growth

While industry leaders favor defensive strategies predicated around high-quality network infrastructure, the sector operating environment is changing rapidly. Although financial performance is proving resilient in the face of macroeconomic headwinds, there are other factors to consider. The top challenges to delivering profitable growth cited by management are disruptive competition (56%) and regulatory or policy uncertainty (52%) — and perceptions of volatility and complexity accompany these pain points.

Looking ahead, disruptive moves from outside the sector will pose a growing threat, subverting telcos’ confidence that they will outperform their immediate peer group. Today, classical big telcos and mobile network operators (MNOs) loom large as perceived competitors, but survey respondents pointed to hyperscalers as becoming the dominant threat five years out, with satellite companies overtaking virtual mobile players. Leveraging network quality may help established telcos counter disruption from satellite providers but is less likely to act as a counterweight to hyperscalers’ capacity to innovate and disrupt. As one CEO put it: “Hyperscalers are eating into our B2B business; it would be easy for them to take control by acting as intermediaries, providing connectivity to customers.”  

Meanwhile, regulation of artificial intelligence (AI), digital markets and network suppliers are all cited by more than one-third of executives as having significant impact on the telco sector in the next three years. As a result, effective management of the compliance burden will require better understanding of industry ecosystems outside the traditional telecoms value chain.

There is room to raise the bar with near-term priorities

As telcos consider their priorities over the next three years, customer experience improvements lead the way, with many respondents keen to highlight the importance of ongoing product simplification as a key enabler. Improving organizational skills and talent rank second, with many telcos keen to overhaul their organizational DNA to bring in younger people with fresher thinking. Digitization, cost control and network modernization round out the top five.

These priorities align well with announced strategies, but do ambition levels travel far enough? When respondents are queried about key levers within each domain, some aspects are surprisingly muted. Simplifying products is rated twice as important as accelerating issue resolution in customer experience interactions. Attracting new talent dominates the people agenda, but the redefined employee purpose that can enable this is cited by just 10%, and the dangers of creating new silos persist. As one CFO highlighted: “It is challenging to get the right kind of talent. They think differently and they have different attitudes to work, compared with older generations.”

Meanwhile, artificial intelligence (AI) ranks behind software-based networks as a critical emerging technology — although executives expect it to grow in importance over the next five years while digital infrastructure sharing and cloud migration lack traction as drivers of improved operational efficiency. Upgrading and decommissioning infrastructure lead network strategy, with network energy efficiency and adoption of network application programming interfaces (API) much less prominent. 

Dissonant perspectives emerge as telcos consider the future state of the industry

The telco of today is confident in near-term growth prospects, trusting in network quality as a differentiator while aiming to overhaul skills, systems and processes as part of established transformation agendas. However, this near-term mindset stands at odds with the more radical view of the telco landscape in five years’ time articulated by industry leaders, who expect significant evolution in stakeholder expectations, sources of disruption and differentiation, market structures and ecosystem positions. This view jars with current strategies that prioritize core products alongside ongoing cost optimization.

Hyperscalers are perceived as the dominant disruptive threat to telcos’ business in five years’ time, but only 37% view business model overhaul as a strategic priority today. Only half of telcos surveyed believe that network quality will still be the most important differentiator in five years, calling into question their faith in core connectivity as a profitable growth driver. Fifty-nine percent believe most of today’s workforce will be upskilled or replaced, but very few see employee proposition and purpose as a focal point in their people agenda today.

Most believe that telcos will play a top role in cross-industry ecosystems, but ecosystem positioning does not rank as a top five strategic priority. Some do recognize this Achilles heel, with one CTO highlighting that “poor ecosystem collaboration is a challenge — way more than before, it’s important to have people who can accept trade-offs within partnerships.” Finally, 43% of industry leaders believe that telcos will split into NetCos and ServCos, but digital infrastructure through M&A ranks last as a near-term priority.

The dichotomy between the current and future state of the sector