B2B at heart of telco growth plans but B2C is still the engine room, finds report

Ray Le Maistre
By Ray Le Maistre

Oct 6, 2022

TM Forum chief analyst Mark Newman presents some of the findings of the telco revenue report findings at the DTW22 event.

TM Forum chief analyst Mark Newman presents some of the findings of the telco revenue report findings at the DTW22 event.

  • The TM Forum has published its second telco revenue growth report
  • Operators see the business customer sector as a better opportunity for revenue growth than the consumer services sector
  • But while there’s a lot of focus on developing enterprise services, it isn’t delivering much uplift yet
  • Fortunately, consumer services continue to prop up the $1.66tn global market

It’s the big existential question for the telecom operator community – how can we grow our revenues? The prevailing and optimistic view is that, aided by the capabilities of standalone 5G, the raw bandwidth of fibre-to-the-premises (FTTP) and smart distributed cloud-native functionality and applications, the enterprise sector is a gold mine ready to be plundered. The current reality, according to a great new report from the analyst team at industry body the TM Forum, is somewhat different, though its findings show very clearly that the B2B sector is the focus of telco growth strategies.

The report, Telco revenue growth - taking it to the next level, is well worth tracking down and checking out. It is a clear, uncomplicated view of where the telco services sector is right now and where the operators hope it’ll be going. 

It also provides a helpful perspective on where the global industry is right now. The TM Forum team, lead by chief analyst Mark Newman and principal analyst Dean Ramsay, based its research on an industry survey, with feedback from more than 200 respondents (mostly telcos), and the public reports from 33 operators that account for some 70% of telco revenues globally, making the team “confident that they reflect trends globally”. Those operators generated 2021 revenues of $1.15tn, up by 3.1% from the previous year (which is, perhaps, a better number than one might expect, though 2020 was, of course, the year that Covid-19 disrupted much of the world, so is something of an outlier for comparisons). 

Based on the collective revenues of those 33 operators, the analysts estimate the global telco services sector to have been worth $1.66tn in 2021, with 69% coming from consumer (B2C) services, 19% from enterprise customers (B2B) and the remaining 12% from wholesale services. (The report does note, though, that small business customer revenues are often captured and reported as consumer revenues, so the B2B share of the pie is likely to be a bit bigger in reality, though by an unknown amount.)

So we have a $1.66tn market that is growing in the low single digits, but margins are tight and costs are going up, so the telcos know they need new revenue streams, preferably with higher-than-normal margins, which is why so much focus right now is on the enterprise services sector, where the deals are bigger and provide a greater opportunity for longer engagements with a broader range of services beyond just communications. That’s why the survey results showed the B2B/enterprise market as providing the best opportunities for revenue and profit growth in the future, though it’s notable that the majority also see an upside in the B2C sector as well – see graphic, below.

Source: TM Forum telco revenue growth report

Source: TM Forum telco revenue growth report

This is quantifiable confirmation of what the industry has been talking about for a few years: Telcos need to get their act together in the enterprise services sector and be more than just a provider of connectivity services. This isn’t a shocking new revelation. 

And yet… why is it taking the telcos so long to do something about it? (Note: This is my opinion, not that of the report’s authors.) They often complain when criticised for being slow, but sometimes that criticism has merit. Why, for example, is Orange only now lighting a fire under its Orange Business Services division to make it more of a digital services partner to enterprises? All credit to the new CEO Christel Heydemann for doing something about it, but why didn’t this happen years ago? The same can be said of BT, which now has a very focused enterprise leader in Rob Shuter who has a very clear vision of what needs to be done and is actually doing stuff and not just talking about it but, again, one wonders why such a revamp didn’t happen years ago. Meanwhile, the IT giants and hyperscale cloud providers are salivating at the opportunities the telcos haven’t locked down.    

This, perhaps, partially explains why the report finds that, while telco B2C revenues grew by 4.8% year on year in 2021, B2B revenues grew by just 1.9%. 

So what needs to be done? The report’s authors note that cloud, security, IoT, platform businesses, and managed/professional IT services currently represent only a “modest proportion of overall revenues but are starting to impact the shape of the B2B business. Operators need to generate growth in these areas just to compensate for stagnation and decline in the legacy B2B sector. IT services represents an important growth area, because operators believe that this may be the most viable option for generating new revenues in these different categories.”

Indeed they do. But do the telcos have the capabilities, skills, knowledge and desire to do that? They will always argue that they do but so far, as the statistics from this report show, whatever it is they’ve done isn’t moving the needle. 

There’s a great deal of value in this report because it’s presenting the helicopter view of where the sector is now in terms of its business performance and provides insight into where those in the industry believe it’s going. It also shows just how confident the survey respondents are about double-digit sales growth, with 44% of those who replied believing that B2B service revenue growth will command a CAGR of greater than 10% over the next five years and 27% expecting B2C service revenue CAGR to be in double figures during the same time period. That’s bullish!

And the report isn’t just about enterprise services – there’s a wealth of insight into consumer service potential too. Definitely one worth reading. 

- Ray Le Maistre, Editorial Director, TelecomTV

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