Identity crisis is crippling telcos – report

• Network operators are stuck in a technology-focused rut and don’t seem to know what they should be, according to Rakuten Symphony
• Telcos need to focus more on their customers, different metrics and the most relevant business model, reckons the vendor’s CMO, Geoff Hollingworth
• The mobile market is going to grow, but mobile operators are in danger of ceding that growth to others, he believes

Around this time of the year the TM Forum usually sticks a mirror in front of the telco community, reminds it that it has become “disconnected from growth” and re-issues its ‘code red’ warning (first sounded in 2023). 

We don’t know if that warning will be re-issued next week during the industry body’s DTW Ignite event in Copenhagen but, ahead of the show, Rakuten Symphony has piled on an extra dollop of service provider sector existential angst by publishing its 2026 Industry Growth Report, which blames the telco sector’s “stagnating margin growth” on collective misguided focus. 

According to the vendor, which is the sister company of disruptive Japanese operator Rakuten Mobile, telcos have become stuck in a technology-focused rut, obsessing about whether a new upgrade or the addition of new features can generate incremental profitable growth while failing to address the real issue they face as companies – their outdated business models. 

“Now is the time for every telecom CEO and board member to make deliberate decisions on what business to be in,” Rakuten Symphony states in the report. “Continuing to position as a ‘techco’ while operating as a utility is the worst of all worlds; carrying the cost structure of the former while being capped by the revenue ceiling of the latter,” it adds. 

The report has been written by Geoff Hollingworth, Rakuten Symphony’s CMO, who has long been challenging the status quo in the industry and who believes operators need to switch their attention and investments away from infrastructure and to business metrics: “No amount of network investment fixes a problem that was never about the network,” he states.

Hollingworth believes telcos are stuck in a rut where they spend money on new technologies to chase new business and create teams to do so, becoming bloated in the process. One example is the ongoing craze for network slicing, for which Hollingworth has no time at all. “We all get together at conferences, speaking about how people need network slicing, but no one can buy it, and no one will guarantee it, no one will give it an SLA. I don’t get it.” 

That kind of technology focus is blinding telcos, distracting them from pinning down the best business model that suits their goals. According to Rakuten Symphony, the vast majority of today’s operators are “carrying technology-company cost structures supported only by utility-grade returns” and still measuring consumer-customer sector success on ARPU [average revenue per user] and churn statistics, a focus that leads to defensive strategies that drive a “race to the bottom”. 

To get out of that rut, Rakuten Symphony suggests that telcos choose one of three business models: A “high-performance utility at the required cost structure”; an “ecosystem enabler and loyalty creator” – this is the model that the report analyses in detail as it ties in with the digital services ecosystem approach adopted by Rakuten Mobile in Japan, where mobile connectivity is just one of a number of services on offer to all subscribers (see this article from 2022 and this recent article that provides an update on Rakuten Mobile’s progress); or a “platform provider that supports specialist operators and MVNOs.”

Rakuten Symphony believes the US airline industry shows that a shift in business model towards a customer loyalty-focused approach can work, citing the example of how, following deregulation in 1978, the carriers built profit growth from a loyalty ecosystem rather than from selling airline seats, “with Delta’s American Express partnership alone worth roughly $8.2bn in 2025, about a tenth of its revenue,” according to Symphony. 

The 28-page report has more detail on those three options, the example of the US airline industry, and a lengthy look at the Rakuten Group ecosystem play in Japan. You can find a link to the report here. 

Its main contention is that telcos should focus on their existing customer base and adopt a business model that will help them retain and grow their relationship and revenues with those customers.  

“The mistake isn’t choosing the wrong path but not choosing at all,” contends Hollingworth. “Standing still feels safe but is also the most expensive option on the table. Every quarter an operator spends protecting a shrinking connectivity margin is a quarter a rival spends turning customers into something far harder to take away. The decision only gets more expensive the longer it is delayed.”

He adds: “The key premise of the paper is – decide what you want to be, and then you streamline everything to be the best of what you want to be, right, from every point of view.”

And he’s frustrated with the growing industry noise about 6G. “We keep speaking as if adding more technology is going to solve something. We need to focus on the customer and what we are going to promise to the customer, then we need to decide what we really need to be best at… but the real problem is that because we never focus on how we are actually going to deliver value to the customer in real terms, we end up with a lot of engineering projects, a lot of bloat, a lot of misdirections, very little focus, and then you end up in a position where we’re claiming we’re doing advanced technology, and in reality, we’re a company that sends a utility bill that no one looks at.” 

At this point, Hollingworth was on a roll. “Building net new business in these complicated areas, like network slicing, like enterprise, is so much harder than providing really good service to existing customers and understanding if there are ways to increase the value you can give to existing customers.” 

Are there any examples of operators – other than Rakuten Mobile, of course – that have their business model heads screwed on properly? Hollingworth believes T-Mobile US, when it was in dire straits following the failed merger with AT&T in 2011, had a customer-focused approach when it devised and launched its ‘Uncarrier’ strategy that focused on customer needs and helped the operator become the mobile powerhouse it is today. But that focus has drifted, reckons Hollingworth, with T-Mobile US talking more about its network evolutions and investments.  

Currently, he believes e& has a clear business- rather than technology-led approach, while Veon shows real promise as a company focused on business rather than technology models, with the added kudos of adapting the business model to suit the various markets in which Veon operates. It should be noted, though, that Veon is engaged with Rakuten Symphony in this strategic development.  

But will anything change? The TM Forum’s ‘code red’ warning was applauded and discussed but doesn’t appear to have shaken the telcos into action and there have been many ‘existential crisis’ proclamations over the past 10 to 15 years that have gone unheeded, even though the major investments in 5G around the world have, for most, been a commercial disappointment. 

Hollingworth isn’t expecting a mass shift in telco corporate strategies as a result of the report’s publication but he hopes that it will at least be a catalyst for discussions about the future of the sector and how service providers can revive their fortunes. 

His fear is that without important self analysis, the customer-oriented business opportunities that do exist will be snapped up by others, and that’s a trend the telcos have seen before. 

“The whole industry needs to have a conversation about how to fix the business. Mobile is as important now as water but just because it’s an important business, a critical service, that doesn’t mean it’s being delivered in the right way. This industry will be bigger in the future, but will the existing service providers be the ones to capitalise on that growth? Who will be the market leaders? I think it will be the ones who build customer loyalty and deliver on the customer promises and right now that looks more likely to be an MVNO disruptor like Revolut or Starlink, which gets rave reviews from its broadband service customers. Do we honestly believe that Elon Musk has put 10,000 satellites in the sky to maintain the status quo and help out terrestrial operators? I think Starlink will do exactly what a connectivity provider should do – be the best in class by stitching together networks to provide a full coverage proposition.” 

Let’s see if the conversion at DTW Ignite is about customer loyalty and relevant business models, or if network slicing gets more airtime. 

- Ray Le Maistre, Editorial Director, TelecomTV