• A new outlook from PwC paints a worrying picture for the global telco sector
• The consultancy expects global telco revenues to grow at a slower rate than inflation through to 2028
• Could AI help reverse telco fortunes? The World Economic Forum and Accenture believe it could

According to the latest Global Telecoms Outlook report from renowned British consultancy PwC, worldwide annual aggregate telecom operator revenues increased by 4.3% in 2023 (the last full year for which figures are available) to reach $1.1tn, which doesn’t sound too bad all things considered. The bad news is that the sector’s growth will not hit that level again for the foreseeable future and will, in real terms, shrink. 

The PwC team notes that global telecom revenues are projected to rise between now and the end of 2028 at a compound annual growth rate (CAGR) of just 2.9%, well below the expected global rate of inflation. 

Another statistic that will discomfit telcos is that average revenue per unit (ARPU) is expected to fall across mobile, fixed broadband, and voice services by an average of  2% annually until 2028. While private 5G networks offer a glimmer of hope for growth, consumer 5G continues to be a service in search of a killer app, leaving subscribers unwilling to stump up a premium for what is, in effect, the same kind of experience as that delivered by 4G, except a bit faster in terms of download speeds. 

Nonetheless, the PwC report points out that total 5G subscription numbers are set to quadruple from the 1.79 billion reported for 2023 to 7.51 billion by 2028, while 5G’s share of total mobile subscriptions will more than triple, rising from the 18.8% achieved in 2023 to 64.1% in 2028. If that growth happens as expected, according to the PwC report, 5G will become the dominant mobile standard from 2026. 

There are other bright spots in the global telecom services sector, including fixed wireless access (FWA), which is expected to be the fastest-growing broadband technology between now and 2028, with a subscriber base CAGR of 18.3%. 

Another brightish spot in the overall gloom is cellular internet of things (IoT) services, a sector that is set to experience decent growth mainly due to demand from the global automotive industry. IoT revenue is forecast to more than double and hit $34.1bn by 2028, with a CAGR of 15.8%. 

As has now become the norm in telecom sector reports in these currently straitened times, the PwC paper follows the line taken by other analysts in other reports and opines that the industry must “reinvent how it creates, delivers and captures value – including strategic investments in AI, fixed connectivity, digital infrastructure and working with investors and regulators to unlock growth.” That might sound a bit like stating the bleedin’ obvious, to quote Monty Python, but the PwC report does highlight variations in growth potential that exist between services and markets. 

For example, fixed broadband and mobile subscriptions are projected to grow annually by 3.8% and 4.3%, respectively, until 2028, while fixed voice subscriptions are expected to decline by 1.8%. Across all geographies included in PwC’s analysis, fixed subscriptions are projected to rise by just 0.6% on average, although some markets, including India, Nigeria and Malaysia, will grow much faster, at 17.2%, 9.2% and 9%, respectively. 

Against the background, the report says, “capital is shifting decisively towards fixed connectivity – or fibre.” In 2023, total telecom sector capital expenditure (capex) fell 2.3%, driven by a 5.7% decline in mobile network investments. However, industry capex is projected to grow at a 2.4% CAGR, fuelled initially by fixed broadband investments for fibre rollout, and later by early operator investments in the supporting infrastructure for 6G. 

Then, of course, there’s AI, which the report calls “a significant opportunity for the telecoms industry, but one that still remains under-utilised.” 

Can AI come to the rescue?

Under the aegis of the Centre for the Fourth Industrial Revolution, the World Economic Forum (WEF) has, in association with professional services giant Accenture, published a new paper examining How telecoms can thrive in the age of generative AI. 

Despite the ‘Fourth Industrial Revolution’ tag, the areas covered are more of a recapitulation of the current position of telcos when it comes to AI rather than a novel, revolutionary approach packed with new ideas. 

Nonetheless, the publication has value as a succinct primer for telcos as they struggle to transmute themselves into ‘techcos’, which the report describes as “highly automated, AI-driven organisations offering services beyond connectivity.” 

The WEF report makes the point that telecom is a “tech-native” industry, well used to integrating new technologies into its operations. Well, maybe, but in the past such uptake has been slow and reluctant on occasions. However, the sector has been working with AI for several years now and machine learning and predictive AI are deeply embedded in its processes. 

That experience means telcos are well positioned to exploit the benefits offered by generative AI (GenAI). Indeed, the report cites evidence that the telecom sector, when compared with other industries, is leading the pack where GenAI is concerned. That said, there is, as yet, little evidence that communications service providers (CSPs) and network operators have been able to capitalise on AI in any meaningful way even as, in  most established markets, CSPs live in a world of stagnating revenues, reducing margin growth and increasing debt-to-equity ratios – factors that severely limit their ability to invest for growth. 

Thus, telco market capitalisations have grown by a mere 7% since 2018. Over that same period the value of ‘digital platforms’ has, on average, grown by 230% and the S&P 500 companies by 172%. 

The WEF and Accenture have worked with telcos, vendors and other ecosystem partners, industry associations and academia across a range of regions and has adduced four top AI priorities that, if addressed, should have the most immediate positive impact on telcos themselves. They are: 

1) The use of AI to help reduce operating expenditure (opex) costs that remain stubbornly high at 65% to 70% of revenue. Indeed, the forecast is that network operations alone will consume 50% of a telco’s total operating expenses by 2027. 

2) Using AI to drive business growth via highly personalised marketing campaigns and “customer journeys powered by predictive models that anticipate individual behaviours.” Hmm. Sounds uncomfortably like an adaptation of the Tom Cruise film, ‘Minority Report’. 

3) Given that just 34% of subscribers profess to be satisfied with their service experience, the use of GenAI could help to “transform customer experiences with advanced conversational tools, such as natural language chatbots and AI-powered retail assistants”. 

4) Using AI to provide secure and reliable operations in complex networks comprising legacy components with open interface elements and increased use of application programming interfaces (APIs). Also, telcos manage masses of sensitive user data and that creates a prime target for cyberattacks. AI should be able to identify and protect vulnerabilities as well as analysing vast operational datasets in real time to detect security incidents and prevent fraud. 

Will this be enough to turn the tide for telcos? We’ll find out over the next five years!

– Martyn Warwick, Editor in Chief, TelecomTV