The telecom industry in the AI era: How telcos can follow the money

The generative AI boom has accelerated the shift in financial market value away from telcos and towards leaders in AI. We identify four goals for telecom companies to adapt to their rapidly changing competitive environment.

Generative AI (GenAI), underpinned by traditional AI, is impacting businesses across all sectors. The technology is improving day-to-day operations across sales, marketing, customer contact, resource planning and optimisation. Collectively, this is enabling faster, more widespread and ambitious organisational and skills change.

At the same time, rapid AI adoption changes requirements at the infrastructure level: data centre, cloud and connectivity must be upgraded and optimised to deliver AI workloads securely, reliably and as energy-efficiently as possible. As a result, financial market value is shifting away from telcos and towards companies driving R&D in AI tech and infrastructure.

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Financial market value is shifting away from telcos and towards companies driving R&D in AI tech and infrastructure

This is an update to our previous Telco 2030 analysis, in which we introduced three possible business models for the telco at the end of the decade: servco, infraco and techco.

In our latest research, we outline the infraco model as the likely outcome for most telcos, but many will fail to adapt to the AI era. A few might achieve accelerated growth.

Three scenarios for telco revenue trajectory to 2035

Telecom techco description:

• Provision of integrated distributed compute and connectivity, optimised in real time to meet specialised needs of applications
• All connectivity and compute adhere to strict SLAs on coverage, compliance, security and reliability
• Innovation of unique tech and services leveraging distributed infrastructure

Infraco description:

• Level 4+ autonomous networks
• Network exposure and programmability services offset commoditisation of traditional connectivity services
• Seamless integration between mobile, fixed, non-terrestrial networks (NTN) and other networks delivers ubiquitous coverage (rural areas, indoors, etc.)

Traditional telco description:

• Slow progress towards autonomous networks
• Limited network exposure and programmability
• Persistent coverage and reliability challenges
• Traditional telcos will have a longer life in markets where no players shift towards an infraco model, resulting in a less competitive environment

Related research

• Telco generative AI adoption tracker
• Sovereign AI: A strategic playbook
• Enterprise AI: What are the best opportunities for telcos?
• Not all telcos need to build their own AI factories

Author

Amy Cameron

Research Director

Amy works with world-leading operators and tech companies to define opportunities and strategies in the B2B and AI fields. She leads STL Partners’ research into application of AI in telecoms, as well as the Growing Enterprise Revenues research stream.