Based on its deep industry knowledge, STL Partners is sharing its vision on how telcos can reverse the trend of stagnating consumer revenues by focusing on innovation, new ventures and excellent customer experience.

The telco consumer business

The consumer segment remains the backbone of the telcos’ business. In 2022, it delivered the majority of the revenues for most operators. Therefore, it is paramount for telcos to ensure a healthy growth in the segment.

Challenges

However, the consumer business faces significant challenges. Telecom operators have experienced a stagnating average revenue per user over the last few years despite costly investments in 5G and fibre. In most countries, the telecom market has matured and is fiercely competitive, with growth in core connectivity revenue possible only through increased market share and often at the expense of profit margin.

Key challenges to the telco consumer business

Source: STL Partners

• Difficult macroeconomic conditions: Increased retail prices and interest rates leave consumers with a weak ability and propensity to spend, even though connectivity and core connected devices are essential in today’s life.
• Evolving consumer behaviour: Shifts in consumer behaviour towards longer replacement cycles of mobile phones, increased environmental consciousness and appetite for new types of devices put further pressure on the telcos’ core business.
• Mature competitive market: Market saturation, intense competition and the maturity of operators’ core offerings is leading to commoditisation – with telcos struggling to secure a return on their significant investments in infrastructure
• Consistent threat from hyperscalers: Competition from hyperscalers is as intense as ever, with internet giants themselves coming of age and experiencing slower growth than in the previous two decades.

Despite the challenges, telcos have many opportunities to grow their consumer business. Key enablers include the latest technological advancements such as 5G, artificial intelligence, flexible cloud-based networks, private networks and edge computing. Some of these provide a chance for telcos to integrate new services with the network in a way that hyperscalers may not be able to do. In addition, societal changes and new consumer experiences give an upper hand to telcos to participate in the next wave of digitalisation of people’s everyday lives.

Three pillars of consumer revenue growth

STL Partners believes that telcos need to build a strategy of growth, based on three core pillars:

Pillars of consumer revenue growth

Source: STL Partners

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Table of contents

• Executive Summary
  • Challenges and enablers for future growth in consumer space
  • Three pillars of consumer revenue growth
• Challenges for telcos in consumer business
  • Difficult macroeconomic conditions stifle consumer spending
  • Evolving consumer behaviour challenges historic spending patterns
  • The mobile telecom services market has matured
  • Hyperscalers continue to pose threats to telcos
• Enablers of future growth
• Three pillars to grow consumer revenues
  • Focus on driving value in the core business
  • Revenue growth from new services outside core connectivity
  • Telcos need to stay relevant and be loved by consumers
• What next: Get in touch to discuss your consumer services strategy

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Marina Koytcheva

Marina Koytcheva

Director, Research

Marina works across STL Partners’ research portfolio, with a specific focus on the Executive Briefing Service, consumer services and sustainability. She joined STL Partners in 2023 with 18 years of experience as a market analyst, first at Nokia, and then at CCS Insight where she led the market forecasting practice across all technology areas and modelled the impact of major global disruptions. She has wide expertise across telecoms, hyperscalers, device markets, consumer behaviour, and the impact of macroeconomic factors on the tech industry. Marina holds an MSc in Finance and Economics, and an MBA.