Generative AI is expected to create significant value across the telecommunications industry. To capitalise on the opportunity, telcos must build new skills across their organisations. Getting this right is critical given the scale of implementation challenges and the significance of impact on how employees work.

The generative AI journey has many challenges, but the destination is worth it

Generative AI is estimated to create US$60 to US$100 billion worth of value for the telecommunications industry each year, equivalent to 2.3% to 3.7% of its annual revenue globally. Much of this value will be achieved through increased internal operational efficiency, as well as through enhancements to existing telco products and services, and the introduction of new generative AI-as-a-service offerings for customers, as highlighted by our interview programme.

The following paper crystallises insights on the opportunities and challenges surrounding generative AI in the telco industry. The insights were gained through an in-depth interview programme with telco executives primarily in either data or strategy functions. A breakdown of the profile of interviewees can be found in the graph below.

Our research programme consisted of in-depth interviews with six telco operators globally

Source: STL Partners

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A key reason for the expected scale of impact of generative AI is the fact that it can be used by those without deep technical skills and coding experience. Models can be interacted with through natural language prompts, which removes a technical barrier to entry. With generative AI, it is possible for any employee across any business unit to leverage impactful use cases and improve their productivity. Some telco business units are expected to benefit from more than 17 discrete use cases. STL will be augmenting our current financial impact assessment for AI and automation to include these use cases and determine which have the most significant ROI impact in the coming months.

Furthermore, beyond purely financial value, generative AI is expected to deliver improved job satisfaction through creating an engaging work environment in which employees can focus more of their time on complex, creative and collaborative endeavours. A recent study shows that two thirds of over 2000 UK workers have experienced an increase in job satisfaction when they’ve embraced generative AI.

The potential scope of generative AI applications in telecommunications is broad. This is generating buzz within the industry, but telcos risk overwhelming themselves if they are overly ambitious without careful use case prioritisation. From STL’s existing research and our interview programme, we understand the use cases that telcos want to prioritise in the near vs. medium vs. long term. The key factors affecting when telcos will seek to adopt different use cases include:

• Whether the use case unlocked demonstrable value for early adopters (even when these are from outside the telco industry).
• The availability of data to feed the model.
• The degree of risk associated with factors such as legal, data privacy and operational stability.

The graphic below illustrates where telcos are focusing their attention across different time scales.

The costs of generative AI necessitate careful use case prioritisation

Source: STL Partners

Table of contents

• Executive Summary
  • What are the next steps for telcos?
• The generative AI journey has many challenges, but the destination is worth it
  • Generative AI poses unique risks and challenges for telcos that require focused attention and expertise to solve
• A cross-domain effort is required to address challenges at different deployment phases
  • Vision definition
  • Model development and acquisition
  • Initial implementation
  • Model fine tuning
  • Scaled implementation, optimisation and utilisation
• Conclusion: telcos must address skill and capability gaps to ensure success
  • Further reading

Related research

• Inside the cloud-native telco
• Automation: Reaching full potential
• Gen AI: Where should telcos start?
• Generative AI and beyond: Preparing for future A3
• AI & automation for telcos: Mapping the financial value

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Author

Will Davies

Consultant

Will Davies is a consultant at STL Partners specialising in Sustainability.