Are leaders ready for the telco of tomorrow? EY Podcast

By Tom Loozen (Senior Partner, Telecommunications), Adrian Baschnonga (EY Global TMT Lead Analyst), and Sören Grabowski (EY-Parthenon Global TMT Leader)

To thrive in the future, telcos must seek differentiators beyond network quality and adapt to changing ecosystems and market structures.

In brief

The growth outlook for telcos is solid but unspectacular, based on core connectivity and continuing cost management allied to reliance on network quality.
Industry leaders foresee pervasive changes to the sector in five years’ time, which today’s defensive strategies are not equipped to address.
Rethinking business models and differentiators, and building new employee propositions and ecosystem positions, are vital for success on the road to 2030.

Telcos have reached an inflection point in their evolution. They are ever more focused on core connectivity and continue to drive new waves of organizational efficiency with the help of emerging technologies. However, industry ecosystems, stakeholder expectations and workforce needs are developing in new directions at pace. In this light, defensive strategies based on network quality and cost optimization may fall short of the more substantial transformation telcos need to achieve.

EY interviewed more than 60 C-suite executives from over 50 telecoms operators to understand their views about organizational priorities alongside the current and future state of the sector. In this article, we explore insights emerging from our research, underlining the dichotomy that exists between defensive near-term strategies and more radical future sector dynamics, and recommending key actions that telcos can take to ensure they remain fit for the future.

About the research

Between September 2023 and February 2024, EY-Parthenon conducted face-to-face surveys of 63 senior business leaders in the telecommunications sector to understand their business imperatives. The questionnaire explored a number of themes, such as the industry operating environment, strategy North Stars, near-term business priorities and the telco world five years from now. Respondents represented 29 countries — including 75% from Europe, 8% from Americas, 9% from Asia-Pacific, and 8% from Middle East and Africa — and featured a range of leadership roles, led by CEOs (32%) and chief strategy or transformation officers (21%). To participate in the survey, respondents were required to be leaders of a telco business function or unit.

Traditional growth drivers underpin a solid performance outlook

Survey respondents have a largely positive view of sector growth: more than half foresee sector revenues and EBITDA growing by 3% or more over the next three years. They are also confident of their own performance relative to their peers, with three quarters expecting to outperform the market over the same period. Inflationary pricing escalators built into consumer subscriptions have been supportive in some markets, indicative of wider resilience where customer spending has held up well in spite of the cost-of-living crisis, as highlighted in the EY Decoding the digital home study.

Looking ahead, two key drivers of profitable growth as cited by the management are: growth in the core connectivity business (67%) and margin development through additional cost reductions and efficiencies (60%). These twin forces score well ahead of adjacent market services or more innovative business models, with only one in three respondents highlighting growth beyond the core business or growth in platform, ecosystem or as-a-service business. That said, there are regional nuances at play: Asia-Pacific telcos are much more receptive to growth via platforms or ecosystems, cited four out of six telco leaders in the region.

Telco market growth outlook



This chart shows survey respondents’ expectations of telecoms market development in their own footprint in the next three years.