GSMA report dangles $400 billion B2B revenue opportunity in front of telcos

A new report prepared by GSMA Intelligence in time for Mobile World Congress (MWC) Las Vegas has quantified the opportunity, presumably to spur attendees into action.

It claims that there is an addressable market worth more than $400 billion for telcos that are looking to grow their enterprise revenues. However, they'll need to extend their portfolios beyond the range of traditional data and voice services.

'Twas ever thus.

The average telco used to be much further towards the top of the value chain, owning the customer experience with a range of walled-garden services that only ran on its network.

That is until the likes of Apple and Google came along with their network-agnostic smartphone operating systems and accompanying app portals. Coupled with the rise of cloud services from hyperscalers like AWS, Microsoft and Google, and most operators have been largely relegated to the role of connectivity provider.

The connectivity is fast, reliable, increasingly intelligent, and offers inherent value. But the average enterprise customer is more concerned with cloud-based apps and services than the network operators that provides access to them.

According to the GSMA report, core telco solutions and services – like SD-WAN, unified comms, and mobile voice and data – contributed around 70% of telco B2B revenues, equal to $250 billion, in 2023. But they offer little headroom for growth with just 3% compound annual growth rate (CAGR) expected to 2030.

In comparison, enterprise spending on services like cloud and data centre, cybersecurity, IoT, analytics, AI, blockchain, network APIs and so-on was around five times greater than traditional comms, weighing in at $1.16 trillion last year. It is also projected to grow much faster throughout the rest of the decade, with an expected CAGR of 14%.

Operators that can get in on this action have the chance to capture as much as 35% of this figure, or $406 billion, the GSMA says.

"Telcos looking to monetise their investments in 5G need to look beyond consumer centric and basic connectivity driven use cases. Greater focus is needed on offering advanced network solutions such as network slicing and private networks in the short term and developing end-to-end solutions to support a variety of enterprise use cases combined with integration capabilities in the longer term," said Tim Hatt, head of research at GSMA Intelligence.

"Enterprises are increasingly looking for service providers to integrate a blend of technologies that fit their specific technology environments and business needs," he said. "Though the competition is fierce, telcos have assets and capabilities they can leverage to play in over one-third of this trillion-dollar market."

In terms of industry verticals, the GSMA identifies financial services, manufacturing, automotive and aviation as representing the most lucrative opportunities for telcos, valuing them at $59 billion, $61 billion, $22 billion and $16 billion respectively. Collectively, they account for 37% of the addressable market opportunity. Their respective CAGR projections are healthy too: 10.9%, 12.1%, 12.0%, and 8.4% between 2023 and 2030.

However, going beyond connectivity is a challenge, given the reach and ubiquity of those aforementioned hyperscalers. According to the report, 24% of operators view hyperscalers as "formidable competitors" in edge networking and cloud. When it comes to cybersecurity, 41% view specialist security vendors in a similar light.

"Winning in market needs a new mindset and operational changes," Hatt said. "To succeed, operators must look to collaborative approaches and new partnerships as well as adopting an enterprise-centric solution-oriented approach; being more like IT consultants than connectivity sellers. Telcos need to consolidate and simplify enterprise portfolios, adapt sales and marketing, and acquire new technical and commercial skills to effectively serve ever-evolving needs of enterprise customers."

This sounds like a tall order for an industry that has attempted on multiple occasions to drag itself up the value chain with limited success.

5G was billed as the network technology that would provide a platform for revenue growth, but it has so far failed to deliver. However, ploughing money into new enterprise-focused skills and capabilities sounds like a risky way of trying to improve telcos' collective situation.

Operators will have to tread very carefully to deliver something truly unique rather than a 'me-too' offering that is easy to disregard in favour of what hyperscalers and specialist vendors have to offer.