As Value Migrates Beyond Connectivity, Where Should Telcos Focus to Capture It?

With connectivity margins under pressure, telecom operators must prioritise programmable infrastructure, AI-driven operations, and enterprise digital services while avoiding structurally unwinnable plays. 

Global mobile data traffic increased more than 20× between 2015 and 2024, yet telecom industry revenues grew at under 3% CAGR over the same period. 

GSMA and McKinsey analyses agree that traffic growth in telecom no longer drives value creation. Economic surplus has shifted from connectivity to layers where software, data, and digital workflow control generate higher returns. 

Cloud-native architectures, API-driven consumption models, and AI-led automation have redefined the methods by which value is created and captured within digital ecosystems. For telecom operators, this evolution has altered the strategic inquiry. The question is no longer whether to progress beyond connectivity, but rather how to do so in a manner that targets the appropriate value pools, avoids structurally unwinnable positions, and reallocates capital with precision. 

A Clear Model of Where Telco Value Is Migrating 

Value within the telecommunications ecosystem is not being distributed uniformly across the "digital" sector. Instead, it is becoming concentrated in a limited number of recognisable value pools, each characterised by unique economic conditions and entry barriers. 

Industry analyses show that four value pools are expanding faster than core connectivity: 

• Programmable infrastructure, such as network APIs, orchestration layers, and edge abstraction. 
  

• Operational intelligence driven by AI-enabled optimisation, assurance and automation. 
  

• Enterprise digital integration combining connectivity with cloud, security and managed services. 
  

• Horizontal digital platforms, including SaaS and consumer applications. 

  
  

Crucially, only the first three are structurally addressable by telecom operators. Horizontal platforms are primarily controlled by hyperscalers and software companies that benefit from scale economics, extensive global developer ecosystems, and capital intensity that telecom companies are unable to replicate. According to McKinsey, these platform layers currently capture over 60% of the total digital value, yet they function under winner-take-most dynamics. 

The opportunity for tech companies is not centred on broad digital expansion. Instead, it focuses on selective engagement in value pools where telecom operators maintain defensible advantages based on their control of infrastructure, service guarantees, and regulated trust. 

Why Connectivity Economics Alone Can No Longer Sustain Growth

 

The economics of connectivity are continuing to decline despite advancements in technology. The cost per gigabyte has decreased at a rate that surpasses the efficiency improvements gained from spectrum refarming, network densification, and sharing. According to Analysys Mason, mobile average revenue per user (ARPU) in developed markets has declined by 2–3% annually since 2018, despite traffic growth continuing at double-digit rates. 

Simultaneously, capital intensity remains high. The rollout of 5G standalone networks, the densification of fibre, and investments in edge computing extend the lifespan of assets but do not significantly change revenue trends. For numerous large operators, the return on invested capital is now struggling to surpass the weighted average cost of capital, which limits strategic options. 

In contrast, hyperscalers and software platforms can effectively monetise reuse, automation, and ecosystems. In 2024, AWS, Microsoft, and Google collectively generated over US$230 billion in cloud revenues, enhancing margins through software rather than through physical assets. This economic disparity highlights the reason why value is shifting away from access provision. 

Structural Reasons Most Techco Strategies Fail 

Despite widespread recognition of these dynamics, fewer than a quarter of telco digital initiatives reach material scale, according to BCG research. Failure patterns are consistent and structural rather than executional. 

First, many operators overextend into low-margin digital services where differentiation is weak. Competing directly in generic cloud resale, SaaS, or consumer platforms diverts capital and management attention without altering the economic landscape. 

Second, platform initiatives often lack product discipline. Network APIs and data products are introduced without the reliability expected by developers, transparent pricing, or well-defined service-level commitments, which restricts their adoption beyond initial pilot projects. 

Third, capital allocation remains misaligned. Digital initiatives are frequently funded as cost centres rather than growth businesses, with unclear return thresholds and weak governance. 

Finally, operating models lag ambition. Software-centric delivery, agile product ownership, and outcome-based incentives are still exceptions rather than the standard within network-led organisations. 

Execution Patterns That Are Shifting the Economics 

Where progress has been made, it reflects disciplined alignment with the value migration model rather than broad digital ambition. 

At the programmable infrastructure layer, Deutsche Telekom has focused on exposing specific network capabilities, such as identity, location, and quality-on-demand, through standardised APIs under the GSMA Open Gateway framework.

By anchoring these offerings to enforceable service levels and usage-based pricing, the company is positioning network intelligence as a consumable resource for developers and enterprises, rather than a bundled feature of access. 

Rakuten Group demonstrates a complementary model. Rakuten Mobile's cloud-native network has been commercialised through Rakuten Symphony, which markets orchestration and automation software on a global scale. The value here lies not in subscriber scale but in software reuse across various operators, enabling Rakuten to engage in infrastructure value pools without increasing balance-sheet intensity. 

Operational intelligence represents the second execution vector. AT&T has embedded AI across network planning, fault prediction and energy optimisation, achieving multi-billion-dollar operating cost reductions over several years. These capabilities are increasingly being offered externally as managed analytics and assurance services, transforming internal efficiency into monetizable infrastructure. 

Specialist firms bolster this trend. Subex, based in India, has established a global presence by providing cloud-native fraud management and network analytics to over 200 operators, illustrating that decision automation and real-time analytics are scalable value pools within telecom ecosystems. 

Enterprise digital integration forms the third pillar. Orange Business has repositioned itself around cloud integration, cybersecurity, and digital operations, with digital services accounting for over 30% of segment revenues in 2024. In parallel, Bharti Airtel has scaled Airtel Business into a multi-billion-dollar unit by combining connectivity with cloud, IoT and security services across India and Africa. In both cases, success relies on the depth of execution and partner orchestration, rather than relying solely on proprietary platforms. 

A Sequenced Roadmap for Sustainable Value Capture 

The most effective techco strategies follow a precise sequence rather than pursuing parallel initiatives. 

Phase one focuses on industrialising the core: This includes cloud-native networks, AI-driven operations and a structural reset of cost-to-serve. Without this foundation, downstream monetisation remains fragile. 

Phase two centres on exposure and monetisation: Operators selectively expose network and data capabilities through APIs and managed services, tied to explicit service guarantees and usage-based pricing. 

Phase three is about selective scaling. Enterprise platforms, ecosystem partnerships and asset-light expansion are pursued only where early economics are proven, and capital discipline can be maintained. 

This sequencing reduces execution risk while aligning investment with defensible value pools. 

Conclusion: From Traffic Growth to Value Control 

The telco-to-techco transition reflects a measurable migration of value across the digital stack. Merely experiencing traffic growth is insufficient to guarantee economic significance. Operators that remain focused solely on connectivity will inevitably encounter margin compression, irrespective of their network performance. 

The next generation of industry leaders will be those who understand where value is concentrating, avoid structurally unwinnable battles, and execute with discipline. By converting network scale into programmable infrastructure, operationalising data and AI, and scaling enterprise digital services selectively, telcos can reposition themselves at the centre of value creation rather than at its edge.