Telecoms revenue growth: approaches and opportunities

23rd January  |  
4 minutes
telco revenue

There are now just a few weeks to go until Barcelona once again opens its doors to Mobile World Congress. MWC, as the event is known, is the preeminent trade event for the entire mobile telecoms value chain, attended by senior executives from the telecoms industry, government, and the wider tech sector.

As always, one of the key themes of the event will be telecoms revenue growth. McKinsey, which will be hosting several roundtables and discussions at MWC ’24 puts it well: “The opportunities for growth in the technology and telecom sector are full of promise but success will not be easily won. The winners will be those who take bold steps now to ensure resilience in an unpredictable market.”

Drivers for telecoms revenue growth

Telco businesses have come under significant pressure over the past few years due to declining revenues and increasing investment costs. The sector has underperformed compared to the market index over the past few years while concurrently accruing some of the highest capital expenditure of any industry as a result of network and infrastructure investments, particularly around 5G deployments.

There was some relief from these trends in 2023, with inflation driving 3% growth in the telecoms services market. However, over the medium to long term, carriers are looking for a more sustainable approach to telco revenue growth. What options are available to them?

Growing telecommunications revenue through service bundling

Broadly speaking, there are three ways in which telcos can look to grow revenue. The first is the tried and tested practice of service bundling.

By combining services such as mobile, internet, TV, and landline into a single package, telcos provide customers with a convenient package that saves them money. Bundling often attracts customers as it simplifies their billing and service management and offers a perceived higher value for money. Additionally, it reduces the likelihood of customers switching to competitors, as the integrated service package becomes a part of their lifestyle. What’s more, bundling can help telcos cross-sell and up-sell services, enabling them to introduce new offerings or enhancements to existing customers more effectively.

However, service bundling comes with some challenges. With more and more telcos using the approach there is pressure to set the price of bundles low to attract customers, which erodes margins. Additionally, if the costs of providing the bundled services are not well-managed, it could also impact profitability.

The data vending opportunity

A second approach to telecoms revenue growth is data vending. Telcos can monetise the huge volumes of data generated by their networks and users by anonymising and aggregating the data for sale to third parties. This is because telco data is a treasure trove of valuable insights into consumer behaviour, location analytics, network usage patterns, and more, which can be used by businesses to better engage with audiences for sales and marketing programmes.

However, this business model comes with significant drawbacks. The biggest challenge is maintaining consumers’ privacy. Subscribers may not be comfortable knowing their data is being sold, even if it’s anonymized. Breaches of privacy, or even the perception of such, can damage a telco’s reputation and erode customer trust. There’s also a regulatory element to this. With the increasing emphasis on data protection regulations like the GDPR in Europe, telcos must navigate complex legal landscapes. Non-compliance can lead to hefty fines and legal challenges.

Driving telco revenue through in-network services

A third approach is for telcos to participate in new vertical market segments through new in-network services. For this business model, telcos can leverage partner ecosystems comprising technology and vertical market experts to innovate compelling new services. Many telcos are already making such moves. In the UK, for example, BT has launched a digital ID aimed at providing access to services such as consumer communications, ecommerce, entertainment and insurance. In Japan, meanwhile, KDDI and Supership  have partnered with Novatiq on a next-generation digital advertising distribution platform.

The digital marketing sector is perhaps one of the most important opportunities for telco in-network services. This is because the sector is crying out for a replacement to the tracking cookies that have been used to power personalised, real-time digital marketing. With tracking cookies on the verge of being phased out due to privacy concerns, advertisers and publishers alike need an alternative.

By partnering with software application companies like Novatiq, telcos can deliver verification IDs that meet the need of advertisers for real-time personalised engagements while also preserving the privacy of consumers. It’s a time-sensitive opportunity with the potential to drive significant revenue growth.

Novatiq will be attending Mobile World Congress this year. Get in touch if you would like to meet at the event and discuss the opportunities available to telcos in the digital marketing space.

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