Analysts believe this will prompt telcos to evolve into techcos while partnering with IT service providers to meet modern demands and increase revenue via cross-selling/upselling.

Tinuade: ‘Telcos to TechCos’, Trends to Watch in the Nigerian Telecommunications Sector in 2025

Embracing this transition, telcos can capitalize on strategic partnerships to drive growth, expand their portfolios and cultivate end-to-end solutions that align with the shifting landscape of IT and telco market demands.

Transforming telcos into techcos: the role of channel partners

The telecommunications (telco) services market is undergoing a significant transformation, driven by the need to adopt business models similar to big tech companies.

Commenting on a recent report by Canalys, Devan Adams, a principal analyst at the firm delved into how channel partners can act as catalysts in this transformation, helping telcos enhance their go-to-market strategies, expand sales and deliver comprehensive solutions:

Key insights

Market growth and opportunities

• The total addressable market (TAM) for telco services is projected to reach US$1.49 trillion in 2025, growing at 3.7% year on year. In contrast, IT services revenue is expected to reach $1.75 trillion, with a 10.7% year-on-year growth rate.
• These stark growth differences highlight the urgency for telcos to evolve their business models to include modern IT services, thereby increasing their revenue through cross-sell and upsell opportunities.

Telco to techco transformation

• Leading telcos like China Mobile, NTT, SK Telekom, Telefonica, Vodafone, e& and AT&T are successfully transitioning to techcos by adopting software and platform-based models, focusing on AI, big data, and cloud services.
• This transformation involves offering high-growth services that can be combined with telco connectivity to meet general market demands and address specific vertical needs.

Channel partner contributions

• Technology services distributors (TSDs)/marketplaces: curate and customize telco solutions, provide tools, training and support to tier-2 partners, and offer digital marketplaces to expand reach and access new customer segments.
• Value-added resellers (VARs): bundle telco services with advanced IT hardware and software, creating comprehensive solutions that enhance customer value and drive higher sales.
• Systems Integrators (SIs)/aggregators: enable large-scale digital transformation projects by integrating telco services with enterprise-grade IT solutions, combining wired/wireless networks with applications, IoT or AI capabilities.
• Managed service providers (MSPs): offer fully managed IT and telco service packages, ensuring consistent quality and performance, and enhancing customer satisfaction.
• Independent software vendors (ISVs): develop compatible IT software that adds value to telco platforms, improving user experience and addressing new use cases.
• Hyperscalers/cloud service providers: provide scalable cloud-based solutions and extensive customer bases, co-creating solutions with telcos and enhancing go-to-market strategies through joint marketing efforts.

Blurring lines between IT and telco

• The convergence of IT and telco is evident as partners increasingly offer integrated solution bundles that combine connectivity with high-growth IT solutions like cloud, AI and cybersecurity.
• Partners frequently bundle telco connectivity with IT solutions, with 80% stating they do so regularly. This trend underscores the importance of offering comprehensive, integrated solutions to meet evolving customer needs.

Go-to-market developments

• Telcos must optimize their partnerships with channel partners to drive digital transformation, enhance customer experiences and achieve substantial sales growth.
• By leveraging the strengths of their channel partners, telcos can provide end-to-end solutions, diversify revenue streams and capitalize on the latest market trends.
• Telcos should fully exploit their existing partnerships with hyperscalers and other big tech companies to revitalize their go-to-market strategies and emulate the agility and innovation of big tech companies.

Conclusion

“Channel partners are essential in helping telcos transform into techcos, enabling them to operate more like big tech companies. This report provides valuable insights and strategic recommendations for telcos and their partners to navigate this transformation successfully.

By formulating strategic plans based on their channel partners’ competencies, telcos can empower their partners to act as stimuli in their journey to operate and perform like big tech companies”, Devan Adams, said.

By harnessing machine learning, natural language processing, and real-time data analytics, telecom companies are collaborating with cloud communication platforms, evolving from traditional service providers into tech-driven innovators—often referred to as “techcos.”

This shift opens up new revenue streams, positioning telecom operators as key players in the digital economy.

AI enhances customer experience

At the forefront of AI’s influence is the way it improves customer interactions. By analysing vast amounts of data, AI personalises engagements through tailored recommendations and promotions, predicts maintenance needs such as customer interactions and feedback to identify trends or potential issues, and proactively manages services.

AI-powered virtual assistants and chatbots offer customers quicker resolutions and a more reliable service, provide 24/7 support, and improve customer satisfaction and loyalty.

Optimising network operations

AI-driven network solutions are reducing congestion and enhancing operational efficiency. Advanced AI algorithms monitor large volumes of real-time network data, enabling telcos to identify potential issues, predict failures, and optimise traffic flow.

For example, AI can automatically adjust network settings to redirect traffic during periods of congestion or equipment failure, minimising disruptions. AI-driven network optimisation extends to energy management as well, where it adjusts power consumption based on predicted peak usage times, contributing to more sustainable operations.

Driving innovation

AI is also driving innovation within telecoms, fostering new services and business models. With the integration of AI and 5G networks, telcos are expanding into industries like healthcare, agriculture, and logistics, offering smart IoT applications that manage resources in sectors such as smart cities and energy grids.

This creates opportunities for telcos to venture into new markets and provide cutting-edge services, like smart home solutions and AI-based IoT integrations that meet the evolving demands of the digital economy.

Improving decision-making

AI’s ability to process and analyse customer data in real time enables telcos to make informed strategic decisions.

The data-driven insights from AI allow operators to anticipate customer needs and market trends.

With 65% of customers reporting higher satisfaction from AI-powered interactions, telcos can create more engaging and predictive CX journeys, resulting in increased Average Revenue Per User (ARPU) through smarter upselling and cross-selling initiatives.

Addressing key challenges

AI is also instrumental in solving some of the persistent challenges faced by Mobile Network Operators (MNOs):

• Network Congestion: AI predicts and manages traffic patterns, dynamically adjusting resources to prevent congestion and ensure efficient network performance.
• Competition: Predictive analytics help MNOs understand market trends and customer preferences, enabling them to offer personalised services that stay ahead of competitors.
• Churn: By analysing customer behaviour, AI identifies potential churn risks, allowing operators to implement targeted promotions and improve customer support, thereby retaining customers.
• Fraud: AI’s sophisticated algorithms detect and prevent fraudulent activities in real time, protecting the network and its users. AI’s fraud detection is already highly successful, with over 90% of companies reporting real-time fraud prevention.
• Sustainability: AI contributes to sustainable practices by optimising energy use in network operations, adjusting power consumption based on anticipated peak usage times.

Monetising AI in telecommunications

The integration of AI presents a wealth of monetisation opportunities for telecommunications companies.

AI-driven services such as advanced analytics, network management tools, and personalised customer experiences not only attract new customers but also enhance retention among existing users.

Internally, AI-powered tools streamline processes, reduce operational costs, boost efficiency, and drive profitability.

For instance, conversational AI chatbots automate routine enquiries, such as balance checks, top-ups, and FAQs, significantly lowering customer service costs.

These tools handle high volumes of interactions simultaneously, ensuring faster response times and freeing agents to address complex issues.

Predictive AI analytics further drive revenue by enabling precise upselling and cross-selling opportunities, such as recommending data plan upgrades to customers approaching their limits.

Telecom leaders around the world have harnessed AI through Communication Platforms as a Service (CPaaS) solutions.

These innovations allow customers to perform actions like bill payments, subscription management, and support queries via messaging platforms like WhatsApp and RCS, simplifying customer interactions and driving engagement.

Notably, McKinsey’s research highlights the financial advantages of AI adoption, with AI-leading companies achieving a five-year revenue CAGR 2.1 times higher than their peers and delivering a total return to shareholders 2.5 times greater.

This underscores the transformative potential of AI for telcos striving to remain competitive and profitable.

Preparing for AI integration

Before integrating AI, MNOs need to carefully consider several critical factors:

1. Data Privacy and Security: Compliance with data protection regulations is essential, ensuring customer data is handled securely.
2. Technical Expertise: Telecom companies need to either build or acquire expertise in AI and data science to manage AI integration effectively.
3. Infrastructure Compatibility: Assessing and upgrading existing infrastructure is crucial to support AI technologies.
4. Change Management: As AI becomes integral to operations, staff training, process adaptation, and alignment of business strategies with AI capabilities are necessary.

Overcoming barriers to AI adoption

Despite the benefits, several factors hold back some MNOs from adopting AI. The investment required for AI technology, including infrastructure upgrades and skilled personnel, can be prohibitive due to high initial costs.

Integrating AI into existing systems and processes presents complex implementation challenges. Managing the vast amounts of data generated by telecom networks, particularly with legacy systems, can be daunting.

Additionally, navigating the regulatory landscape concerning data privacy and AI ethics adds to the complexity.

Organisational inertia and resistance to change further slow-down the adoption of new technologies.

By addressing these challenges, telecom operators can effectively leverage AI to transform their operations, enhance customer experiences, and unlock new revenue opportunities while boosting efficiency and fostering customer loyalty.

The future of telecommunications is undeniably intertwined with AI, promising a more efficient, innovative, and customer-centric industry.