Telcos need hyperscalers to harness $513b digital service opportunity

Telecoms operators have been advised to forge a partnership with hyperscalers to harness opportunities in the fast-growing market for digital consumer services, estimated to be worth around $513 billion by 2027.

In its ‘Quantifying the Consumer Telco Opportunity – 2023’ report, Omdia, an analytical firm, has estimated that non-traditional categories, such as digital gaming, online video, messaging apps, smart home services and digital music are going to grow at compound annual growth rates (CAGRs) of between five per cent and 21 per cent in the next five years.

While the markets are expected to still be of smaller value compared to established telecoms services such as mobile data, fixed broadband and pay TV, the five markets are forecast to be worth a total of $513 billion by 2027 with the largest share comprising of digital gaming and online video.

Checks by The Guardian showed that MTN digital subscribers rose by 37.5 per cent as of 2022 with over N10.3 billion earned in revenues.

Omdia has identified “strong future potential” for operators that can be unlocked through e-health and financial services. It noted that several telcos have already begun investing in these areas, including Vodacom South Africa with its ‘financial services and lifestyle super app’ VodaPay which has more than 1.1 million monthly active users (MAUs) since launching in 2021.

Principal Analyst for digital consumer operator strategy at Omdia, Jonathan Doran, called for service operators to look beyond data and “diversify into adjacent digital markets to enable the continued growth of their telco consumer businesses.”

While many telcos have already invested in TV and online video entertainment, Doran suggested that there are other fast-growing markets that operators can explore.

But despite the prognosis for substantial benefits in the digital customer services field, Omdia expects “significant competition” from hyperscalers, especially big tech players Google, Amazon, Meta and Apple.

“In many areas, telcos will need to accept that competing head-on is unrealistic and developing partnerships with such players is not only more pragmatic but will also serve to strengthen their products and brands”, the analyst emphasised.

Further in the analysis done by Telecomtv.com, the more active operators are in investing in a given service area, including through partnerships, “the bigger market impact they have, which in turn better positions them to take a bigger slice of overall market revenue.”

Omdia’s report and related recommendations are far from unexpected, as many global telco players already have a flair for the possibilities in the realm of digital offerings.

Just recently, the Middle East telco giant agreed to spend $400 million for a majority stake in Careem Super App to deliver digital services, including food and grocery delivery, fintech offerings and a digital wallet among many more and boost its digital services play with $400 million investment into a super app.