How Much Mobile and Telco Success Beyond "Connectivity"?

By some estimates, larger mobile and fixed network connectivity service providers earn substantial percentages of revenue from sources beyond their core connectivity services for consumers and businesses, often in the form of services for business customers, but with some contributions from video entertainment revenues bought by consumers. 

All that matters for service providers as they hope to create more value from their products and services, beyond “dumb pipe” connectivity, though that is the point of home broadband or business data connections. 

Though the role within the internet ecosystem is that of “connectivity” provider, internet service providers often (telcos always) earn significant revenue from applications such as carrier voice and text messaging, device sales and rentals. In many cases, telcos also own and operate application businesses, most often aimed at business customers.

So when forecasters suggest that the bulk of “new service revenues” from 5G will come from business customers, that is a logical extrapolation from the fact that most non-connectivity revenue already earned by connectivity service providers is earned from services sold to business customers, not consumers. 

All that matters when trying to forecast the importance of any proposed new service provider revenue source, whether data centers, internet of things, edge computing, private networks, security, AI as a service or other products. 

Few, if any, service providers provide any detailed breakout of what we might call “ancillary” revenues earned by providing services or products other than “connectivity.”

But many would estimate that many larger telcos earn as much as 22 percent to 27 percent of total revenue in such ways. Consider Verizon, which might earn as much as 20 percent of its total revenue from Verizon Business operations, which primarily sells non-connectivity information technology solutions and services for businesses.

Verizon Connect, the unit providing fleet management and telematics solutions, might generate two percent to three percent of Verizon's overall revenue, perhaps in the same range as Verizon supplied cloud services. 

Rank	Company	Country	Total Revenue (USD Billion)	Non-Connectivity Business Revenue (%)	Examples of Services
1	Deutsche Telekom	Germany	81.0	35%	T-Systems (IT solutions & services), cloud services, cybersecurity
2	AT&T	USA	170.8	30%	WarnerMedia Business Solutions (now part of Discovery), AT&T Cybersecurity, Fleet Management Solutions
3	Verizon Communications	USA	136.9	27%	Verizon Business (IT solutions & services), Verizon Connect (fleet management), cloud services
4	NTT Group	Japan	103.5	25%	Dimension Data (IT solutions & services), NTT Communications (global network services)
5	Orange Group	France	52.5	23%	Orange Business Services (IT solutions & services), cybersecurity, cloud services
6	Vodafone Group	UK	44.4	20%	Vodafone Business (IT solutions & services), Managed Security Services, IoT platforms
7	Telefonica	Spain	43.4	18%	Telefónica Tech (IT solutions & services), Cloud & Security Services, Big Data solutions
8	China Telecom	China	54.8	16%	Tianyi Cloud (cloud services), enterprise IT solutions, system integration
9	América Móvil	Mexico	53.2	15%	Claro Business (IT solutions & services), data center services, cybersecurity
10	SoftBank Group	Japan	89.3	14%	Yahoo Japan Business Solutions, Arm Technology (chip technology), enterprise IT solutions
11	Deutsche Bahn	Germany	43.6	13%	Schenker Logistics IT services, Arriva IT solutions, DB mindbox (IT consulting)
12	KDDI	Japan	44.2	12%	au Business Solutions (IT services), data center services, system integration
13	Bharti Airtel	India	34.5	11%	Airtel Business (IT solutions & services), cloud services, data center services
14	Telecom Italia	Italy	17.0	10%	TIM Enterprise (IT solutions & services), Noovle IoT platform, cloud services
15	Telenor Group	Norway	20.2	9%	Telenor Connexion (IoT solutions), dtac Enterprise (Thailand), Grameenphone Enterprise (Bangladesh)
16	Proximus	Belgium	6.0	8%	Proximus Flex (flexible work solutions), B2B IoT solutions, IT managed services
17	Ooredoo Group	Qatar	13.6	7%	Ooredoo Managed Services, cloud services, cybersecurity services
18	Telia Company	Sweden	5.1	6%	Telia Innova (IT solutions), Cloud Services, IT consulting
19	Swisscom	Switzerland	8.4	5%	Swisscom Enterprise (IT solutions & services), cloud services, IT consulting
20	Telekom Austria Group	Austria	7.3	4%	A1 Digital (IT solutions), A1 Business Cloud, IoT solutions
21-25	Other Telcos	N/A	N/A	<4%	IT solutions & services, data center services, security solutions

Rank	Company	Country	Total Revenue (USD Billion)	Non-Connectivity Revenue (%)	Examples of Non-Connectivity Services
1	Deutsche Telekom	Germany	81.0	32%	Cloud services, IT solutions, media & entertainment
2	AT&T	USA	170.8	28%	WarnerMedia (now part of Discovery), DirecTV, cybersecurity services
3	Verizon Communications	USA	136.9	25%	Oath (now Verizon Media), cloud services, Verizon Connect for fleet management
4	NTT Group	Japan	103.5	22%	Dimension Data (IT services), Docomo Bike Sharing, Docomo Healthcare
5	Orange Group	France	52.5	20%	Orange Business (IT solutions), Orange Money (mobile finance), cyberdefense services
6	Vodafone Group	UK	44.4	18%	VodafoneZiggo (cable TV & broadband), M-Pesa (mobile money), IoT platforms
7	Telefonica	Spain	43.4	16%	Movistar Play (streaming service), cloud solutions, Telefónica Tech (IT services)
8	China Mobile	China	114.5	15%	Migu Music (music streaming), cloud services, mobile advertising
9	China Telecom	China	54.8	14%	Tianyi Cloud (cloud services), enterprise IT solutions, smart city projects
10	América Móvil	Mexico	53.2	13%	Claro video (streaming service), Telcel IoT solutions, financial services
11	KDDI	Japan	44.2	12%	au Smart Pass (loyalty program), au WALLET (mobile payments), home security systems
12	SoftBank Group	Japan	89.3	11%	Yahoo Japan, Arm Holdings (chip technology), Sprint (now part of T-Mobile US)
13	Bharti Airtel	India	34.5	10%	Airtel Payments Bank, digital TV services, data center services
14	Telecom Italia	Italy	17.0	9%	TIMvision (streaming service), cloud services, Nuvola IoT platform
15	Telenor Group	Norway	20.2	8%	Telenor Connexion (IoT solutions), dtac (Thailand), Grameenphone (Bangladesh)
16	Ooredoo Group	Qatar	13.6	7%	Ooredoo Money (mobile wallet), managed IT services, smart city projects
17	Deutsche Bahn	Germany	43.6	6%	Schenker Logistics, Arriva (public transport), DB mindbox (IT solutions)
18	Proximus	Belgium	6.0	5%	Proximus Flex (flexible work solutions), IoT connectivity, TV production services
19	Telia Company	Sweden	5.1	4%	Telia Innova (IT solutions), Bonnier Broadcasting (media), TV4
20	Swisscom	Switzerland	8.4	3%	Bluewin (internet hosting), cloud services, IT consulting
21	Telekom Austria Group	Austria	7.3	2%	A1 Digital (IT solutions), A1 Xplore TV, A1 IoT services
22	MTN Group	South Africa	16.0	1%	MTN MoMo (mobile money), digital entertainment platforms, enterprise IT solutions
23	Vodacom Group	South Africa	9.0	1%	M-Pesa (mobile money), Vodacom Business (IT solutions), financial services
24	Liberty Global	UK	7.9	0%	Cable & internet services, Virgin Media O2 (UK), Telenet (Belgium)
25	Millicom	Luxembourg	4.0	0%	Tigo Money (mobile money), cable & internet services, digital media offerings

Of course, many telcos also earn revenue from consumer services including subscription entertainment video services. -/*

Rank	Company	Country	Total Revenue (USD Billion)	Video Entertainment Revenue (%)	Examples of Video Services
1	AT&T	USA	170.8	12%	Earnings from WarnerMedia DirecTV ownership
2	Verizon Communications	USA	136.9	8%	Oath (now Verizon Media), Yahoo Screen (streaming)
3	Orange Group	France	52.5	7%	Orange TV (pay-TV), OCS (streaming), Canal+ (France)
4	Vodafone Group	UK	44.4	6%	VodafoneZiggo (cable TV & broadband), Horizon TV (Ireland)
5	China Mobile	China	114.5	5%	Migu Video (streaming), IPTV services
6	América Móvil	Mexico	53.2	4%	Claro video (streaming), IPTV services
7	Telekom Italia	Italy	17.0	3%	TIMvision (streaming), Infinity TV (pay-TV)
8	SoftBank Group	Japan	89.3	3%	Hulu Japan (streaming), SoftBank TV (satellite TV)
9	Bharti Airtel	India	34.5	2%	Airtel Xstream (streaming), IPTV services
10	KDDI	Japan	44.2	2%	au Smart Pass (loyalty program with video content), UULA VOD service
11	Deutsche Bahn	Germany	43.6	1%	DB Play (streaming platform), TV channels on ICE trains
12	Ooredoo Group	Qatar	13.6	1%	beIN SPORTS (regional sports network), IPTV services
13-25	Other Telcos	N/A	N/A	<1%	IPTV services, partnerships with streaming platforms, niche video offerings

The point is that larger internet service providers with voice, messaging and other operations (telcos, cable operators and others) operate both “dumb pipe” internet access as well as applications businesses (voice services, text messaging, business applications, systems integration, data center services).

Focusing on the “core business” therefore is a complicated, double-edged sword. Focusing strictly on “internet access, voice and text messaging” might be quite limiting in an environment where growth is slow and profit margins are thin. 

But moving into different roles within the ecosystem is always challenging, and telcos often have met with limited success when attempting to do so. 

So execution risk is always significant. And some telcos arguably have done a better job of diversifying.

Telco	Business	Year Launched
AT&T	Data centers (AT&T Global Network Services)	2011
Deutsche Telekom	System integration (T-Systems)	1995
Orange	Cybersecurity (Orange Cyberdefense)	2015
Singtel	Digital advertising (Singtel DASH)	2012
NTT Docomo	Smart cities (Docomo Smart City)	2017
Telefonica	IoT solutions (Telefonica Tech)	2011
Telstra	Digital health (Telstra Health)	2018
Vodafone	Enterprise software (Vodafone Business Solutions)	2016
KT	AI and robotics (KT AI & Robotics)	2018

Telco failures also are common. 

Telco	Business	Year Launched	Outcome	Reason for Failure
AT&T	Cloud computing (AT&T Cloud)	2013	Sold to Amazon in 2017	* Late entry into the market. * Difficulty competing with established cloud providers like Amazon Web Services (AWS) and Microsoft Azure.
Deutsche Telekom	App store (T-Mobile Zone)	2002	Shut down in 2005	* Lack of compelling content and applications. * Competition from established app stores like Apple App Store and Google Play.
Orange	Music streaming (Orange Music)	2003	Shut down in 2007	* Difficulty competing with established players like Spotify and iTunes. * Limited user base and content library.
Verizon	Video streaming (Verizon FiOS TV)	2005	Sold to Frontier Communications in 2016	* High cost of content acquisition and infrastructure deployment. * Limited market share compared to cable and satellite TV providers.
Singtel	Social networking (Singtel Circle)	2009	Shut down in 2012	* Failure to attract a critical mass of users. * Competition from established social networks like Facebook and Twitter.
NTT Docomo	Mobile payments (Docomo Mobile Wallet)	2010	Shut down in 2014	* Low adoption rate among users. * Competition from existing payment methods like credit cards and digital wallets.
Telefonica	Home security (Telefonica Movistar Home)	2011	Sold to Securitas Direct in 2015	* Difficulty scaling the business beyond core customer base. * Competition from established security companies.
Telstra	Digital TV (Telstra BigPond TV)	2007	Shut down in 2013	* High content acquisition costs and low profitability. * Competition from streaming services and satellite TV providers.
Vodafone	Mobile advertising (Vodafone Mobile World)	2009	Shut down in 2012	* Difficulty attracting advertisers and developers. * Lack of critical mass of users.
KT	Online gaming (KT GamePark)	2000	Shut down in 2004	* Failure to compete with established online gaming platforms. * Limited content and user base.

As a general rule, telcos have had better success with business-focused services than consumer-focused services. That possibly explains the higher expectations mobile service provider executives have for business revenue upside from 5G, for example,.compared to consumer services. 

Study Source	Date	Business Focus	Consumer Focus	Top Revenue Opportunities
GSMA Global Mobile Trends Report	Q1 2023	Enterprise IoT, Fixed Wireless Access (FWA), Network Slicing	Enhanced Mobile Broadband (eMBB), Mobile Entertainment, AR/VR	eMBB, Enterprise IoT, FWA
Ericsson Mobility Report	Nov 2023	Private networks, Industry 4.0, Cloud RAN	Video streaming, AR/VR, Gaming	Industrial IoT, eMBB, Private Networks
Capgemini	Oct 2023	Edge computing, Network as a Service (NaaS), Cloud Gaming	AI-powered services, Immersive experiences, Health & Wellness	Industrial IoT, NaaS, AI-powered services
Deloitte	Sept 2023	Smart cities, Augmented Reality (AR) applications, Predictive maintenance	Cloud gaming, Immersive entertainment, Social media	Smart cities, eMBB, Cloud gaming
PwC	July 2023	Connected vehicles, Cyber security, Digital twins	Personalized content, On-demand services, Healthcare applications	Connected vehicles, Cybersecurity, Industrial IoT
McKinsey & Company	June 2023	Smart agriculture, Remote healthcare, Education & Training	Personalized AR/VR experiences, Connected homes, Education platforms	Smart agriculture, eMBB, Personalized AR/VR
Gartner	May 2023	Predictive analytics, Blockchain, Supply chain optimization	Virtual Reality (VR) experiences, Enhanced security, On-demand entertainment	Business process optimization, eMBB, VR experiences
Accenture	Apr 2023	Digital workforce solutions, Smart retail, Manufacturing automation	Personalized entertainment, Connected car services, E-commerce & Retail	Workforce automation, Smart retail, eMBB
KPMG	Mar 2023	Smart grids, Energy management, Environmental monitoring	Social media platforms, Connected devices, Location-based services	Smart grids, eMBB, Connected devices
Bain & Company	Feb 2023	Healthcare data analytics, Financial services, Logistics & transportation	Immersive gaming, Social media with AR/VR integration, Online education	Healthcare analytics, Logistics & transportation, eMBB
Boston Consulting Group	Jan 2023	Autonomous vehicles, Robotics, Remote manufacturing	Virtual reality tourism, Personalized learning, Connected home ecosystems	Autonomous vehicles, eMBB, Robotics