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 |
