Operators will focus on smaller acquisitions/partnerships, not major deals

B2B revenue has climbed steadily for telecoms operators, with annual growth rates of around 5% from 2020 to 2023. For a typical operator, revenue from business customers has increased from 24% of the total (that is, revenue including consumer and wholesale) to around 26%. The market for small and medium-sized enterprises (SME) is a particularly bright spot – KPN’s revenue from this segment grew 9.4% in the first 9 months of 2024, for example. 

However, even with these promising results, operators need to do more if they are not to surrender their potential share of value. 

Operators have often failed on customer service and have also been heavily dependent on major acquisitions of IT service companies for growth, but they have often struggled to add value to the businesses they buy. Integration of systems is a major issue for some, especially when acquisitions are large or take them into new markets. Adding value through offering better/bundled connectivity is an obvious step operators can take, but such initiatives have not always been successful.

In 2025 we expect more operators to:

• Transform internal processes to be quicker, more flexible and easier to deal with. Some operators, such as Telia, have made good steps in this direction, but many have not. Too often, operators have failed to match the dynamism and flexibility of the retailers that constitute the channel. These channel partners have a simpler business model than network operators and focus more on customer experience. Operators need to come closer to matching their levels of service. 
• Look at acquisitions that can add value to the standard connectivity offer. Swisscom’s model of small, frequent acquisitions alongside investment in organic growth seems to get around this problem to some extent. These firms are easier to absorb and integrate. The IT services market is still highly fragmented with hundreds of smaller players.
• Partner rather than acquiring to extend their portfolios. There is also a middle ground of taking a stake in partners/potential partners. This approach is growing in popularity, and we expect to see more in 2025.