Analysys Mason's predictions for the technology, media and telecoms sector in 2025

Tom Rebbeck

Hello, and welcome to the Analysys Mason podcast. My name is Tom Rebbeck, and I'm a partner here in the research division.
Every year, Analysys Mason produces a series of predictions on the areas we cover. On this podcast, we're going to hear from the authors of our predictions.

Cyber security in M&A priorities

Tom Rebbeck

Let's turn to Oscar Birnbreier for his prediction. Oscar is the co-lead of our cybersecurity practice. Oscar, over to you. What's your prediction?

Oscar Birnbreier

My prediction for the M&A market in 2025 is that risks of cyber attacks will push cybersecurity up the M&A priority list.

Why is that so? First of all, we have to understand the impact of cybersecurity on our economy. The estimated annual cost of cybercrime worldwide is or will be in 2028 approximately $14 trillion. In 2018, it was approximately $0.86 trillion. Over the time span of 10 years, there is an increase of over 1,500%. It is an incredibly big number. Just to make that imaginable I asked Copilot, what can you buy for $13 trillion? Copilot suggested that you could rebuild the entire U.S. Interstate highway system more than 30 times or fund NASA for over 1,300 years. That's the scope of what we are talking about.

I'm very convinced that cybersecurity has a vital role to play in the success of a deal. We see two drivers. The first driver is financial and reputational damage from cyber incidents. That's probably something which everybody can understand. Damage is done, and you need to invest money in order to clean up, it’s very straightforward.

The second driver is not so straightforward, and that's about regulation.

A regulatory body, for example, the government, could put fines on you if you are not compliant with their security and regulatory requirements. Regulations could be NIST 2, DORA, or the Cyber Resilience Act in Europe. So those are the big drivers of cyber security.

Then, on the other hand, if we are looking at benefits - for the sell side it's always good to protect the assets. Why is that? If you can protect your assets like intellectual property or consumer data you will significantly boost the overall market value of your company. So it's always a good idea to invest in cyber security and protect your assets. There are also benefits from the buyer's side, that is if you have a good cybersecurity posture, this will reduce follow-up costs of integration.

Why is that so? I'm going to tell you a real-life example. We had a client who bought a company. The company is active in more than four countries in Europe. After the deal was done, they quickly realised during the integration process that the company they bought was not up to their security standards. So they put a full stop to the whole integration programme and said first we have to raise the security posture of the newly acquired company, and then we can continue with the integration. Which costs a lot of money, a lot of resources, and a lot of time. That was an example of how not to do that.

There are many benefits for both of these. You're protecting your assets either way. You maintain stakeholder trust, which is a really important thing in cybersecurity and, generally, for companies. You also ensure a much smoother transaction process.

That's why my prediction for 2025 is risks of cyber attacks will push cybersecurity up the M&A priority list.

Tom Rebbeck

Great. Thank you, Oscar.

Government's role in digital resilience

Tom Rebbeck

Ian, let's turn to you next. This is Ian Adkins, who's one of our experts working in the public sector on public sector projects. Ian, over to you and your prediction.

Ian Adkins

Thanks, Tom.

Our prediction is about the government's involvement in digital infrastructure and the need to avoid catastrophic failure. We use that sort of language because increasingly governments are getting very concerned about all sorts of resilience factors in society and in business. So we realised these themes were very important for telecoms networks. Resilience and security are two words we're hearing a lot about. We're also aware, from the work we've done on broadband intervention for governments, which is normally related to wider benefits of having good telecoms and digital connectivity, that the impact of any sort of comms failures is quite substantial on societal activity and the economy more generally. So that factor, combined with the cost of making some investment in resilience, which from a commercial perspective is not always imperative for a commercial investor, we realised that the commercial economic gap will be there. In other words, the cost of resilience needs to have some sort of government intervention. So, we're thinking that's going to start happening. It has a number of common factors with what I mentioned earlier, broadband intervention. Governments have well-established programs over many years. There is a full broadband intervention, and there are well-established guidelines for broadband intervention. For example, in Europe, the European Commission has state aid guidelines. For governments to intervene, they need to reflect their intervention in the market through the powers that they have. So, while there are lots of similarities, the drivers are different.

It's not a market failure in an economic sense. It's a resilience and security driver. What's interesting is that we don't know if governments have the powers or if the powers would apply in the same way as the sort of market failure driver perspective. They possibly have to approach this in a very different way because the scope of what they intend to do for resilience would be quite different to a typical broadband intervention. So, while there are a lot of commonalities and similarities, there will also be differences. It's like a revisiting of that broadband intervention strategy 10 to 15 years ago that needs to be looked at. So governments need to think carefully about it.

There will be impact across the digital infrastructure landscape, fixed-mobile, submarine, satellite, the oversight from cybersecurity perspectives, and lots of different sorts of issues, even though the subject might be a resilience-driven intervention. I think regulators will need to be involved, and this will also flow over into the impact on investors and investment if there's going to be some sort of government intervention. It has started to happen in some countries. We have noticed in Norway that there is a fund effectively that's set up to look at risks and vulnerability, and the state deliberately makes funding, full funding or funding contributions towards security and emergency preparations, and a significant amount has already been invested in network reinforcement type of projects. So that is why we think this is important and why we think governments will start getting more and more involved in resilience-driven intervention in networks.

Tom Rebbeck

Great. Thank you, Ian. Let's turn to Rupert next. So Rupert Wood, Research Director.

New ownership models in telecommunications

Rupert Wood

So, in the last 12 months, some new models of ownership and wholesale, primarily in fixed or fibre, have emerged. And we predict more of these. Essentially, we're predicting more sharing and more federating.

So over the last six or seven years, there's been a flow of transactions, which has slowed down rather recently, but that has resulted in the de-layering of telcos into netcos and servcos, which become more independent of one another. The relationship between the two entities becomes essentially transactional. This has happened primarily in fixed, but it can also extend into mobile as well. In these cases, usually, infrastructure investors take a whole or partial stake on the netco side. There have been two main rationales for doing so, both of which are covered by the rather vague umbrella term unlocking value. Those two main rationales are the financial to raise cash, to accelerate rollout, and perhaps to reduce debt. And the other rationale is operational, that the two entities should have more focus independently. They should develop their own businesses. They should invest more independently of the other entity. For netcos, there's the opportunity to get extra tenancies on the infrastructure for both as the opportunities become more productive to reduce inefficiencies inherent in the integrated model.

Over the last year, we've seen a few examples of deals where the logic of de-layering has been called into question, in part because this is not delivered on all its promises. A recent report by Analysys Mason research suggests on the operational rationale side; the results have been rather modest. A good example of this is the US netco Unity and the fibre retail provider Windstream got back together in 2024 after nine years apart and pretty much all of the original rationale of delayering was turned on its head. It didn't generate a revenue delta for the netco. Separate focus as an ideal gave way to alignment of investment. The one-off and ongoing costs were presented as duplicated investments or as an unnecessary overhead. But relayering isn't the only alternative.

A first alternative for larger whole buyers, the large retail plays in the market, who are currently whole buyers often, is to take equity stakes or IRUs in netcos that perhaps come to reflect their existing market share on ambition. Thus, the network becomes a network share, perhaps at an infrastructure level only. A recent example of that is Zegona Spain, or Vodafone Spain, as it's known, taking shares or IRUs in Telefonica and MasOrange netcos. I think whole buyers generally want a higher but not total degree of owner economics that gives them a lower total cost of ownership, so long as the equity price is right. So, you end up with a shared ownership of networks. Interestingly, the French very constructed broadband model envisaged something like this form of co-investment from the outset, it factored it in. But now it seems that commercial realities might be bringing that about in a different way. Interestingly, I think this might entail, in a much longer term, a reduction in the role of infrastructure investors in the market. A second alternative is federated or clubbed access. This is where two players avoid inefficient overbuild by access swapping. That can be bilateral access swapping or multilateral access swapping, but crucially, not fully open access on equal terms. A couple of examples would be WYRE, a new fibre network in Belgium, and Proximus, the Fiberklaar part of Proximus in Belgium, agreeing to build in different zones but to provide wholesale access to one another. Another example is a federated approach in Germany between four alternative plays, an open-access alliance. Agreements like this might create two tiers of access, a tier for members of the club and a tier for outside, or even a single tier only for members. I think these examples suggest that the vertically integrated and the open access delayed models are not the only approaches, and we expect to see more of these varied approaches in future.

Tom Rebbeck

Great. Thank you, Rupert.

The green gold rush of copper recovery

Tom Rebbeck

Next, we'll hear from Grace Langham, who works on our Sustainable Networks programme. So, Grace, over to you and your prediction.

Grace Langham

This prediction is about the recovery of copper wiring and how this will drive a green gold rush starting in 2025. The prediction came out of a model we have built at Analysys Mason that looks at two things. The first is to provide an estimate of the total weight of copper in an incumbent access network from 1985 for 30 countries worldwide. The second is to estimate the volume of copper that has been permanently taken out of service or decommissioned for each country out to 2035.

Based on our model, there are currently at least 40 million tonnes of copper lying within telecom networks worldwide. And this 40 million tonnes of copper is worth about $125 billion if you take the current market price for copper. The current global production of copper from mines amounted to around 22 million tonnes in 2023. This demand for copper is rising, driven by electric vehicles, renewable technologies and data centres. The large majority of incumbent operators worldwide will have decommissioned their networks, so apparently, they will stop the service of their copper networks by 2035.

What we also understand is that the actual physical recovery of this copper after it has been decommissioned, so removing the copper from poles or digging it up, has barely started. The carbon footprint per tonne of producing pure copper from ore is about four kilotonnes of CO2. We also understand that copper from removing and recycling telephone lines from telecom networks has a carbon footprint of about 0.6 to 1.5 kilotonnes of CO2 equivalents. The difference depends on how much carbon emissions are associated with the actual removal process of the copper. But what is clear is that it has a substantially lower carbon footprint than producing copper from ore. Around 2.5 kilotonnes of CO2 equivalence is avoided by using copper from the recycling copper lines. If we scale these numbers up to calculate an estimate for what one-off avoided emissions would be from removing copper from a network the size of BTs, for example, based on the fact that BT has reported that it plans to remove about 50% of its copper network, then we can calculate the one-off avoided emissions which could be around 600 kilotonnes of CO2 equivalents. Let's say BT was able to take out its whole copper network, then that figure would be just over 1,000 kilotonnes of CO2 equivalents. If I put that into a bit of context, BT's annual Scope 1 and 2 emissions across all parts of its business, so mobile and fixed, was 686 kilotonnes of CO2 equivalents in 2022. So, if BT were to remove all of its copper network, it would be able to avoid carbon emissions greater than its entire carbon emissions in any year.

The copper removal process is a huge project that will last multiple years, but the environmental implications are pretty enormous. On top of these avoided emissions, it's well-known that replacing copper with fibre creates massive operational energy savings.

So, to conclude, on top of the well-known energy cost savings from switching off copper and moving to fibre, operators can stand to gain in three key ways. Larger operators can generate billions of dollars by selling on their recovered copper, as BT is already doing. Secondly, operators can improve their recycling performance by reporting these statistics and their annual reports. And lastly, operators can also improve their carbon emission profile by voluntarily reporting their avoided emissions. Going forward, we expect more companies will try to communicate their avoided emissions to both customers and investors.

Tom Rebbeck

Great. Thank you, Grace.

Grace Langham

Thank you very much.

Tom Rebbeck

The next prediction is my own prediction, looking at the consumer market.

Revamping consumer propositions

Tom Rebbeck

My prediction was that one of the major European incumbent telecom operators would radically revamp its consumer proposition during 2025.

I think predictions come in different categories. Some things will happen that we're very certain will happen. There's evidence for them already. There are things that might happen, a bit more speculative. And there are things that we think should happen. This probably fits into the last category. It's something that I think should happen, but I'm not convinced that it will happen during 2025. But as we'll see, I think there's certainly a need for the larger incumbents to look at their propositions.

If we think of Digi as a way of illustrating this, Digi is the biggest player in Romania. It's been successful in its offering in Spain. It also launched fixed and mobile services in Portugal and Belgium at the end of last year. As it's done in Spain and Romania, it's launched with very aggressive pricing. Its pricing on fixed services starts from €10 for 500 megabits per second, ranging to €20 for a 10-gigabit connection. So cheap prices. If we look at the advertised pricing from Proximus, the Belgium incumbent, they range from €57 per month for 500 megabits per second to €70 for two gigabits per second. This is a slightly unfair comparison as the Digi network is still quite small, but it does have plans to cover two million homes. Also, Proximus does have a sub-brand, Scarlet, that's slightly cheaper; the prices are more like €40 rather than the €50-60 for a Proximus plan, but I think the main point is still clear. Digi is far cheaper.

The benefits from Digi aren't purely on price. We've seen from its performance in Spain that Digi does well in terms of its network and in terms of its customer service. When we've done consumer surveys, it scores very highly on those aspects. So it's not purely a cheap price. I think it's fair to expect something similar both in Belgium and in Portugal.

So, onto the prediction. At some point, operators like Proximus will realise that they're going to have to do something radical about their pricing. Hence, the prediction is that in 2025, one of them will revamp their propositions. There is a precedent for this in Ireland. So, the incumbent Air has been the most aggressive player on mobile. It has a €15 a-month plan for unlimited 5G. That's the cheapest offer or as cheap as the equivalent offers on the market. So, that is an example of an incumbent being very aggressive and rethinking its proposition. There are some caveats around it. That's only on mobile, where Air is very much the challenger. The other big caveat is the ownership of Air. Air is owned by investment funds related to Xavier Niel. That's also the controller of Iliad. So, very much taking the Iliad playbook and imposing it or introducing it with Air. So, it's far from typical, but I think we'll see some other similar moves during 2025.

B2B operators and smaller deals

Tom Rebbeck

So next we'll turn to Charles Murray, who's a partner in our transaction services team.

Charles Murray

My prediction for this year is that operators in the B2B space will focus on smaller deals, platforms, and tech side, as opposed to the larger deals that they've historically done.

Tom Rebbeck

So there's an implication in there that there's been a problem with the existing deals. What's gone wrong with the M&A that B2B teams have done?

Charles Murray

So historically, they've got into IT services by large deals with hyperscalers and other big platform manufacturers. However, that has resulted in struggling to add value to the platform and also, to a certain extent, competing with their channel partners who can also go to the hyperscalers and the big platform providers in the same way.

Tom Rebbeck

So, this focus on these smaller deals? How will that help?

Charles Murray

It will allow the operators in the B2B sector to get involved more on the platform side. Focusing on the platforms and the ability to add value to smaller platforms, bringing them to market and being that platform's champion in the market in a way that they struggle to do with the larger platforms. On the tech side, enhancing their B2B offering and their engagement with the channel in a way that reduces the friction with the channel and improves the channel's experience. So, they're more likely to use the operator and the operator's platform as opposed to wanting to go direct.

Tom Rebbeck

Right. Let's talk a bit more about the channels because the sorts of products we're talking about are very different from the historic ones.

Charles Murray

Correct. Historically, the channel partners have very few places to go. If you wanted connectivity, you had to come to one of three or four operators in the market to get that connectivity or get that mobile. When you're talking about cyber products or hosting products, then there's a much wider selection of suppliers available, and the channel partners can go direct. They don't have to go to the operators. So friction is a key barrier to them using operators for IT products and platforms instead of wanting to go direct or going to other aggregators.

Tom Rebbeck

So what can the operators do to make themselves more attractive?

Charles Murray

Operators for years have tried to improve that channel engagement, that channel interface, but their systems are often slow, and poor, and their payment terms are, generally speaking, challenging.

I think that the system side can be sold through the acquisition of tech platforms, which are much better, and they can move the channel partners onto that. Then, the commercials of their offering need to be significantly improved, Paying the channel partners on time, effectively and efficiently would be a big win.

Tom Rebbeck

There's also something in there about the education of channels because the channels have dealt with telecom products. Relatively simple, straightforward, and much simpler than the cybersecurity suite.

Charles Murray

Yes, indeed. A leased line or a mobile is pretty well known. You sell it, and two years later, you renew the contract. It's very simple. So channel partners know what they're buying. Whereas a cyber product or the cyber environment is much more complicated. The channel partners are relatively small businesses themselves often. They don't have the in-house capability and expertise to be able to sell that to their customer bases, so they're reliant on the platform to provide that. That’s a key role that the operators can provide, but it is a different type of role than they're used to, ensuring that expertise in terms of both pre-sales and life support for the products is critical.

Tom Rebbeck

Yes. It’s a significant change for the channel partners. They've got to transform their business from being a fairly simple reseller to being managed, professional services consulting all these things.

Charles Murray

Yes. And in a way, the smaller end doesn't necessarily have to do that big transformation. If they are reliant on the upstream platform provider to provide all that information, they effectively just become the billing entity, etc. So it's all to do with where you demark what parts of the process between the channel partner and the platform provider. In something like security, particularly in the smaller end of the channel, the platform provider can provide a lot more capability and thus charge an appropriate, higher gross margin for that service.

Tom Rebbeck

Very interesting. Thank you, Charles.

Next, we're going to hear from Lluc Palerm, who works in our Space team. Lluc, what's your prediction for 2025?

Optimism in the space industry

Lluc Palerm

Hi, Tom.

We are very optimistic about the future of the space industry, and we think that 2025 will be a tipping point for take-home investments in space. Three main converging trends make us very positive about the future of the space industry. On one hand, we see the economies of space evolving quite fast. Launch is getting cheaper. Manufacturing of satellites is getting cheaper. All these translate into cheaper satellite services and big elasticities in the customer's life.

We also see a lot of improvements in terms of the capabilities that the space industry can offer. Starlink, for example, is offering terrestrial-like services with its Starlink consumer service.

Another key trend that we are seeing is the integration of satellite and non-terrestrial networks into the 3GPP and telco standards. That's the adoption of satellite technologies and adapting technologies for terrestrial to the satellite environment. This is helping to scale the satellite industry. We are seeing a lot of traction on telcos trying to engage with the space industry. Remarkably, there is the investment from Apple into the global star constellation that is triggering a lot of interest in the MNO environment. That is triggering some fear of missing the opportunity of capitalising on the new technologies offered by space. Other examples are that Skylog has recently partnered with Verizon and Deutsche Telekom to deploy D2D and IoT services. China Telecom is investing aggressively in D2D services. They are the telco with the largest footprint on D2D services in China and globally. Then you have other examples like Deutsche Telekom or Orange being part of the IRIS² consortium for the European constellation. This is just the first stage of the journey. We think that 2025 will see a lot of investments in the industry. We forecast that over $20 billion will be announced for investments in the satellite industry this year. This is a market with a lot of potential in the long term and our forecast is very optimistic about the opportunity. We forecast that by 2033, the satellite telco integration opportunity will reach $165 million in revenues, with key verticals being D2D, consumer broadband, backhaul, connected cars, government and military, and IoT. So there are multiple opportunities where telcos can capitalise on the new opportunities offered by the space industry.

Tom Rebbeck

Great. It sounds like a positive outlook for space in 2025. Thank you, Lluc.

AI driving business transformation.

Tom Rebbeck

Let's turn to Paul Jevons. Paul is a director in our transformation business. Your prediction was about AI continuing to drive business transformation. So, where do you see things right now?

Paul Jevons

Right now, pretty much every large organisation has some sort of transformation going on, and there is a consensus that AI represents huge opportunities across the value chain. But what we're seeing so far is the focus, both front office and back office focus, on cost efficiency, making the organisation more efficient and driving down costs rather than driving revenue.

Tom Rebbeck

And how do you think the progress to date will shape what happens next?

Paul Jevons

I think there are a number of things. Those organisations that have realised and are starting to realise the cost and efficiency benefits, which are significant. We're seeing, in some scenarios, up to 80% of human transactions now being handled by an AI bot of some sort. But as they embed that within their business they will start to turn their focus to how to generate revenue. That's potentially a different set of systems and a different set of business processes, so they will change their focus. In addition, people who were more in the follower category now have a different competitive baseline for the cost of the business. So that's going to force them to go faster and to implement their transformation so that they can be as competitive as their peers.

Tom Rebbeck

They need to cut those costs to be as efficient as everybody else.

 Paul Jevons

Yes. The industry baseline is now changing.

Tom Rebbeck

Right. So the transformation you talked about, where's that focused?

Paul Jevons

The transformation is primarily focused on systems and data. A lot is being done and has been done around data. You talk to some of the larger organisations, such as Vodafone, for example, who talk about how they've been on their data journey for four years plus, understanding where the data is, how accessible it is, how accurate it is, and how available it is. So, the focus today and the first place that people will need to address is the data and the systems used to access the data. And then the systems that are used by the data to interact with the customer.

Tom Rebbeck

OK, so what does all of that mean for the future?

Paul Jevons

Well, I think in terms of the future, if we roll all of that forward, you've got to imagine a world where all of the simple transactional tasks are now handled by an AI of some form, Gen AI or other types of machine learning. So, those tasks are no longer part of an organisation's human capital requirements. But also, the organisations are carrying out new, very complex tasks, which were never possible before. They're only possible because of AI because a human couldn't do it. So, what you have to look at is, what’s the operating model transformation that's required to accommodate that? It's no longer just about the technology and the systems, but what retained organisation do I need if AI is doing all of those things? What do I need people to do that I didn't in the past, or no longer need because AI is doing it? What are the skills, what are the capabilities, what's the governance, what's the impact on business processes, and how do I then differentiate my business when everybody's got AI?

Tom Rebbeck

Yes. Everybody's got AI doing the basic stuff, so you're focusing on the more complicated.

Paul Jevons

It becomes more complex, but also, what's the operating model I need in my business to effectively run and govern the AI that's doing all the simple stuff and the complex stuff? And then how do I differentiate and create value and revenue growth because I can't take any more cost out of the business?

Tom Rebbeck

Very good. Very interesting. Thank you, Paul.

Paul Jevons

Thank you.

Tom Rebbeck

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