Telcos race to transition from ‘dumb pipes’ to tech players with help from AI
Ryu Young-sang, CEO of South Korean telecoms giant SK Telecom, told CNBC that AI is helping telecoms firms improve efficiency in their networks.
Manaure Quintero | Afp | Getty Images
BARCELONA — Global telecommunications firms are talking up advances in key technologies like artificial intelligence as they look to transition away from being perceived as the “dumb pipes” behind the internet.
At the Mobile World Congress technology conference in Barcelona, CEOs of multiple telecoms companies described how they’re piling money into new technological innovations, including AI, next-generation 5G and 6G networks, satellite internet and even smart cities.
Makoto Takahashi, president and CEO of Japanese telecom giant KDDI, detailed plans to build a smart city dubbed Takanawa Gateway City in Tokyo, as well as roll out direct-to-cell satellite internet connectivity in partnership with Elon Musk’s Starlink venture.
Ralph Mupita, the CEO of Africa’s largest mobile network operator MTN, also took to the stage to share how the company has made significant strides toward becoming a company that offers both wireless connectivity and fintech services such as payments, e-commerce, insurance, lending and remittances.
“The telco business has served us well. It has iterated since. But the future is really about the future of platforms,” Mupita said in his keynote talk, adding the company has invested aggressively into other areas such as media streaming and financial services.
From ‘dumb pipes’ to ‘techcos’
Some lingo that has gathered steam in the telco industry for the last couple of years is the phrase “techco,” a portmanteau of the words “telco” and “tech.”
The term refers to the idea of a telco firm that operates more like a tech company — one that invests in cutting-edge technology and offers digital services to consumers to help them make money from the significant capital expenditures they’ve allocated to upgrading their wireless networks.
For two decades, tech giants such as Meta, Google, Amazon, Apple, Microsoft and Netflix have flourished in a world where content can be delivered directly to people’s devices, consumers can communicate seamlessly with one another, and data can be stored or streamed online without having to own cumbersome infrastructure — all thanks to innovations like the internet, smartphones and the cloud.
However, these innovations have disrupted telecom firms’ business models, to the point where they’re now often perceived as legacy players that are only there to lay down the cables and other network infrastructure that enable internet connectivity.
It’s a dilemma that’s earned telco brands the pejorative term “dumb pipes.”
“I remember early in the industry, even before mobile internet when SMS used to be the killer app,” Hatem Dowidar, CEO of UAE state-owned telecom company e&, said in a keynote speech at MWC. “We used to make messaging revenue. We used to make voice revenue.”
“All this over the years got disrupted by over-the-top players, to the point that today, a lot of telcos around the world are reduced to being a pipe of packets just getting data across the networks,” Dowidar added. “And competition is not staying still. They have the scale, they have the investment to go and disrupt even further.”
Telcos embrace AI
Ryu Young-sang, CEO of SK Telecom, told CNBC’s Arjun Kharpal that the South Korean telecoms giant has looked to AI technology to help it improve the efficiency of its wireless network — something that was consistently on display at numerous telco operators’ booths at MWC.
“For telcos, there are two aspects of AI. One is as a user, the other is as a supplier,” said Young-sang. “As a user, you are a telco business, you can improve your network efficiency, marketing and customer service by using the AI technology. You can improve your own operations.”
“The other aspect is, AI can be a growth engine, a new business opportunity for telcos,” he added. Data centers, the facilities that offer computing capacity needed to run generative AI applications like ChatGPT, are another key area where telcos like SK Telecom can play a key role, Young-sang said.
In the Western world, the race to build data centers is one that’s been mostly dominated by cloud computing giants — or “hyperscalers” — such as Amazon, Microsoft and Google. However, SK Telecom is aggressively expanding AI-ready data centers of its own globally, according to the firm’s CEO.
Can telcos catch up on tech?
For many telecom industry analysts, chatter about telcos seeking to transform themselves into tech players isn’t entirely new — companies in the industry have long been aware their relevance in communications and media has been dwindling.
Kester Mann, director of consumer and connectivity at market research firm CCS Insight, told CNBC that while he’s not a great fan of the “techco” term, it’s something the industry continues to focus on and has gathered pace in the context of the AI boom.
“AI can influence so many areas … and obviously that does play to that trend around telco to techco and operators positioning themselves more than just a connectivity provider,” Mann said.
So-called “autonomous networks,” or networks that can be managed and fixed with limited human oversight, is an area that’s quickly gaining traction in the industry, according to Nik Willetts, CEO of telco industry association TM Forum.
“Autonomous Networks is a movement we see moving from theory to reality incredibly quickly, thanks to advancements in AI combined with a new level of ambition and industry-wide action,” Willetts said.
This tech “can unlock a step-change in operating and capital efficiency, improving EBITDA and free cashflows, as well as unlocking new revenue opportunities and much-needed improvements in customer experience,” he added.
Jeetu Patel, chief product officer of IT networking giant Cisco, said he sees telcos playing a vital role as AI drives up demand for network traffic and bandwidth.
“The reality is this: the network bandwidth appetite is going to increase exponentially with AI,” Patel told CNBC. “Today, 100% of our workforce is human. Tomorrow, you will have that being augmented by AI agents, robots, humanoids, a lot of edge devices.”
“These agents are going to be more chatty and they’re going to require more network traffic and bandwidth,” he added. “I think service providers have a significant role to play. In my mind, the opportunity is not gone for them.”
An Apple store in Walnut Creek, California, U.S., on April 30, 2025.
Paul Morris | Bloomberg | Getty Images
Apple is asking a court to pause a recent decision in its case against Epic Games and allow the iPhone maker to once again charge a commission on in-app transactions that link out for payment.
Last month, U.S. District Judge Yvonne Gonzalez Rogers in Oakland found that Apple had violated her original court order from the Epic trial, originally decided in 2021, that forced Apple to make limited changes to its linking out policy under California law.
Judge Rogers’ new ruling is more expansive, ordering Apple to immediately stop imposing its commissions on purchases made for iPhone apps through web links inside its apps, among other changes.
Apple is now looking to get a stay on that order, as well as another one from the case that prevents it from restricting app developers from choosing the language or placement of those links, until the entire decision can be appealed. Apple says that required changes in their current form will cost the company “substantial sums.”
“This is the latest chapter in Epic’s largely unsuccessful effort to use competition law to change how Apple runs the App Store,” Apple said in the emergency motion for a stay. The motion cites a previous order in the case that found that new linking policies would cost Apple “hundreds of millions to billions” of dollars annually.
If Apple succeeds, it will allow the company to roll back changes that have already started to shift the economics of app development. Developers including Amazon and Spotify have been able to update their apps to avoid Apple’s commissions and direct customers to their own website for payment.
Prior to the ruling, Amazon’s Kindle app told users they could not purchase a book in the iPhone app. After a recent update, the app now shows an orange “Get Book” button that links to Amazon’s website.
Epic also plans to introduce new software to allow app and game developers to easily link to their websites to take payments.
“This forces Apple to compete,” Epic Games CEO Tim Sweeney said shortly after last month’s decision. “This is what we wanted all along.”
Apple said in the filing that “non-party developers are already seizing upon the Order to reduce consumer choice (and damage Apple’s business) by, among other things, impeding the use of” in-app purchases.
Rogers made a criminal referral in the case, saying that Apple misled the court and that a company vice president “outright lied” about when and why Apple decided to charge 27% for external payments. The real decision, the judge said, took place in meetings involving Apple CEO Tim Cook.
Wednesday’s filing from Apple doesn’t address Rogers’ accusations that the company misled the judge, but it does argue that the ruling was punitive. Apple’s lawyers also claimed that civil contempt sanctions can only coerce compliance with an existing order, not punish non-compliance.
Apple said earlier this week in a court filing it would appeal the contempt ruling.
“We’ve complied with the court’s order and we’re going to appeal,” Cook told investors on the company’s quarterly earnings call last week.
WATCH: Apple says it strongly disagrees with Epic Games decision
Rene Haas, CEO of chip tech provider Arm Holdings, holds a replica of a chip with his company’s logo on it, during an event in which Malaysia’s Prime Minister Anwar Ibrahim officially announces a $250 million deal with the company, in Kuala Lumpur, Malaysia March 5, 2025.
Hasnoor Hussain | Reuters
Arm shares dropped more than 8% in extended trading on Wednesday after the chip-design company issued weaker-than-expected guidance for the current quarter.
Here’s how the company did in the fiscal fourth quarter compared with LSEG consensus:
- Earnings per share: 55 cents, adjusted vs. 52 cents expected
- Revenue: $1.24 billion vs. $1.23 billion
While Arm topped estimates for the quarter ended March 31, Wall Street is looking ahead to the company’s forecast for the first quarter.
Arm said revenue will be between $1 billion and $1.1 billion. The middle of the range is below the $1.1 billion average analysts estimated, according to LSEG. Earnings per share will be between 30 cents and 38 cents, while analysts were expecting 42 cents.
SoftBank controls about 90% of Arm, and took the company public in 2023. It now has a market cap of over $130 billion as of Wednesday’s close.
Arm designs the fundamental architecture upon which many chips are built, and sells licenses for its designs to companies such as Qualcomm and Nvidia, charging royalty fees on each sale they make. The company claims 99% of premium smartphones are powered by Arm technology.
Royalty revenue in the quarter rose 18% from a year earlier to $607 million.
Net income fell 6% to $210 million, or 20 cents a share, from $224 million, or 21 cents, in the year-ago quarter. Revenue jumped 34% from $928 million a year earlier.
Thomas Fuller | SOPA Images | Lightrocket | Getty Images
AppLovin shares soared as high as 15% in extended trading after the company reported earnings and revenue that beat expectations and announced the sale of its mobile gaming business.
Here’s how the company did compared to LSEG consensus estimates:
- Earnings: $1.67 per share vs $1.45 per share expected
- Revenue: $1.48 billion vs $1.38 billion expected
AppLovin also agreed on Wednesday to sell its mobile gaming business to Tripledot Studios in a deal worth $400 million in cash considerations. The advertising tech company will also obtain a roughly 20% ownership stake in Tripledot Studios, which makes mobile games like Sudoko Friends, Puzzletime and Solitaire Classic.”
The deal is expected to close in the second quarter of 2025.
AppLovin said second-quarter sales should come in the range of $1.2 billion to $1.22 billion, trailing analysts expectations of $1.38 billion.
The company reported first-quarter net income of $576 million, or $1.67 per share, up from $234 million, or 67 cents per share, in the same quarter of 2024.
AppLovin total costs and expenses for the first quarter came in at $820.55 million, representing a 14% increase from the previous year during the same quarter.
The ad-tech firm said in February that it had signed a term sheet to sell its apps business for “total estimated consideration” of $900 million, which included $500 million in cash.
AppLovin’s business has been split between advertising and apps, which is primarily made up of game studios that the company has acquired over the years. With the historic growth in its advertising unit, due to rapid advancements in artificial intelligence, the apps business had become much less important.
The company logged $1.16 billion in first-quarter advertising sales, up from the $678 million it recorded a year ago during the same period.
Sales of the company’s apps-related business for the quarter came in at $325 million, which was a 14% decline from the prior year.
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