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.”
Omada Health smart devices in use.
Courtesy: Omada Health
Virtual care company Omada Health filed for an IPO on Friday, the latest digital health company that’s signaled its intent to hit the public markets despite a turbulent economy.
Founded in 2012, Omada offers virtual care programs to support patients with chronic conditions like prediabetes, diabetes and hypertension. The company describes its approach as a “between-visit care model” that is complementary to the broader health-care ecosystem, according to its prospectus.
Revenue increased 57% in the first quarter to $55 million, up from $35.1 million during the same period last year, the filing said. The San Francisco-based company generated $169.8 million in revenue during 2024, up 38% from $122.8 million the previous year.
Omada’s net loss narrowed to $9.4 million during its first quarter from $19 million during the same period last year. It reported a net loss of $47.1 million in 2024, compared to a $67.5 million net loss during 2023.
The IPO market has been largely dormant across the tech sector for the past three years, and within digital health, it’s been almost completely dead. After President Donald Trump announced a sweeping tariff policy that plunged U.S. markets into turmoil last month, taking a company public is an even riskier endeavor. Online lender Klarna delayed its long-anticipated IPO, as did ticket marketplace StubHub.
But Omada Health isn’t the first digital health company to file for its public market debut this year. Virtual physical therapy startup Hinge Health filed its prospectus in March, and provided an update with its first-quarter earnings on Monday, a signal to investors that it’s looking to forge ahead.
Omada contracts with employers, and the company said it works with more than 2,000 customers and supports 679,000 members as of March 31. More than 156 million Americans suffer from at least one chronic condition, so there is a significant market opportunity, according to the company’s filing.
In 2022, Omada announced a $192 million funding round that pushed its valuation above $1 billion. U.S. Venture Partners, Andreessen Horowitz and Fidelity’s FMR LLC are the largest outside shareholders in the company, each owning between 9% and 10% of the stock.
“To our prospective shareholders, thank you for learning more about Omada. I invite you join our journey,” Omada co-founder and CEO Sean Duffy said in the filing. “In front of us is a unique chance to build a promising and successful business while truly changing lives.”
WATCH: The IPO market is likely to pick up near Labor Day, says FirstMark’s Rick Heitzmann
Technology
Google would need to shift up to 2,000 employees for antitrust remedies, search head says
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business3 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway