Is AI the Ticket for Long-Awaited Telco Revenue Growth?

Share
In order to become more AI-native, McKinsey suggests adopting RAI practices
Research by McKinsey suggests that, if telcos become more AI-native, they will achieve greater revenue growth and unlock US$250bn in value by 2040

The telco industry is currently having to confront huge amounts of pressure and falling revenues, but artificial intelligence (AI) could be a welcome solution for companies looking to boost their optics.

According to research by McKinsey, generative AI (Gen AI) alone could boost earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins by 10% within the next five years. 

This could be a welcome advantage for telcos seeking to reinvent themselves and compete with technology giants - something which they are still struggling with. Its potential to offer significant financial gain has already caught the attention of industry leaders, according to McKinsey.

Becoming more AI-native

AI can offer telcos a transformative opportunity to drive innovation, enhance customer experiences and unlock new revenue streams. However, the path to becoming an AI-native organisation is not without its challenges, given increasing regulatory landscapes and ethical concerns.

AI-native refers to AI being implemented as the first thought in the system and not as an afterthought. 

McKinsey analysis indicates that telcos implementing the most advanced RAI practices could deploy use cases that collectively capture up to US$250bn in value worldwide by 2040 - a figure representing 44% of the full industry-wide value created by AI during that period.

Responsible AI: A business imperative for telcos (McKinsey)
Source: Responsible AI: A business imperative for telcos (McKinsey)

"AI gives telcos another chance to reinvent themselves," the report says. “The goal is to become AI-native organisations that embed AI into every aspect of the business to help drive growth and renewal. 

“If telcos act quickly, they can lead the way in deploying both generative AI (gen AI) to improve the customer experience and cut costs and analytical AI to optimise their back-end operations and infrastructure.”

Capturing the technology’s full potential 

In order to successfully become more AI-native, businesses are being advised to ensure they adopt responsible AI (RAI) practices within their organisation. 

RAI frameworks, which govern accountability and transparency in AI deployment, are crucial for telcos to gain consumer trust, protect sensitive data and safeguard against security threats. It is continually being viewed as a business imperative, with McKinsey citing that RAI will help businesses ‘drive faster’ to harness the full potential of AI.

Telcos can benefit from RAI in multiple ways:
  • Better business outcomes
  • Competitive advantage
  • Sustainable growth
  • Increased customer trust
  • Enhanced operational efficiency
  • Stronger talent attraction
  • Financial gains

“Forward-thinking telcos recognise that robust RAI governance serves as a set of “good brakes” that enable them to “drive faster” to harness the full potential of AI while mitigating risks,” the report notes.

Despite such potential, many telcos are still in the early stages of RAI implementation. A key barrier to widespread adoption is the lack of industry-standard frameworks. Without clear guidelines, unfortunately many operators are having to take a reactive approach as new regulatory requirements emerge.

Youtube Placeholder

To address this gap, the McKinsey report is calling for more RAI frameworks tailored to the unique industry challenges associated with AI in the telecom sector. These frameworks should include industry-specific maturity models, clear RAI guidelines, best practices and progress metrics.

“An effective RAI framework should include an easy-to-use maturity-modelling tool to help telcos fully understand their baseline AI readiness and identify opportunities for growth and improvement. Maturity models help telcos capture their full AI potential at every stage of deployment.”

Responsible AI: A business imperative for telcos (McKinsey)

“By prioritising RAI, telecom operators can capture the full potential of AI for their businesses and build trust with customers, leading to new innovations and new revenues,” McKinsey explains. “Emphasising RAI can also help telecom companies attract and retain the best talent, fostering a culture of continuous improvement. 

“Put simply, implementing AI responsibly makes good business sense.”

******

Make sure you check out the latest edition of Mobile Magazine and also sign up to our global conference series - Tech & AI LIVE 2024

******

Mobile Magazine is a BizClik brand

Share

Featured Articles

Rakuten Viber Anti-Fraud Tool: Confronting Messaging Scams

Developed with Eurobank, Rakuten's global messaging platform strengthens security with one-time password verification and real-time number checking system

EY: Streaming Cost Concerns Amid Rising Demand for Services

An EY study reveals rising concerns over the price of streaming sites and troublesome connectivity, despite continued surging demand for premium services

Amazon Smart Glasses: Optimising Deliveries via New Trial

Amazon trials smart glasses for delivery drivers, hoping to transform last-mile logistics and improve e-commerce efficiency and retail customer experience

Google Joins Mobile Ecosystem Forum as Member to Advance RCS

Connectivity

The Big Tech Impact of Australia's Proposed Social Media Ban

Media & Entertainment

How EE is Rolling Out its 5G Standalone Upgrade in the UK

5G & IOT