Is AI the Ticket for Long-Awaited Telco Revenue Growth?
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.
"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.
- 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.
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.”
“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.”
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