2024 Tele 9-20

​9. 
​As telecoms move toward flatter work structures, generative AI can make that transition both more urgent and more complicated. It’s a bit of a chicken-and-egg situation: Generative AI may make it easier to flatten work structures in some mainly nontechnical areas, but telecoms need to attract the right kind of generative AI talent that may expect the workplace to already have become less hierarchical.

​9. 
​As telecoms move toward flatter work structures, generative AI can make that transition both more urgent and more complicated. It’s a bit of a chicken-and-egg situation: Generative AI may make it easier to flatten work structures in some mainly nontechnical areas, but telecoms need to attract the right kind of generative AI talent that may expect the workplace to already have become less hierarchical.

Generative AI complicates flattening work structures in telecoms, needing specific talent.

Multiple Choice

What challenges do telecoms face when adopting generative AI for work structures?

• 1. Attracting the right talent

• 1. Adapting to hierarchical systems

• 1. Implementing technical solutions

• 1. Overcoming chicken-and-egg situations

Multiple Choice

What is a major challenge for telecoms when adopting generative AI?

• Generating more revenue

• Flattening work structures

• Hiring non-technical staff

• Reducing operational costs

​10. 
Across industries, workplaces have been shifting toward flatter organizational structures that give individual employees more power and autonomy. Although global telecom organizations may have lagged in this shift until now, they likely need fewer silos and more cross-functional corporate structures. They also need more tools and technical processes, including Gen AI, to help accommodate the growing technological requirements of the industry. Existing IT and tech workers within telecom organizations can help drive the internal shift toward collaborative models across functions to solve complex problems, but telecoms should also consider reorganizing to attract more and different IT and tech talent, especially around Gen AI. Some organizations may need to bring in talent from outside of the industry, especially from the technology sector, who can help reshape teams to be more agile.

​10. 
Across industries, workplaces have been shifting toward flatter organizational structures that give individual employees more power and autonomy. Although global telecom organizations may have lagged in this shift until now, they likely need fewer silos and more cross-functional corporate structures. They also need more tools and technical processes, including Gen AI, to help accommodate the growing technological requirements of the industry. Existing IT and tech workers within telecom organizations can help drive the internal shift toward collaborative models across functions to solve complex problems, but telecoms should also consider reorganizing to attract more and different IT and tech talent, especially around Gen AI. Some organizations may need to bring in talent from outside of the industry, especially from the technology sector, who can help reshape teams to be more agile.

Telecoms need flatter structures, cross-functional models, and new technical talent for Gen AI.

Multiple Choice

What is crucial for telecoms to adapt to new technological requirements?

• Hiring more non-technical staff

• Maintaining traditional structures

• Developing cross-functional models

• Increasing silos

​11.
Generative AI may require CSP organizations to evolve faster. Recent developments in generative AI and other automation technologies are beginning to reshape nearly every part of telecom organizations globally, from internal functions to customer relationships and even
complex network maintenance tasks. Like many other industries, these developments may change how some lower-level telecom roles work and drive adjustments in talent strategy. Given the ongoing, intense competition for talent, organizations should consider retraining and redirecting these employees to support the organization in other capacities where possible. Moreover, implementing AI technologies will likely also require telecoms to focus on hiring more technical talent, which is already in high demand from other industries that often offer more competitive salaries and have a reputation for being more cutting edge among employees.

​11.
Generative AI may require CSP organizations to evolve faster. Recent developments in generative AI and other automation technologies are beginning to reshape nearly every part of telecom organizations globally, from internal functions to customer relationships and even
complex network maintenance tasks. Like many other industries, these developments may change how some lower-level telecom roles work and drive adjustments in talent strategy. Given the ongoing, intense competition for talent, organizations should consider retraining and redirecting these employees to support the organization in other capacities where possible. Moreover, implementing AI technologies will likely also require telecoms to focus on hiring more technical talent, which is already in high demand from other industries that often offer more competitive salaries and have a reputation for being more cutting edge among employees.

​Generative AI reshapes telecom roles, requiring retraining and new technical hires.

Multiple Choice

How should telecoms respond to generative AI advancements?

• Reduce technical staff

• Focus on customer service

• Retrain existing employees

• Ignore automation technologies

​12.
Overall, telecom organizations may struggle to compete for this talent more than other technology sectors due to high costs and competition against industries with a reputation for more operational flexibility. As a result, telecom organizations should focus on retaining and
upskilling technical employees wherever possible. Opportunities also exist to recruit among often overlooked talent demographics that can be trained with technical skills, including individuals who don’t have traditional degrees, those who are making career shifts, those returning to the workforce after a break, or young professionals who might be looking for early career opportunities to do technical work.

​12.
Overall, telecom organizations may struggle to compete for this talent more than other technology sectors due to high costs and competition against industries with a reputation for more operational flexibility. As a result, telecom organizations should focus on retaining and upskilling technical employees wherever possible. Opportunities also exist to recruit among often overlooked talent demographics that can be trained with technical skills, including individuals who don’t have traditional degrees, those who are making career shifts, those returning to the workforce after a break, or young professionals who might be looking for early career opportunities to do technical work.

Telecoms should retain and upskill employees and recruit diverse talent for technical roles.

Multiple Choice

Why should telecoms focus on upskilling employees?

• To cut operational costs

• To reduce competition

• To fill technical roles

• To eliminate traditional degrees

​13.
Telecom organizations globally have continued to reduce their workforces to cut costs throughout the past year. Some of these cuts may have been related to automation and AI, while others were due to lower-than-predicted profits caused by cost-cutting measures to meet profitability targets. Continued reductions to telecom workforces may continue into 2024 as organizations could trim costs to match consumer demand and direct new resources toward growing technological opportunities. Balancing cost-cutting and short-term profitability with the potential for developing a competitive advantage through new automation technology will likely be a major challenge over the next year that organizations should navigate with caution.

​13.
Telecom organizations globally have continued to reduce their workforces to cut costs throughout the past year. Some of these cuts may have been related to automation and AI, while others were due to lower-than-predicted profits caused by cost-cutting measures to meet profitability targets. Continued reductions to telecom workforces may continue into 2024 as organizations could trim costs to match consumer demand and direct new resources toward growing technological opportunities. Balancing cost-cutting and short-term profitability with the potential for developing a competitive advantage through new automation technology will likely be a major challenge over the next year that organizations should navigate with caution.

Telecoms balance cost-cutting with investing in automation for a competitive edge

Multiple Choice

What is a significant challenge for telecoms in the coming year?

• Increasing profits

• Reducing customer base

• Balancing cost-cutting with automation investment

• Expanding non-technical workforce

​Post-peak 5G spending trough and vendor consolidation

14.
Although 5G networks are still being launched in some ew geographies, and networks are being made denser with more towers and antennas, the bulk of CSP spending on 5G equipment and spectrum seems to be behind us, and there are few signs that the trend will reverse. This has positive implications for CSPs that may have higher free cash flow as 5G build-out settles but hasegative implications for the companies that make 5G wireless equipment. If annual revenues fall too far, the industry may see fewer vendors.

​Post-peak 5G spending trough and vendor consolidation

14.
Although 5G networks are still being launched in some ew geographies, and networks are being made denser with more towers and antennas, the bulk of CSP spending on 5G equipment and spectrum seems to be behind us, and there are few signs that the trend will reverse. This has positive implications for CSPs that may have higher free cash flow as 5G build-out settles but hasegative implications for the companies that make 5G wireless equipment. If annual revenues fall too far, the industry may see fewer vendors.

​5G spending declines, leading to increased cash flow for CSPs but lower vendor revenues.

Multiple Choice

What is a positive outcome of the decline in 5G spending for CSPs?

• Higher vendor revenues

• Increased cash flow

• Lower free cash flow

​15.
Since 1990, roughly once per decade, the global wireless industry as upgraded the entire ecosystem: 2G in 1992, 3G in 2001, 4G in 2010, and 5G in 2019.42 Each generational upgrade required mobile network operators (MNOs) to spend billions of dollars globally on RAN and spectrum; it also requires the istribution of new phones to consumers to take advantage of the new technology and networks. The companies that make RAN gear (the original equipment manufacturers, or OEMs) and the companies that make phones saw their revenues and profits grow rapidly during the adoption phase of each upgrade cycle—and then flatten or decline until the next generational upgrade occurred.

​15.
Since 1990, roughly once per decade, the global wireless industry as upgraded the entire ecosystem: 2G in 1992, 3G in 2001, 4G in 2010, and 5G in 2019.42 Each generational upgrade required mobile network operators (MNOs) to spend billions of dollars globally on RAN and spectrum; it also requires the istribution of new phones to consumers to take advantage of the new technology and networks. The companies that make RAN gear (the original equipment manufacturers, or OEMs) and the companies that make phones saw their revenues and profits grow rapidly during the adoption phase of each upgrade cycle—and then flatten or decline until the next generational upgrade occurred.

​Wireless industry upgrades boost OEM and phone company revenues during adoption phases.

Multiple Choice

What typically happens during the adoption phase of a new wireless generation?

• Decreased spending on RAN

• Revenue decline for phone companies

• Reduced need for new phones

• Rapid revenue growth for OEMs

​16.
In 2024, the industry will likely be in such an intergenerational trough. Smartphone sales fell 5% in 2023 to 1.16 billion units, the lowest in a decade. As we showed in our 2024 Global TMT Predictions, vendors of leading online applications are not expected to require more bandwidth from users for at least the next two years. Meanwhile, RAN revenues peaked in 2021, were relatively flat in 2022, and, by the first half of 2023 were “declining at the fastest pace in seven years.

​16.
In 2024, the industry will likely be in such an intergenerational trough. Smartphone sales fell 5% in 2023 to 1.16 billion units, the lowest in a decade. As we showed in our 2024 Global TMT Predictions, vendors of leading online applications are not expected to require more bandwidth from users for at least the next two years. Meanwhile, RAN revenues peaked in 2021, were relatively flat in 2022, and, by the first half of 2023 were “declining at the fastest pace in seven years.

​2024 may see an intergenerational spending trough with lower smartphone sales and RAN revenues.

Multiple Choice

What is expected for the wireless industry in 2024?

• Intergenerational spending trough

• Increase in smartphone sales

• Growth in RAN revenues

• Decreased competition for talent

​17.
But what is a headwind for OEMs is often a tailwind for telecoms. Over the past decade, their capital intensity (capital expenditures as a percentage of revenues) has been in a range between 16.3% and 17.8%—at the high end, that’s about $330 billion globally per year. At a high level, lower capital intensity and higher margins is a good thing for telecoms, as higher free cash flows can be used to pay down debt, return to shareholders via dividends, invest more in building out fiber optic access networks, invest in OSS/BSS transformation (a projected $80 billion market by 2028), and invest in generative AI infrastructure.

​17.
But what is a headwind for OEMs is often a tailwind for telecoms. Over the past decade, their capital intensity (capital expenditures as a percentage of revenues) has been in a range between 16.3% and 17.8%—at the high end, that’s about $330 billion globally per year. At a high level, lower capital intensity and higher margins is a good thing for telecoms, as higher free cash flows can be used to pay down debt, return to shareholders via dividends, invest more in building out fiber optic access networks, invest in OSS/BSS transformation (a projected $80 billion market by 2028), and invest in generative AI infrastructure.

​Lower capital intensity allows telecoms to invest in debt reduction, dividends, and new technologies.

Multiple Choice

What can telecoms use higher free cash flow for?

• Reducing network density

• Reducing dividends

• Increasing debt

• Investing in new technologies

​18.
In the big picture, how much do intergenerational wireless spending troughs matter? In the 1990s, there were more than a dozen large companies globally that made RAN gear. There are now about five to six that have more than 90% of the market. Each trough has seen vendor consolidation, and it seems likely that the 5G trough could lead to a similar outcome. However, with recent technology sanctions, many telecoms may have fewer choices for vendors offering wireless equipment. If there is further consolidation, there could be what amounts to a single vendor in some markets. In contrast, wireline markets (fiber, cable, etc.) have greater supply chain diversity and choice between vendors.

​18.
In the big picture, how much do intergenerational wireless spending troughs matter? In the 1990s, there were more than a dozen large companies globally that made RAN gear. There are now about five to six that have more than 90% of the market. Each trough has seen vendor consolidation, and it seems likely that the 5G trough could lead to a similar outcome. However, with recent technology sanctions, many telecoms may have fewer choices for vendors offering wireless equipment. If there is further consolidation, there could be what amounts to a single vendor in some markets. In contrast, wireline markets (fiber, cable, etc.) have greater supply chain diversity and choice between vendors.

​Intergenerational troughs lead to vendor consolidation, potentially reducing choices for telecoms.

Multiple Choice

What is a likely outcome of intergenerational troughs in the wireless industry?

• Increased number of vendors

• Vendor consolidation

• Decreased telecom flexibility

• More supply chain diversity

​19.
As a further complication, up until recently almost all RANs were closed ecosystems. As we predicted in 2021, there is a slow but gradual shift to an increasing percentage of Open RAN architectures. Although it’s still early days, and Open RAN was still not widespread in 2023, forecasts are for it to be 15% of global RAN sales by 2027. It is also possible that growth in Open RAN will see a proliferation and deepening of supply chain alternatives in the RAN market. Further, telecoms could use Open RAN as a means of creating a more flexible and cost-efficient network infrastructure.

​19.
As a further complication, up until recently almost all RANs were closed ecosystems. As we predicted in 2021, there is a slow but gradual shift to an increasing percentage of Open RAN architectures. Although it’s still early days, and Open RAN was still not widespread in 2023, forecasts are for it to be 15% of global RAN sales by 2027. It is also possible that growth in Open RAN will see a proliferation and deepening of supply chain alternatives in the RAN market. Further, telecoms could use Open RAN as a means of creating a more flexible and cost-efficient network infrastructure.

​Open RAN could diversify supply chains and create flexible, cost-efficient networks for telecoms.

Multiple Choice

What is a potential benefit of Open RAN architectures for telecoms?

• Reduced supply chain alternatives

• Less flexible network infrastructure

• Higher operational costs

• More cost-efficient networks

​20.
All of this assumes there’s not a 6G upgrade cycle in the near term. At this time, 6G has not even been defined (likely 2025–2028), and most analysts are not expecting a commercial launch until 2030— with the full revenue ramp likely occurring in the following years. A complicating factor is the development and release of 5G Advanced in 2024–2025, based on the 3GPP Release 18 and 19 updates. It offers a number of improvements over 5G (releases 15, 16, and 17), supporting much improved network energy efficiency, AI/ML RAN automation, XR (VR, AR, MR, etc.), and more advanced MIMO antenna technology— and may delay or even obviate a move to 6G in the next decade.

​20.
All of this assumes there’s not a 6G upgrade cycle in the near term. At this time, 6G has not even been defined (likely 2025–2028), and most analysts are not expecting a commercial launch until 2030— with the full revenue ramp likely occurring in the following years. A complicating factor is the development and release of 5G Advanced in 2024–2025, based on the 3GPP Release 18 and 19 updates. It offers a number of improvements over 5G (releases 15, 16, and 17), supporting much improved network energy efficiency, AI/ML RAN automation, XR (VR, AR, MR, etc.), and more advanced MIMO antenna technology— and may delay or even obviate a move to 6G in the next decade.

​5G Advanced may delay 6G, offering improvements in efficiency and technology.

Multiple Choice

What might delay the move to 6G in the next decade?

• Development of 5G Advanced

• Early launch of 6G

• Lack of 5G improvements

• Reduced demand for AI/ML RAN automation