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It has been more than a quarter of a century since the launch of the GSM standard and the resulting digitalization of mobile networks, and though European mobile network operators have great business opportunities, they are also facing big challenges.

Digitalization and the Internet of Things (IOT) are expected to be largely supported by 5G mobile communications, which should open almost inexhaustible new business potential for the telco industry.

At the same time, companies need to invest significantly to consolidate 5G technology. The verticalization of business models and the virtualization of infrastructure require organizational and cultural changes to an extent and a complexity not comparable to previous changes in the telco sector.

Critical in the short term is that sizeable new revenue streams can be expected five to seven years from now at the earliest, presenting difficulties for the telcos, where revenues and profitability have been down for years. Technology and service firms like Alphabet, Amazon, Facebook and Microsoft are already investing in their own telco infrastructure and have a stronger financial position than European mobile network operators do.

To hold their ground with 5G, mobile network operators have to return to profitable growth in the legacy business and thereby becoming attractive again for investors.

BearingPoint has carried out an explorative analysis on different determinants for growth and profitability and has identified proven practices from other regional markets and different industries that can be adapted and used by European mobile network operators. A summary of the survey results is available for download.

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