Telcos are unlocking higher values as the market notes the arrival of AI and perceives greater value in the services telcos provide. Even so, the gap in valuations between revenue and profit growth that has led to depressed valuations for most of this millennium continues. Telco performance still lags behind both the broader market and the IT sector, according to research firm Oliver Wyman, detailed in Figure 1.
Figure 1: Telco performance has lagged the returns of the broader market and IT sector
Source: SNL Oliver Wyman analysis
The firm believes there is a significant improvement to be made and telco valuations could enter the range of nine-to-11 times EBITDA. The firm says the industry is currently in a six-to-seven times EBITDA dead-end. That would result in potential to triple the equity value of a telco and help to reinvigorate investment in technology and innovation.
The main tools at hand are new technologies such as software-defined networks, cloud-based architectures and application of AI to telco operations. These will allow for greater simplicity, faster time-to-market and more flexibility while enabling lower operational expenses. AI in particular will increase automation in network engineering and operations as well as customer processes.
“We’re making good progress,” confirmed Nik Willetts, the CEO of TM Forum, speaking to Agile Telco at DTW Ignite 2025. “When we issued our code red alert two years ago at this event, we never thought we’d be seeing this growth. Telco values are up 20%.”
Revenue up, spending down
That’s true in some markets, with Deloitte agreeing that North American telcos were up more than 20% in 2024 but telco stocks globally have seen valuation growth of 11%. The firm says that earnings are up too with average revenue per user up by about 2% at the same time as operational expenses are being contained and capital expenditure is declining. There’s altogether a far more rosey picture emerging and that’s reflected in greater positivity.
The Forum isn’t claiming credit for this first phase of industry growth but Willetts does think the intervening time between the code red alert over the industry’s future and this year’s event has been used thoughtfully. Initiatives to create open APIs, assess AI opportunities and enable efficient operations are setting the industry up to enable and handle growth. “In a resource-constrained world should you put resources into TM Forum?” he asked. “Yes, because the amount of resource is quite small and the payback is substantial. With an API, you would have had to develop it yourself but doing it in the Forum is dramatically faster and cheaper, and at some point, it becomes a standard.”
API enablement and adoption of autonomous networking are ways that telcos are transforming their prospects but AI is increasingly seen not only as means to reset costs and make telco operations efficient. It’s also a new revenue stream. Deloitte points out that estimates on Gen AI spending alone over the next five year range from hundreds of millions of dollars to more than one trillion dollars on the physical layer needed. That’s chips, data centres and electricity.
Can telcos cash in on AI infrastructure boom?
The firm says telcos should participate by connectivity the hardware and software and profiting from being an enabler of distributed AI. Telcos’ long-haul fibre will be joined by capacity owned by AI giants but there is still a large opportunity to exploit. Deloitte reckons the big tech players will invest US$100bn on network capex between 2024 and 2030. Telcos’ expertise in network infrastructure investment and their experience of efficient roll-outs is a clear value lever.
On the wireless, side, AI monetisation is likely to be possible if concepts of the AI radio access network bear fruit. Adding a mix of GPUs and CPUs to cell towers and enabling more intelligence at the edge in this way could be a money spinner.
It’s not the turnaround in financial fortunes that is exciting Willetts. “What I’m encouraged by is the foundations for growth are now there,” he said. “The velocity to respond to customer demands is there and the ability to experiment has been created. Telcos can now sit down with enterprise customers – which is what hyperscalers are doing – and address their needs. With networks alone, we haven’t been able to do that. We now need to focus on listening to the customer, considering how to price, what SLAs to offer and addressing issues with roaming.”
Emphasis on confidence
“The pieces are fitting into place and mood here is positive,” added Willetts. “We have to have confidence in the value we’re bringing.”
That confidence is being seen in the market. Bain & Company have recently reported that, after a slow start to the year, telco M&D deal value has increased 44% in the first half of 2025 to US63bn. Much of the activity is in the Americas and big deals are generating the momentum – the top five deals announced so far this year account for 80% of the total value of transactions.
Strange as it might be to say: we’re now in a telco industry that is seeing growing revenues, growing valuations and a lively M&A marketplace. Admittedly, growth is still below other sectors but we should welcome the significant increases seen in the last year. We should also recognise that many of the drivers for growth are only just in place or yet to be operational. When these technologies are adopted and new telco value is more widely understood we expect to see even more positive performance.
George Malim