Article

How can MNOs thrive in the cloud era?

20. December 2024

Mobile network operators are at a turning point, figuring out their role and “winning formula” to thrive in the cloud era. MNOs have a path to success in optimizing their edge infrastructure, forming strategic partnerships, and developing innovative cloud solutions, to steer towards profitable growth. This transformation offers new revenue opportunities and positions MNOs as essential players in the digital economy.

From legacy to leadership: telcos’ role in the cloud revolution

In today’s rapidly evolving digital landscape, telecommunications companies face both pressing challenges and transformative opportunities. To stay competitive, they must transition from traditional infrastructure providers to profitable service providers. The dominance of hyperscalers such as AWS, Microsoft Azure, and Google Cloud demands that Telcos leverage their unique assets and carve out distinct roles in the cloud ecosystem. This article examines how Telcos, particularly in Germany, can reposition themselves as profitable players by harnessing their edge infrastructure and developing differentiated cloud offerings.

From infrastructure to service provider

The cloud industry is now dominated by hyperscalers, who provide scalable, cost-efficient cloud infrastructure to enterprises globally. This has revolutionized how businesses access and utilize computing resources, but it has also introduced challenges & complexities for Mobile Network Operators (MNOs).

Hyperscalers such as AWS, Microsoft Azure, and Google Cloud dominate the market with their vast, scalable infrastructures, seamlessly delivering computing, storage, and data services globally. Their enterprise-ready solutions have become the benchmark for reliability and scalability across industries.

  • Challenges & Opportunities for MNOs
  1. Increasing dependence on hyperscalers: MNOs are dependent on hyperscalers for hosting and managing their as well as their clients’ opera-tions, reducing their control over critical infrastructure while increasing op-erational costs incurred to hyperscalers’ services.
     
  2. Local expertise advantage for MNOs: MNOs tend to have a far better un-derstanding of local standards, legislation, and market sentiment compared to mostly US-based hyperscalers. This serves for an added value to the cli-ents. Building this expertise is costly and time consuming for hyperscalers, an opportunity to exploit for MNOs.
     
  3. Strategic value of edge computing: Hyperscalers recognize the criticality of local edge-computing infrastructure to customers & applications. These in-frastructures have been developed and are operated mainly by MNOs such as Telekom, Vodafone, Telefónica as well as in large European-wide collab-oration programs. With its proximity to end users and low latency, edge computing is vital for industries such as IoT and autonomous vehicles. For hyperscalers, replicating this infrastructure at scale is prohibitively expen-sive, carving out an indispensable role for MNOs as partners as well as competitors.
  • Open gateway collaboration

Initiatives like Open Gateway and Open Access Point reflect the telco industry's shift away from old business models, highlighting the need for collaboration to reach new customers and customize services for existing ones. Open gateway models allow partnerships between hyperscalers, MNOs, and developers and are becoming more common to enable the digital economy. In sharing infrastructure such as computing resources and data storage, MNOs can create specialized ser-vices alongside hyperscalers’ global capabilities and yet again create a differenti-ated value add in the ecosystem.

  • The next Frontier: going for the 6G edge advantage

Even though monetizing the 5G / 5G SA networks is not yet completed, the indus-try moves towards 6G. There again, it intends to enable edge computing and de-liver low-latency connections. MNOs will further leverage their existing edge net-works to deliver real-time applications, such as autonomous driving and remote healthcare that hyperscalers cannot match. This positions MNOs to capture critical markets as demand for advanced connectivity grows.
 

How can MNOs capitalize on their unique position? Strategies and examples

MNOs hold a strategic position between hyperscalers and end users, offering local connectivity and latency advantages.

Here’s how they can maximize this potential with actionable strategies:

  • Invest in edge computing

Expanding edge infrastructure allows MNOs to offer low-latency cloud services tai-lored to specific industries. Example: Telefónica has developed solutions for in-dustrial IoT, providing real-time analytics and enabling autonomous machinery operations. This specialization caters to industries where even milliseconds of la-tency matter, creating a unique value proposition for local businesses & specific use cases.

  • Adopt co-compete models: collaborate while competing

MNOs can simultaneously collaborate and compete with hyperscalers. Example: Deutsche Telekom partners with Microsoft Azure for 5G-enabled cloud solutions but retains independent services that leverage local expertise. This strategy com-bines the global capabilities of hyperscalers with the MNO’s unique strengths, en-suring differentiation.

  • Develop private cloud platforms

Owning cloud infrastructure reduces reliance on hyperscalers while offering tai-lored, private secured solutions. Example: Orange’s Flexible Engine delivers local-ized cloud services, meeting Europe’s unique regulatory requirements. Proprietary platforms like Flexible Engine also allow competitive pricing and customized ser-vice levels, appealing to regional enterprises (e.g., APIs allowing businesses to manage cloud services efficiently). 

  • Offer hybrid cloud solutions

Hybrid models integrate private cloud security with public cloud flexibility, ad-dressing critical business needs. Example: Vodafone combines its secure data cen-ters with Google Cloud to serve industries like healthcare and finance, where data privacy and control are non-negotiable.

MNOs path to profitable growth in the cloud era
The path to profitable growth for MNOs demands that existing assets be utilized & optimized and strategic collaborations be established in the ecosystem to deliver innovative services & solutions.

  • Optimize infrastructure performance

Expanding edge capabilities and automating network operations significantly re-duce costs and free resources for new service opportunities. The example of Voda-fone Germany’s integration of AWS Wavelength into its 5G network demonstrates that it enables real-time data processing for connected cars and digital twins while streamlining operations. Such quantum leaps are vital as 5G and 6G rely on faster, more efficient networks.

  • Leverage partnerships

Strategic alliances with hyperscalers can expand MNOs’ reach into new markets. 
Example: In partnering with AWS, an MNO can launch joint edge computing solu-tions that combine AWS’s scale with the MNO’s local network. Collaborations among MNOs themselves can also create region-specific offerings, enhancing competitiveness (e.g., Deutsche Telekom & Orange network sharing).

  • Innovate with proprietary services

In rolling out hybrid cloud solutions, MNOs can enrich their value beyond connec-tivity, while monetizing the core Data networks. In providing data analytics services combined with real time data availability & processing, MNOs can improve indus-tries such as logistics, enable initiatives such as smart cities, offering actionable value creating insights that generate recurring revenues.

Summary

The next wave of digital transformation offers MNOs an unparalleled opportunity to redefine their role within the cloud ecosystem. In leveraging their core connectivity capability, combining it with the edge infrastructure, MNOs can foster innovative partnerships, and build proprietary cloud-based solutions and services. As such, MNOs can establish themselves as indispensable enabler and value contributor in the broad cloud ecosystem.

Such a business model transformation for MNOs – from infrastructure providers to full-fledged services & solutions partners – is not an option as it is key to sustained economic performance. For those who succeed, it will (1) unlock new revenue streams, (2) secure their unique role in the cloud ecosystem and (3) allow them to capture their share of the economic benefit. From Market approach redefinition to Operating Model reset and Competences and Capabilities upgrade, the transformation challenge is not to be underestimated.

Authors:
Serge Hoffmann, Managing Director (Email)
Gerrit Bückins, Principal
Sven Plitzko, Senior Consultant
Gillian Bohle, Associate Consultant