Mid the intense competition and cost-cutting confronting telcos, early evidence suggests that generative AI (gen AI) could be the catalyst to reignite growth after a decade of stagnation. But will it be a groundbreaking differentiator or simply table stakes?
Already the technology is on track to become a new norm in the industry. Most telco leaders we surveyed1 say they are developing gen AI solutions that range from pilots to full-scale deployments, and leading telcos such as AT&T, SK Telecom, and Vodafone have made much-publicized early gen AI commitments and launched trials. Some telcos around the world have started to experience significant double-digit percentage impact from this technology. One European telco recently increased conversion rates for marketing campaigns by 40 percent while reducing costs by using gen AI to personalize content. A Latin American telco increased call center agent productivity by 25 percent and improved the quality of its customer experience by enhancing agent skills and knowledge with gen-AI-driven recommendations.
Most impressive is that these telcos deployed the models in just weeks—the first went live in two weeks, and the second in five. For an industry with a mixed track record for capitalizing on new technologies and legacy systems that slow innovation, these early results and deployment times illustrate the potentially transformative power of gen AI.
These aren’t one-offs. Pretrained models that can be fine-tuned in days for use cases are readily available, enabling organizations to bring proofs-of-concept to life with minimal up-front investment, achieve impact out of the gate, and scale their efforts. Our experience working with clients indicates the potential for telcos to achieve significant EBITDA impact with gen AI. In some cases, estimates indicate returns on incremental margins increasing 3 to 4 percentage points in two years, and as much as 8 to 10 percentage points in five years, by enhancing customer revenue through improved customer life cycle management and decisively reducing costs across all domains.
However, while nearly all of the 130 telcos we surveyed are doing something with gen AI, our survey findings suggest a palpable sense of caution and skepticism in the industry. More than 85 percent of the executives surveyed are cautious to attribute more than 20 percent revenue or cost savings impact by domain, with the greatest enthusiasm for a radical transformation in customer service (Exhibit 1).
Exhibit 1
This blend of optimism and restraint highlights the critical juncture the industry faces. Seizing the gen AI opportunity to differentiate services and achieve sustainable growth will require the hidebound industry to embrace innovation, exploration, and agility at an unprecedented level and move from decoupled AI efforts to a holistic, AI-native telco.
The chance for telcos to make this change has never been more accessible. The industry has struggled these last ten-plus years to achieve the potential of “traditional” AI, given the complexity and legacy processes involved. In addition to the significant impact gen AI can bring to bear with entirely new use cases and applications, its ability to learn from vast amounts of diverse data and interact in near-human-like ways may be the tipping point for accelerating broader AI programs and the building blocks that enable them, fueling company-wide transformations.
Furthermore, the imperative for such change has never been greater. Because gen AI democratizes access to powerful capabilities, any telco—a small operator or large incumbent—can reshape customer expectations and its organizational efficiency. In doing so, they can potentially narrow previously unassailable competitive advantages and overturn long-standing barriers to growth. Those at the forefront of this movement stand to position themselves to regain growth faster and capture a more significant share of the nearly $100 billion in incremental value (Exhibit 2). That is in addition to the $140 billion to $180 billion in productivity gains that gen AI will create in the industry above what could be unlocked by traditional AI.
Exhibit 2
How can telco leaders use the technology to drive AI transformations and unlock new value? What challenges do they face? And what will it take to succeed? This article offers insights into these critical questions, drawing extensively from our research, industry survey, and first-hand experience implementing these technologies.
Gen AI today in the telco industry
Gen AI represents the latest advance in AI, and it may arguably be one of the most important. The technology’s ability to analyze more and different types of data such as code, images, and text, and to create new content, enables new levels of personalization, performance, and customer engagement. With today’s capabilities, many use cases are already possible across network operations, customer service, marketing and sales, IT, and support functions.
These use cases can both enhance existing AI capabilities (through the inclusion of new unstructured data sources) and provide new sources of value (through gen AI and in combination with traditional AI solutions) to deliver significant impact across all key domains.
