The modern telco

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Mobile network operator growth is stagnant. Earnings before interest, taxes, depreciation, and amortization (EBITDA) margins haven’t budged from 30-40% in over a decade. Telcos want better performance, but can’t seem to figure out what to do.

What if the answer isn’t incremental optimization, but to approach the operations of a telco in a completely new way?

If telcos were to truly reinvent themselves—discarding the “old way” of doing things and rallying the leadership team around adopting a cloud-first, AI-first mindset—they could unlock profit improvements exceeding 10x current performance.

I know what you’re going to say. “That’s impossible. We’re so burdened with legacy applications, we can’t make that transition.” But there are a few telcos around the world that are adopting a new way of operating. Telco execs should be paying attention.

Three operational models

When we look at telcos around the world, three archetypes emerge: legacy, hybrid, and modern.

Legacy architecture operators: These guys are all about tradition. Their operations have minimal cloud adoption, human-intensive operations, and siloed system architectures. They buy only from Amdocs, Ericsson, Huawei, Netcracker, or Nokia. What they mean when they say “cloud-native” is only private cloud. Everything runs on premise. They restrict access to artificial intelligence (AI). They make requests for proposals (RFPs) for everything, even though they know which vendor they’re going to select before the process even starts. This group represents 70% of global Tier 1 operators.

Hybrid operators: There’s a smaller set of operators starting to make changes. They may have started with selective cloud migration for IT workloads, have AI implementations in pilot, and have done partial process automation. They want to change—just not too fast. They have their eye on the new challenger vendors but only relegate projects with these vendors to small subsidiaries, insignificant departments, or trials. They don’t want to go big unless another operator goes first. This describes about a quarter of major telcos worldwide—the ones genuinely attempting to evolve. Examples include AT&T, Orange, Verizon, and 1&1.

Modern operators: This group is daring to rethink and reinvent the approach to telco operations. They’re doing comprehensive, public-cloud deployment of network workloads; AI-driven autonomous operations; and API-first system integration. These operators are mavericks, and have courageous leaders. They know these new technologies will work; they just need to be applied to telco. They aren’t afraid to be the first ones to do it. In fact, they want to blaze the trail. Modern operators represent <5% of the current market but demonstrate structural performance advantages. I’m talking about Rakuten Mobile and DISH, but Telefónica Germany and Vodafone Group are making moves that indicate they may join this group, too.

The performance differential between these archetypes reveals untapped efficiency potential within traditional operating models. If you’re a telco executive seeking truly outstanding performance, your company must adopt the modern operator mindset—but the window for competitive advantage is narrowing as more operators recognize the opportunity.

Modeling the modern telco

I knew big efficiency gains were possible, but not how big—so I modeled it. I took a representative “legacy architecture” Tier 1 operator (based on the public flings of an actual telco) with the following characteristics:

• Market position: 20 million subscribers, €8.5 billion annual revenue  
• Current approach:  Legacy systems, physical infrastructure, human-intensive operations  
• Organizational structure: 12,000 employees across seven functional areas  
• Financial performance: 40% EBITDA margin, about €250 million net profit

Applying modern technology principles with AI-first operational design yields the following transformation potential:

10x profit improvement? WOW. These eye-popping improvements derive from a wholesale shift from the traditional approach to the modern approach. But transformation of this magnitude requires more than technology adoption. It demands fundamental changes in leadership approach and organizational culture.

The transformation playbook

So, how do you make the shift? The first step is establishing the company culture and leadership requirements to embark on this journey. Here are the fundamental prerequisites for achieving modern operator performance:

Are you ready?

As we learned from Jim Abolt on the first episode of Telco in 20, true transformational leaders make big changes to big things. Others just make excuses.

To embark on results of this magnitude, you need to make sure you are brainy and bold enough.

Ask yourself:

• While your competitors optimize for 2-3% margin improvements, do you see the 10x profit opportunity they’re missing? Being brainy means your plans are superior, not just different.
• When the entire industry says you’re wrong, are you confident enough to push forward? Opposition isn’t a warning sign—it’s confirmation you’ve identified something others can’t see yet.
• Superior strategy is worthless without flawless execution. Do you have the determination to stick with it when early results are messy and critics multiply?
• This transformation model has succeeded in every other major industry. Do you have leaders on your team who stay committed when challenges emerge, who won’t retreat to familiar territory when times are tough?

Most non-transformational telecom CEOs will choose incremental improvements and retire with intact reputations while their companies become irrelevant. To do what I am suggesting takes a true transformational leader.

Get going

Once you’re ready to move forward, you can begin systematic transformation across your organization. Assuming your telco is ready to tackle this challenge, here’s the breakdown of the changes needed across seven functional areas.

Network Operations: 2,000 → 600 FTEs (70% reduction) Replace manual monitoring and legacy OSS with AI-driven autonomous networks, machine learning for predictive fault detection, and public-cloud-native platforms wherever possible. Move network workloads to the public cloud, like Telefonica Germany has done. Adopt OpenRAN.

IT Systems & BSS/OSS: 1,500 → 325 FTEs (78% reduction) Move from on-premises BSS systems to AI-first, SaaS-based, BSS platforms with an open API architecture. Adopt TM Forum’s Open Digital Architecture like Vodafone Group; do pilots of new technologies, not RFPs.

Customer Experience: 4,000 → 600 FTEs (85% reduction) Deploy AI agents to handle 85% of interactions, with predictive analytics for proactive issue resolution and self-service platforms.

Sales & Marketing: 1,500 → 700 FTEs (50% reduction) Implement digital-first customer acquisition, AI-driven segmentation, and hyperpersonalization. Deploy AI agents to handle 25% of interactions and eliminate variable compensation plans for work that can be handled by AI. Eliminate underperforming retail footprint.

Infrastructure & Field: 1,500 → 800 FTEs (50% reduction) Migrate to public cloud infrastructure, deploy predictive maintenance, and enable remote monitoring to minimize on-site work. Look at TELUS’ work to support field workers with AI to service repairs more quickly—it improved forecasting accuracy from 69% to 89% and reduced network operating costs by over €20 million.

Administrative Functions: 750 → 250 FTEs (65% reduction) Automate HR processes with AI, implement AI-assisted financial operations, and adopt shared services models. Use AI to generate compliance reports.

Product & Strategy: 400 → 400 FTEs (0% reduction) We left this function untouched in order to maintain strategic capabilities for market analysis, product innovation, and partnership development.

Putting it all together

Putting all those recommendations together, here’s how it all adds up:

Operational efficiency metrics show that current subscribers per employee in the traditional telco are 1,700, which can be optimized to 5,400 with the modern approach, resulting in an efficiency improvement of approximately 3x. These aren’t theoretical improvements—they represent the actual performance gap between legacy and modern operators today.

This works: just look at JP Morgan Chase Bank

JP Morgan has been on this journey since 2018. Its move to the public cloud and infrastructure modernization delivered €500 million in direct savings—€300 million from modern engineering practices and €200 million from infrastructure improvements. It achieved 30% efficiency gains from public cloud migration and its new data centers are 30% more efficient than legacy ones.

They invested these savings plus additional capital into AI, hiring 2,000 AI/ML experts and generating €1.5 billion in annual business value from 300 AI use cases in production. Its COiN platform alone saves 360,000 legal work hours annually.

It proved the cloud-first, AI-first model works in banking—one of the most regulated industries, just like telecom. 

If JP Morgan can do it, why can’t a telco?

Strategic and financial implications

The transformation opportunity yields:

• 10x profit improvement through systematic operational automation
• About 70% workforce reduction while maintaining service quality standards
• Sustainable competitive advantage through superior cost structures and operational capabilities

The modern telco operating model represents a fundamental architectural shift from human-intensive to AI-driven operations. The technology is already here, and is ready for immediate implementation with proven risk mitigation strategies.

Leadership teams must evaluate transformation timing relative to competitive positioning and market dynamics. Obviously this kind of transformation takes several years, maybe even a decade to achieve. Maybe you don’t go as far as my model suggestions—but you’re closer to my suggestions than not. With methodical changes to operations, hiring practices, and technology adoption, massively improved profit is achievable.

The question is—who’s going to give it a try?

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