Zagreb, January 15, 2025 – According to KPMG’s global study “Telco to Techco” from 2024, telecommunications operators are facing the urgent need for radical transformation to meet the demands of the digital era. As revenues from traditional services stagnate, industry leaders are shifting their focus toward the convergence of telecommunications and digital services, investing in 5G and fiber infrastructure, and embracing innovations such as cloud computing and artificial intelligence—all aimed at meeting the increasingly complex needs of users. In the Adria region, these challenges are further intensified by smaller market sizes and rising costs, compelling telecom operators to adopt agile and strategic changes to ensure competitiveness and long-term growth.
Signals for Change
Over the past few years, revenue from traditional telecommunications services has stagnated (CAGR below 1%), with limited growth observed only in the business segment (B2B). This slowdown is largely driven by saturation in the consumer segment (B2C), where competition exerts strong pressure on average revenue per user (ARPU). As a result, and amid ongoing consolidation among European telecom operators aimed at achieving operational synergies, leading operators are increasingly shifting their business focus toward the B2B segment as the foundation for future growth.
Telecom operators today face a wide range of challenges that clearly signal the need for change. In the B2C segment, revenue from voice services is declining, while revenue from data and media services is growing only at the rate of inflation—accompanied by significant increases in required investments (such as 5G mobile network deployment and accelerated migration to fiber infrastructure in fixed networks, especially in suburban and rural areas), as well as rising costs and competition in media content delivery. Consequently, the B2C focus is shifting toward the development of new technology services (e.g., smart homes, orchestration of partner ecosystems via proprietary platforms that enable access to services such as telemedicine, home security, various insurance products), with a primary emphasis on cost efficiency through increased automation and digitalization of processes (e.g., self-service, “uberization,” and digitalization of sales, activation, and customer support partnerships).
The drive for cost efficiency is expected to prompt many telecom operators to initiate a new wave of digitalization, implementing modern billing, CRM, work management, BI, and similar platforms, along with associated mobile applications for customers, employees, and partners. These efforts aim to significantly increase automation across key sales, activation, billing, and support processes, while simultaneously improving operational efficiency, preserving profitability, enhancing customer and employee experience, and supporting better decision-making in operations and investments (e.g., promotions, actions, micro-investments in networks and services at specific locations).
At the same time, industry leaders are re-evaluating their technological capabilities and business models. They are leveraging open data architectures to unlock their networks, foster simplicity, and drive ecosystem growth. Success metrics are also evolving—from traditional indicators such as call volumes, ARPU, and subscriber counts to more modern measures like API integrations and the creation of new value for users.
Everything Is Changing
When executed properly, digital transformation can reasonably be expected to lead to increased revenues and margins, enhanced company value, and new growth opportunities. However, this requires a significant and radical shift in how most traditional telecom operators currently operate—encompassing changes in skills, culture, business models, risk-taking, customer awareness, partnerships, and operational practices.
Building a new business model demands stronger ecosystem connectivity—both internally within the company and externally with customers and stakeholders. Telecom operators must be agile and ready to adapt quickly in order to grow their market share. To do so successfully and sustainably, they must act swiftly, boldly, and assertively.
A Regional Perspective: Telecom Operators in the Adria Region
Daniel Lenardić, Partner in charge of Advisory Services at KPMG Croatia, part of the KPMG Adria cluster (which includes KPMG offices in Croatia, Bosnia and Herzegovina, and Slovenia), notes that regional telecom operators are seeing a rise in digitalization investments following a period of reduced spending after the COVID-19 crisis. Alongside major investments in network infrastructure (5G mobile network deployment and expansion of fiber infrastructure in fixed networks), operators are initiating investments in new OSS and BSS technology platforms, such as modern billing systems, CRM platforms, BI tools, and workforce management systems.
As regional telecom operators increasingly focus on delivering ICT services—particularly in the B2B segment—it is reasonable to expect further acquisitions of ICT companies, especially those specializing in niche technologies such as artificial intelligence, data management, and cybersecurity.
Marko Učkar, Associate Partner in the Advisory Department at KPMG Croatia, responsible for technology within the KPMG Adria cluster, adds that telecom operators in the region are not only facing mounting pressure from intensified investment in 5G and fiber networks—which in itself may not be problematic—but also have limited ability to pass on the costs of these investments to end users. This is due to a strong emphasis on increasing market share and user base, which is reflected in the stagnation of ARPU over recent years.
The relatively small size of telecom operators in the region presents an additional challenge when compared to their EU counterparts. Based on our experience, the smaller scale of both operators and markets places regional telecom companies under added pressure. Despite offering a broad range of services comparable to much larger EU operators, regional players struggle to achieve efficiency while still needing to make substantial investments in further digitalization—an essential step toward becoming a technology-driven company.
This, combined with the recent significant rise in labor and service costs across the region, contributes to lower returns on digitalization investments and less cost reduction compared to EU peers.
Overall, rising prices of ICT services and equipment in recent years, coupled with major investments in 5G and fiber networks aimed at acquiring new users in smaller urban areas, will continue to exert pressure on margins and overall business performance of regional telecom operators. Therefore, finding the right balance between focusing on new revenue streams through technology services and achieving greater cost efficiency via automation of key business processes and user acquisition remains a critical challenge for telecom operators in the region.
