The margin-connectivity-churn framework for driving success in the telecom ecosystem

From the days of 1G to today’s 5G, the telecom industry plays a critical role in our connected society. The data moving across telco lines is the oil of the 21^st century. Enterprise leaders depend on invisible connectivity to power their business. Currently, the industry is in an era of transition as new technologies, new competitors, and over-the-top (OTT) services compete for customers’ share of wallet.

Today, the industry stands at a crossroads and faces multiple challenges. Traditional telecom revenues are declining under challenges from OTT players, high capex expenditures in 5G that have yet to yield financial return, and a killer 5G use case that is still a mystery. Regulations and compliance requirements are increasing by the day, and rogue agents are challenging the industry to keep networks secure. For a telecom CTO, this means they must rethink how they and their IT services partner are aligned for long-term success. To support this conversation, HFS has developed a framework around how telcos need support from IT to business as they divest, acquire, and evolve into a ‘newco’ model.

A holistic roadmap for success in telecom

To overcome the challenges, HFS Research believes that telecom companies must focus on three key areas:

1. End-to-end solutions and ecosystem orchestration
2. Compliance and emerging trends, and
3. Innovation and open architecture

Addressing these three areas will help them achieve success in what HFS Research believes is the triad driving telecom outcomes—margin, connectivity, and churn (see Exhibit 1).

This framework will serve as the foundation for HFS Research’s deep dive into telecom’s future—tracking which telcos evolve successfully, which remain stuck in legacy models, and where the industry must go next.

Exhibit 1: Redefining business and IT services around the core telco business and IT needs to drive telecom service outcomes

Source: HFS Research, 2025

HFS describes the core business needs of telecom providers as follows:

1. End-to-end orchestration: The industry can no longer function in silos—success now hinges on partnerships with cloud providers, software vendors, enterprise services, and private-sector collaborators to create comprehensive solutions. By embracing an ecosystem-driven model, telcos can integrate cutting-edge capabilities such as AI-driven network optimization, real-time analytics, and industry-specific applications, ensuring tangible business outcomes for their clients. This shift from traditional connectivity providers to ecosystem orchestrators enables telecom firms to unlock new revenue streams and remain competitive in a rapidly evolving digital landscape.
2. Compliance and emerging trends: They will play a pivotal role in defining the future of telecom. With cybersecurity threats escalating and sustainability mandates tightening, telcos must embed regulatory compliance into their service offerings, setting them apart from hyperscalers and OTT disruptors. Aligning emerging market trends with regulatory adherence allows telecom operators to proactively shape demand, improve consumer trust, and craft a differentiated go-to-market strategy.
3. Innovation and open architecture: Telcos must emphasize their ability to deliver innovation through open digital architecture, and network-as-a-service models can help firms stay competitive. Collaborating with industry organizations to develop open standards and architecture is crucial. Innovation and open architecture can also play a crucial role in unlocking business support systems (BSS) (and operations support systems (OSS) value by driving agility, automation, and efficiency in telecom operations.

By focusing on these three, telecom companies can successfully address the triad of optimizing margins, improving connectivity, and managing churn.

Margins, connectivity, and churn—the triad to effectively measure telco performance

The various challenges and opportunities can be classified under margins, connectivity, and churn management (see Exhibit 2).

Exhibit 2: Margins, connectivity, and churn management—the triad driving telcos

Source: HFS Research, 2025

Telecom companies must find a balance between affordable services and profitability. Customers expect transparent pricing, flexible plans, and no hidden fees, while telecom providers face rising infrastructure costs and heavy investments in 5G and future networks. To stay competitive, providers are using AI and automation to optimize operations, reduce maintenance expenses, and improve efficiency. Monetizing 5G through enterprise services, the internet of things (IoT), and private networks presents a new revenue opportunity that can help offset traditional revenue declines from voice and data services.

Reliable and widespread network coverage is the backbone of the telecom industry. Customers today demand high-speed, low-latency connections that work seamlessly across urban and rural areas. To bridge the digital divide, telecom companies are expanding coverage through satellite internet, LTE networks, and fiber optic rollouts, ensuring that underserved regions can access quality connectivity. With 5G adoption and the future development of 6G, providers are investing in Open RAN, Edge Computing, and AI-driven networks to ensure their infrastructure is scalable and ready for the next wave of digital innovation. Strong connectivity allows businesses to operate more efficiently, consumers to access better digital experiences, and the telecom industry to enable the future of smart cities, the IoT, and immersive technology.

Today’s consumers expect personalized service plans, bundled offerings including streaming and app partnerships, and omnichannel support across digital and physical stores. The rise of the IoT and connected devices means that telecom companies must ensure seamless connectivity across smartphones, smart homes, and emerging technologies such as augmented reality (AR) and virtual reality (VR). Additionally, sustainability is becoming a growing concern—telecom companies are focusing on renewable energy for network operations and e-waste recycling initiatives to align with eco-conscious customer values. By ensuring reliable service with minimal downtime and using AI to predict and proactively fix issues, telecom companies can create a customer-first experience that fosters loyalty and long-term engagement.

The Bottom Line: Telcos must reinvent themselves to drive new outcomes in a data and cloud-centric market.

The days of incremental improvement are over; it is time for reinvention. Standing still is not an option. Telcos must move beyond connectivity and become digital ecosystem orchestrators—monetizing network APIs, embedding AI-driven automation, and forging deep industry partnerships. Cost-cutting isn’t a strategy; it’s a short-term fix. The winners will be those who redefine their business models, exploit new revenue streams, and break free from legacy mindsets.