Hyperscaler Coopetition, Sovereign Clouds
are Keys to Telcos’ Growth
Telecommunications companies have for years been fighting the tides that could turn their core data-transmission services into commodities. Many are now finding success across agribusiness,
health care, retail, manufacturing, tourism, banking, energy, utilities, logistics, and beyond.
These acts of diversification may look, well, diverse. But this isn’t AT&T buying Time Warner played out across different industries. Rather, today’s quest for higher margins generally tracks
with what looks to be an emerging, foundational business model for successful telcos of the future. They’re embedding IT and communications solutions and services more deeply into the systems
serving those end customers. That industry- and business-specific tailoring bakes in deeper customer relationships and higher switching costs.
These solutions and services – IoT, mobile edge computing, private 5G, AI co-development and more – involve data transmission but extend well beyond it. That’s pushing telcos into realms lorded
over by global hyperscalers such as AWS, Microsoft Azure, and Google Cloud.
Telcos may not be mom-and-pop shops, but the parents of hyperscalers dwarf them. Growing these new businesses without facing off against such giants leaves telcos two main options. The first is
to partner with hyperscalers in mutually beneficial “coopetition.” The second is to exploit telcos’ history and market presence in their local and regional domains to capture sovereign cloud and
other business that global hyperscalers might otherwise disproportionately win. Let’s start with coopetition.
Hyperscalers as partners
Telcos and hyperscalers have been partnering for years now, but that’s mainly been through telcos carrying massive amounts of streaming and social media traffic – typically on the cheap, courtesy of net-neutrality rules. But several factors are changing that. With an increasing focus on expanding cloud services to the edge to support mobile, we’re seeing better balance in hyperscaler-telco relationships. Telcos bring their expertise in network deployment and managed services; hyperscalers contribute their vast infrastructure, AI tools, and innovation speed. Here are some examples of joint initiatives and emerging business models.
Shared infrastructure investment
Major telecoms and hyperscalers have co‑funded projects like subsea cables, data centers, and AI facilities. For example, Meta was an anchor investor along with several telcos in the recently completed Equinix 2Africa cable system. In India, Google and Airtel are investing about $15 billion to build a gigawatt AI data center and subsea cable hub in Visakhapatnam on the Bay of Bengal, citing national digital strategy and AI scaling needs. These co‑investments reduce each party’s risk while more tightly integrating networks and cloud infrastructure.
Cloud‑native 5G core networks
Telcos are increasingly moving core network functions onto public clouds. In the United States, AT&T moved its virtualized 5G core network onto Microsoft Azure, aiming to become “public‑cloud first” for non‑network workloads. Microsoft, in turn, reworked AT&T’s 5G core network software into Azure Operator Nexus for sale to operators around the world. In Europe, Telefónica Germany migrated its existing 5G core entirely to AWS, citing AWS’s data security and sovereignty capabilities. These moves allow operators to update network software faster and scale capacity elastically without new hardware. AWS has also worked with NTT Docomo in Japan and Dish in the United States to build scalable 5G networks on AWS, benefiting the telcos through lower capex and faster innovation thanks to a cloud‑native core.
Mobile edge computing (MEC)
Private 5G networks
Industrial and enterprise customers are deploying private 4G/5G, often in partnership with hyperscalers. The Integrated Private Wireless on AWS program has leading carriers including Deutsche Telekom, Orange, Telefónica Tech, KDDI and T‑Mobile manage secure, cloud-integrated private wireless offerings. The services let enterprises easily subscribe to a telco‑provided private network with local radio cells that are integrated with AWS compute and AI-ML (Machine Learning) services on‑premises or in nearby data centers. The telcos design and operate the wireless networks; AWS provides cloud orchestration, storage and AI tools. The combination helps customers in manufacturing, transportation and mobility, and energy boost efficiency and speed up innovation.
