The telco to newco shift is happening, but success depends on securing the basics

Telecom firms are racing to reinvent themselves. The transition to a “newco” is about shedding the skin of legacy communications facilitators and carriers to become emerging and diversified digital-first newcos. The push is urgent because the ever-shrinking margins in connectivity are forcing providers to find sources of new value in adjacent offerings such as digital media, Network-as-a-Service (NaaS), and location-as-a-service. Additionally, newcos must become ecosystem orchestrators of data across IoT, AI, and blockchain.

HFS sees four forces are fueling this reinvention:

• Embrace digital at the core: Legacy infrastructure is dead weight. Digital-native strategies must take its place.
• Innovate and diversify: IoT, AI, and blockchain aren’t buzzwords. They’re revenue engines that can expand service portfolios.
• Reimagine customer experience: Cloud, automation, and CX-led models are the levers for retention and growth.
• Rewrite the business model: Composable, ecosystem-driven structures unlock monetization and future revenue streams.

But transformation doesn’t happen overnight. As the exhibit illustrates, success is sequential: telcos can’t jump to innovation without first establishing control of the basics.

HFS’s hard truths for telco leaders:

• Service delivery is the priority. Reliable operations, provisioning, and support are non-negotiable. Transformation collapses without a rock-solid foundation.
• Customer loyalty is next. Experience management and retention strategies create the stickiness needed to scale.
• Sales and marketing follow. Go-to-market strength builds on operational excellence and loyal customers.
• Innovation waits its turn. Future-state capabilities only pay off once the present state is mastered.
• Infrastructure is table stakes. It’s essential, but no longer a bona fide differentiator.

The Bottom Line: The telco-to-newco journey is real and already underway. But that only happens when telcos strengthen their delivery, loyalty, and market execution before chasing shiny innovations. Get those right, and the path to sustainable growth becomes clearer.

HFS Research believes that IT service providers and advisors are critical allies in addressing those hard truths. They’ll be essential for helping enterprises strike the right balance between core offerings and boldly diversifying across emerging trends and solutions. And only CEO-level commitment can drive the pace, discipline, and sequencing required to make the leap from telco to newco.