ISG Provider Lens™ Telecom, Media and Entertainment Industry Services - Media and Entertainment Managed and Next-Gen IT Services - North America 2024

The telecom, media and entertainment (TME) industry focuses on connectivity, content and innovation driven by evolving business models.

Strategic consolidation and an emphasis on improving technology capabilities are driving a noticeable increase in M&A activity in North America’s telecom, media and entertainment (TME) industries. Compared to previous years, the number of deals increased significantly in 2023 and 2024 as private equity groups became more aggressive in purchasing media and technology businesses. As businesses look to safeguard their digital infrastructures in response to growing customer demands for individualized content and services, there is a noticeable movement toward cloud services and  cybersecurity. Furthermore, as businesses manage compliance while seeking expansion through mergers and  acquisitions, regulatory scrutiny continues to influence deal-making tactics. As the economy stabilizes amidst the lowering of interest rates and persistent inflation, there is cautious optimism about future M&A activity.

After a sluggish 5G monetization era that followed the CapEx-heavy 5G investment cycle over the last five years, the last-mile fiber connectivity market has recently seen a surge in M&A activity. For instance, Bell Canada announced plans to acquire fiber internet provider Ziply for $5 billion. Ziply has operations in the Pacific Northwest, where states are receiving over $500 million in funding through the Broadband Equity Access and Deployment (BEAD) program. This acquisition benefits from both BEAD incentives and additional support from the Rural Digital Opportunity Fund and Connect America Fund Phase II. Following this, Verizon revealed its intent to acquire Frontier Communications for $20 billion, positioning it as the largest fiber provider in North America after AT&T. In Q2 2024, T-Mobile US and EQT
partnered to acquire fiber-to-the-home platform Lumos from EQT’s predecessor fund, EQT Infrastructure III.

Overall, the market is witnessing a dynamic shift toward building comprehensive wireline ecosystems that combine telecommunications with rich media content to meet modern consumer demands. This trend also reflects a strategic shift from focusing solely on coverage to emphasizing capacity, speed and CX-centric SLAs, or XLAs.

On the media and entertainment side, Silver Lake’s $13 billion acquisition of Endeavor, a global entertainment, sports and content company; Permira’s $7.2 billion acquisition of Squarespace, an AI-driven website design company; Skydance Media’s pending $2.4 billion acquisition of Paramount Global; and Blackstone’s $1.6 billion acquisition of
Hipgnosis Songs Fund (HSF) all signal venture capital companies acquiring media assets. These assets could reach their fair value within three years with the infusion of AI, ML, hyperautomation, AR and VR, and blockchain technologies.

Examining sub-industry M&A trends, Live Nation’s $500 million acquisition of OVG in live events, Sony’s $1.2 billion acquisition of Crunchyroll to consolidate its position in the anime streaming market, Discovery’s $43 billion merger with WarnerMedia, and Spotify’s $50 million purchase of Podchaser all indicate cross-market or sub-market consolidation within the media & entertainment industry. By 2025, Comcast also plans to spin off its $7 billion cable and digital properties into a new listed entity. This will enable Comcast to move towards a modern media landscape with a focus on streaming (Peacock), broadband and theme parks.

With interest rates expected to decline, further consolidation is anticipated in 2025.

The TME industry is undergoing a significant transformation, driven by technological advancements, changing consumer preferences and evolving business models. Key trends shaping the industry include the increasing adoption of 5G and fiber-to-the-x, a shift toward cloud-based solutions and the growing significance of data and AI. To stay competitive, TME enterprises must focus on digital transformation, network modernization and CX. This requires leveraging emerging technologies such as AI, ML and blockchain to optimize operations, enhance customer engagement and create new revenue streams. Additionally, strong cybersecurity measures and data privacy practices are essential for protecting sensitive information and maintaining customer trust.

Key trends in the TME industry include:

• Digital transformation: Companies are accelerating their digital initiatives, leveraging cloud technologies, AI and
automation to optimize operations and enhance CX.

• Network evolution: The widespread adoption of 5G and fiber-to-the-x networks is driving demand for increased network capacity, flexibility and security.

• Content and platform innovation: TME companies are investing in innovative content creation, distribution and
monetization strategies, including streaming services, OTT platforms and immersive experiences.

• Data-driven insights: Data analytics and AI provide valuable insights into customer behavior, optimize operations and drive personalized experiences.

• Cybersecurity and privacy: As cyber threats evolve, TME companies must prioritize cybersecurity measures to protect sensitive data and ensure business continuity.

• Sustainability and ESG: ESG considerations are increasingly important for TME companies

To navigate these trends, TME companies are adopting a various strategies, including partnerships, M&As and internal transformation initiatives. Before exploring each sub-industry, let us outline the scope of the IPL report.

Key characteristics and focus areas of the TME industry:

• The core focus of TME companies centers on providing communication and content services.

• Primary offerings relate to connectivity/content sales, including subscription, advertising and licensing.

• The sector primarily serves consumers, accounting over 80 percent of its revenues.

• Innovation can span the entire value chain, encompassing storytelling, creative content and physical infrastructure with virtualization.

• Market presence is often defined by regulatory boundaries for telecom providers, while media conglomerates and OTT players typically have a global presence.

To view the landscape in a simple and structured way, ISG has curated a framework that represents the entire value chain for telecom as well as media & entertainment industries. The colored tiles represent the current themes  relevant for the market while the outer tiles are specific set of capabilities ISG sees as unique for this year.

• Encapsulates what enterprises are doing across the telecom industry markets and helps connect them to digital solutions

• Represents the entire value chain of supply and demand within the market

• Inner tiles represent themes of enterprise objectives

• Outer tiles represent initiatives

• Behind each outer tile is a specific set of capabilities, featuring unique market- leading providers and solutions

ISG will benchmark all providers in an archetype report in 2025 to help different cohorts of enterprises take an informed sourcing decision.

The ISG’s telecom industry framework offers a comprehensive view of the current market state through various competitive level 2 parameters. It serves as a foundation for evaluating both brownfield and greenfield telecom  operations on a maturity model. This model will be translated into an archetype report that ISG will publish in 2025 for the vertical industry.

Telecom business trends

1. North American telecom providers (telcos) are diversifying, divesting investing in adjacent areas or their core businesses to achieve focus, scale and profitability. Despite a low number of M&A deals from 2022 to YTD 2024, notable trends emerged. In May 2024, the U.S.-based fiberco and network provider Zayo announced the separation of its European operations from its global and North American projects. The U.S. Department of Justice approved T-Mobile’s joint ventures with FTTH firms Lumos Networks and Metronet, pending Federal Communications Commission
(FCC) approval.

T-Mobile US is also involved in joint ventures and M&A activities, including a $4.4 billion agreement to acquire US Cellular’s spectrum and network assets, with the transaction anticipated to close by mid-2025.

• However, ISG anticipates that as the Federal Reserve unwinds, deal volume will likely increase into 2025. The  industry is shifting toward “singular” business models, as demonstrated by recent mergers, spinoffs and asset sales. This shift reflects a need for more focused operations and value creation. If telecom companies do not continually adapt their business models, they risk becoming economically unsustainable within a decade.

• Investment activity in telecommunications, particularly from private equity and venture capital, has hit low levels. Nevertheless, investments related to AI and data centers may see a resurgence compared to earlier trends focused on 5G.

• Currently, TME enterprises are consolidating vendors, applications and services to manage IT budgets, reduce
overhead costs and improve cash flow, avoiding large transformations unless they enhance agility with small investments and quick outcomes. They are prioritizing operational excellence and gaining data control by leveraging AI and analytics to deliver innovative use cases and improve overall experiences.

2. As many telcos have not realized quick returns from their 5G investments, they are shifting focus toward monetizing 5G via enterprise offerings, use case deployments for B2B adoption, indoor wireless applications and
private 5G lab setups with related engineering. This shift not only promotes a digital delivery model, favoring a higher OpEx to CapEx ratio, but also encourages cross-functional collaboration among operational support systems (OSS), business support systems (BSS), marketing, technology, operations and finance. It enforces a product mindset that
owns end-to-end processes, encompassing engineering, design, quality, data, customer service and stakeholder engagement, while alliances with technology giants become essential.

• As mobile data growth plateaus in North America and FTTx technologies catch up with fixed wireless access (FWA),
Wi-Fi access is becoming federated with open roaming models. Additionally, AI’s capability to compress storage at the edge calls for customizable product mindsets that cater to various connectivityoriented use cases across urban, rural
and suburban settings, including pop-up sports ventures or live events.

• The consolidation of the satellite sector makes for integrating non-terrestrial networks into terrestrial connectivity.
However, CapEx must primarily come from satellite operators to enhance capacity and coverage, requiring involvement from governments, ITU and regulatory agencies such as the Federal Communications Commission (FCC).

• Most U.S. and Canadian telcos are investing in 5G and 5G advanced trails for various use cases. While AT&T has
reduced vendor financing, it has increased investments in network modernization. This shift yields both positive and negative consequences for involved vendors. Following the successful adoption of CBRS in the U.S., the shared and open constructs of connected solutions will be welcomed by telcos interested in software and managed services over
hardware refreshes. The telco-to-tech transformation calls for a reassessment of how CapEx cycles are viewed.

3. As customer service becomes increasingly important and due to the FCC’s stringent oversight, telecom enterprises will simplify consumer interactions, such as contacting customer support, canceling subscriptions and handling automatic service renewals. This surging demand for ‘direct to device’ connectivity has led to heightened M&As activity, with SES acquiring Intelsat to create a merged entity with over 100 geosynchronous earth orbiting (GEO) satellites, focusing on coverage rather than bandwidth and latency. The FCC is considering expanding regulations on cable operator installation, outages and service calls to satellite TV, telephony and broadband services, promoting accessibility for people with disabilities.

The following technology or IT trends align with the prevailing business trends in the telecom industry.

Technology/IT trends for telecom enterprises:

1. Generative AI (GenAI) integration: Telecom companies are increasingly adopting AI, particularly GenAI, to improve various business aspects, leading to greater efficiency, improved CX and revenue uptake. This includes:

• Enhanced customer service: Advanced chatbots and personalized experiences help reduce costs, improve service quality and increase customer satisfaction.

• Improved network performance: AI automates tasks such as network optimization, architecture design, field support, predictive maintenance, contracts management and fraud detection, leading to efficient operations and reduced disruptions.

• New business model development through software engineering: AI enables innovative services and applications, unlocking new revenue streams. Use cases include virtual programming, code enhancement, defect prediction, IT support, test case generation. Further, capabilities such as LLM/GPU as a service and sovereign cloud brokers can enhance telco portfolios. However, challenges such as absence of technical skills, data platforms, data privacy concerns and immature regulatory frameworks hinder widespread adoption.

2. Network modernization with enhancements in AI, 5G, IoT and edge computing: 5G technology is  transforming the telecom landscape with faster speeds, lower latency and increased capacity, driving the growth of:

• IoT: Facilitates seamless communication among devices, improving operational efficiency and enabling real-time
applications.

• Edge Computing: Processing data closer to its sources enable faster response times and supports applications such as smart cities and industrial automation. When combined with AI, this approach fosters new revenue models and efficiencies.

• 5G, edge and fiber: The transition to nextgeneration networks progressing with 5G deployment, fiber densification and the virtualization of RAN components using Open RAN. The reach of fiber also relies on the adoption of alternative networks, small cells, neutral hosts and DAS in rural, semi-rural and urban settings. While the initial focus of 5G was on enhanced mobile broadband (eMBB), technology advancements such as FWA and RedCap capabilities are enhancing coverage, cost-effectiveness and capacity for ultrareliable low-latency communications (urLLC) and massive machine-type communications (mMTC) use cases. A new phase of ROI and value creation is emerging as the ecosystem matures. Despite 5G’s benefits, telecom companies struggle in monetizing it for consumers and expanding coverage in underserved areas through satellite technology integration.

3. Cloud-native transformation, cybersecurity and data privacy: Telecom companies are shifting toward cloud-native architectures for achieve greater agility, scalability and cost-efficiency. This trend involves adopting practices such as containerization, microservices and DevSecOps. Cybersecurity has become a priority due to the increasing complexity of IT environments and growing cyber threats. Telecom companies are investing in advanced threat detection, incident response and data privacy compliance solutions to safeguard their networks and customer data.

• The AI-native telco depends on autonomous operations and networks, incorporating intelligent cybersecurity with zero trust architecture and sustainable operations. As per ISG, nearly 14 percent of the use cases are led by Telecom and Media vertical in the market and this number is increasing as enterprises demand higher efficiency and revenue opportunities.

• Additionally, given the current costconciousness, cautious optimism regarding 5G monetization and tighter regulatory settings, telcos need to focus on collaboration within the ecosystem with standardized APIs, GenAI-led
automation, investments in self-care and self-healing capabilities and development of an integrated operating model across platforms, services and operational centers. This strategy will not only foster growth but also adapt to evolving
regulatory regimes.

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