Beyond Connectivity: The Future of Telco Super Apps

In today’s rapidly evolving telecom landscape, operators are under growing pressure to rethink their business models and unlock new revenue streams beyond traditional connectivity services.

There has been pressure on telcos to diversify their revenue streams and stop being “just another telco.” Revenue growth is expected to be less than inflation, and core connectivity revenues are stalling.

The Urgent Need for Telco Revenue Diversification

Telcos run the risk of becoming utilities because to pricing battles with new MVNO entrants, service commoditization, and increased churn.

Although offering connectivity services is a telco’s primary function, there is a significant possibility to move beyond connectivity by rethinking the telecom app. All customers have these apps on their phones, however they are only for account administration.

Rethinking the Telecom App as a Growth Engine

This distribution level may serve as a springboard for new revenue strategies, such as increasing ARPU through upselling and experimenting with completely different revenue models.

By including entertainment, education, banking, and other value-added services into their applications, these strategies can turn telcos into digital lifestyle hubs. They can also employ AI to permanently alter how consumers engage with telecom apps.

Turning Telco Apps into Digital Lifestyle Hubs

Based on data from Circles’ Xplore innovation engine tests, this vision serves as the foundation for Circles’ outlook on the future of telecom apps. Circles Xplore is a telco app innovation sandbox that allows low-risk testing to boost user engagement and test new service offerings without interfering with essential telecom operations.

The first findings are encouraging. Users spend between 47% and 156% more time on the telco app in the markets where Xplore is implemented. Furthermore, there is a correlation between higher ARPU and active telco app users. The data confirms Xplore’s central claim that highly engaged users are more likely to result in extra revenue opportunities, even though correlation does not imply causation.

From Connectivity Provider to Digital Ecosystem Leader

Telcos have the chance to reinvent themselves as centers of digital lifestyle and go beyond simple connectivity. Telcos can develop scalable revenue paths at scale, boost customer loyalty, and unleash new growth by integrating lifestyle services and experimenting with offerings like generative AI.

There is a race to the bottom since many telco businesses choose to compete on pricing because they regard themselves primarily as connectivity providers. A commoditized industry with substantial churn risk and sluggish revenue growth in the low single digits is the outcome of today’s growing adoption of contractless plans.

The Hidden Power of Telco App Distribution

However, the broad availability of telco apps presents an unexplored possibility for telcos. A telco app is necessary for any smartphone with a mobile connection, but as Jackie Tan, Xplore Lead, Circles observes, these are often underutilized.

“They only use the app when there is a problem with their plan or when they need to check their bill.”
The customer acquisition expenses for telecom app distribution are practically negligible because every phone has a telco app. Because of their extensive distribution, telcos have a special chance to compete with other non-telco apps that must fight for consumers either organically or inorganically.

Expanding Beyond Core Connectivity

Telcos must expand their apps beyond connectivity if they want to leverage their distribution advantage. Telco apps can serve as testbeds for AI and non-telco services in addition to handling telco accounts. Beyond connectivity, this creates additional avenues for increased app engagement and revenue generation.

Telcos are now speeding up their efforts to find money outside of their core as connectivity has become a commoditized red ocean. Creating a super app or creating a more verticalized ecosystem that is suited to the requirements of particular services, like education, are two potential strategies.

The Rise of Super Apps in Digital Markets

Super apps with a lot of promise include WeChat in China, Gojek in Indonesia, and Grab in Southeast Asia. To further solidify their place in people’s lives, they provide a range of services catered to their target audiences and frequently introduce additional, demand-driven offerings.

Leveraging Telco App Install Base for Digital Lifestyle Expansion

Telcos must utilize all of their advantages, particularly their sizable install bases for telecom applications, in order to establish a presence in the hyper app-dominated digital services markets of today. Telcos may recast themselves as people’s go-to digital lifestyle centers by integrating and testing lifestyle service offerings from entertainment, comedy, education, and even mental wellness into their apps.

Innovation Costs and Strategic Challenges

But creating independent innovation sandboxes for telco apps can be costly. Some telecom companies make significant investments in innovation, such as Vodafone and Microsoft’s US$1.5 billion, ten-year innovation agreement that aims to provide AI to its customers.2. Because of these exorbitant expenses, other telcos choose to concentrate on their core stack rather than innovate.

This is where the app can incorporate a stand-alone telecoms innovation tab, such as Xplore’s innovation engine, to test various services at cheap cost and low risk without interfering with the app’s overall operation.

AI Partnerships and Open Innovation Testing

The OpenAI API, Circle’s official AI partner, allows for the testing and embedding of various applets, third-party services, and even AI assistants within this tab. Telcos can then use these test results to discover potential digital lifestyle niches.

It can be difficult to find a niche or compete with already-existing mega applications, but telecoms have another advantage: consumer data. Data-driven telcos can learn about their customers’ preferences and in-demand services by using their databases of comprehensive consumer data, as well as by conducting surveys and research-based phone calls.

Data-Driven Personalization and Market Segmentation

Telcos may test and customize different services and offerings on the innovation tab for various market segments thanks to this thorough research.

In Southeast Asia, for instance, Grab concentrates on practical services like finance, delivery, and ride-hailing. Conversely, Grab does not currently provide streaming services for education or entertainment. This approach’s flexibility has also made it possible to provide more experimental services, such as mental health care. In this way, telecom companies might establish a super app niche to build traction before broadening their range of services.

Super App vs Vertical Specialization Strategy

Building highly specialized services, like financial education, is an alternative to the super app model, which aims for horizontal breadth in terms of offerings. An inventive telco app might, for instance, give a conversational tool that promotes mental wellbeing in the demanding world of today or an AI-powered service that offers precise, current information on financial markets.

There are already prospective client categories for this strategy. While investigating telco customers in Taiwan, Singapore, Japan, and Australia, Circles discovered a number of “super groups” of customers who might profit from these deep verticals:

Business Impact and Digital Transformation Results

Businesses Reporting Growth as a Result of Digital Transformation
Global telco businesses are beginning to notice the effects of moving beyond connection. The potential to expand to monetizable non-connectivity services is evident, even if all examples concentrate on customer loyalty and incentives programs.

Etisalat attributed its revenue growth in 2023 to the Smiles app.3 The Smiles app is a super app for rewards points that allows users to accrue and use points for commonplace activities like dining out, shopping, and scheduling home services.

T-Mobile’s president and CEO, Mike Sievert, stated in a recent earnings call that their flagship digital platform saw amazing engagement with over 50 million downloads, 10 million more than they had anticipated. Meanwhile, T-Mobile’s T-Life customer loyalty act also saw higher than anticipated uptake. T-Life is a component of T-Mobile’s strategy to use digital technology to improve customer experiences.4.

Generative AI and the Future of Telco Apps

Expanding the functionality and engagement of the primary telecom app itself is still possible, even though emphasizing interaction through customer loyalty is one thing. And generative AI can help with this.

Artificial intelligence (AI) that is generative has transformed how people work and play. AI has the potential to significantly alter how users engage with telco apps due to the increasing capacity of huge language models.

AI Vision and the Evolution of Telco Apps

Jackie Tan has expressed his ideas about what Xplore may accomplish for telcos:

“To establish the closest intimate connections between people and technology ever.”

Comparing the possibilities of telco applications to the JARVIS AI from Marvel’s Iron Man, he explained that his idea for AI technology in chat apps was a friend and “butler” who could serve as a confidante or assist with duties like booking a table at a restaurant.

Growing Attention Around AI Initiatives

There is a lot of talk around these AI initiatives, and users are beginning to pay attention. Given how swiftly technology is developing, telco apps could surpass current generative AI capabilities and genuinely transform how people use technology.

Presenting Circles Xplore: Engagement Is the First Step in Innovation

The Circles Xplore innovation engine includes these AI projects and ecosystem experiments. The Xplore platform was developed as a low-cost, low-risk innovation engine for telecoms companies to assist them increase app engagement before testing lifestyle engagement approaches. Xplore offers a ready-made sandbox for experimentation by integrating modules like casual games, bite-sized news, horoscopes, and even AI conversation into already-existing telco apps.

Strong Early Results Across Global Markets

The preliminary findings are strong. Users of Xplore tabs spend 47–156 percent more time in-app in markets including Japan, Singapore, Mongolia, and Pakistan. There was a noticeable difference in the spending patterns of this group of active users: cohorts with greater ARPU spent more time on Xplore. In a sector where ARPU growth usually lags in the low single digits, the boost is noteworthy even though the relationship is correlational rather than causative.

SaaS Deployment and Rapid Integration

Telcos can embed and launch the innovation tab in four weeks thanks to Xplore’s SaaS delivery strategy. This method, which is run by a skilled team and makes use of tried-and-true models, provides instant feedback loops while saving partner telcos months of internal development time and resources.

In order to integrate the innovation tab and conduct the experiments, this team will collaborate with the team behind the destination telco app. In addition to receiving frequent updates on fresh discoveries and insights from the Xplore team, client telecoms can view experiment outcomes on a dashboard.

Competitive Advantage and Monetization Opportunities

The introduction of Povo AI also encouraged competitors to step up their own AI projects by positioning KDDI as an innovator rather than a follower. The Xplore tab and other telecommunications innovation sandboxes offer two advantages: direct monetization through direct ARPU uplift (e.g., charging a premium for AI features) and indirect monetization through identifying user segments that are highly engaged with the telco app.

The Future: Transitioning from a Utility to an Electronic Friend

Telcos must reconsider their role in order to overcome commoditization. They must take advantage of the vast install bases of their apps, the depth of their customer data, and the collaborations they can form in order to go beyond connection revenue and become true hubs for digital lifestyles. By experimenting with low-risk, modular innovation engines, businesses may find out what their customers really value and apply those insights to other areas of their portfolios.

Unlocking Multiple Sources of Digital Value

Repositioning themselves as centers of digital living allows telcos to access at least three different sources of value:

In the future, being hubs for digital lifestyles has even more potential. Telco apps could become everyday personal assistants that are always on, always relevant, and deeply ingrained in people’s daily routines thanks to generative AI and hyper-personalized digital services.

Accelerating the Techco Transformation

The telecom sector has started to investigate these options, and low-risk, independent innovation sandboxes that can test integrated AI projects and optimize metrics like boosting app engagement will assist accelerate their transition to becoming techcos.

In order to achieve sustainable growth and maintain their positions as true techcos in the digital economy, telcos that are prepared to go beyond connectivity can seize this opportunity to become cherished digital service providers who pay attention to their clients.

Global Innovation Momentum

For telecoms in Japan, Singapore, Mongolia, the Middle East, and other countries, innovation sandboxes like Circles’ Xplore keep revealing new ideas and products. Would you like to examine these improvements for yourself or learn more about the other findings that Circles Xplore revealed?

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Disclaimer: This article is for informational purposes only and reflects industry developments within the global telecom and digital innovation ecosystem.