Returns have picked up for telcos. In the five years from 2021 through 2025, the 63 telcos in our 2026 Telco Value Creators Report delivered a median annualized total shareholder return (TSR) of about 9%. This is a sharp increase from the 4% we reported 12 months ago for the period from 2020 through 2024 and above the sector’s cost of equity (currently about 6.5%).
The recovery marks a notable improvement for telecommunications, a sector that has long been challenged to create sustained investor value. In our 2025 Telco Value Creators’ ranking, just three companies had a TSR of 20% or more; this year, nine do. (See Exhibit 1.)
The gains are not evenly spread; the top-ranked players are pulling ahead of the average, driven by innovative strategy, effective execution, and the ongoing digitalization of everyday life, both consumer and business.
By archetype, global telcos led with a median five-year TSR of 14%. Large national players, defined as those focused on a single geographical market with revenues in excess of $10 billion, returned 9% over the same period; smaller players delivered similar returns.
The laggards were infrastructure companies, asset-heavy spinouts that have structural sensitivity to higher interest rates and limited pricing power. Their five-year TSR of –4% reflects, in part, the loss of investors, which are moving to integrated operators with more strategic control.
Overall, though, the improved performance lifts telcos to 21st place in our list of 33 sectors, a creditable 10-place jump from 12 months ago.
The improvement came, in part, from consolidation and more rational behavior in the telco markets and in part from buoyant equity markets—particularly those outside the US, whose gains were broad-based rather than concentrated in technology and AI stocks. This makes telcos’ improved performance relative to companies in other sectors all the more noteworthy, given that telcos typically perform poorly in rising markets and strongly only in years, such as 2022, when markets go into reverse.
What did not contribute to the improved performance? AI. Despite widespread interest and some deployments, AI has not triggered an investor rerating for telcos. So, telcos’ performance is not an AI success story—at least not yet. We anticipate that telcos will derive great value from AI in the future.
Stay ahead with BCG insights on technology, media, and telecommunications
A Growing Performance Gap
Telcos’ stronger overall returns mask a growing divide. The performance gap between leaders and the rest of the industry has widened significantly: the top 20 operators now generate approximately three times the median TSR of the remaining sample.
This increasing dispersion suggests that returns are becoming a challenge for some players, especially in developed markets, where repeated efficiency campaigns are seeing diminishing returns and 5G and fiber-to-the-home have yet to deliver a significant increase in average revenue per user (ARPU), despite a significant capital outlay.
The other key metric we track is value creation, measured as the absolute change in market capitalization plus dividends paid over five years. The telcos in our study generated a net $616 billion over five years—down from nearly $700 billion over the five-year period that ended in 2025 after a small number of national players in highly competitive markets experienced substantially reduced value.
Value creation is even more concentrated than TSR. (See Exhibit 2.)
The upper ranks of our TSR and value creation exhibits are dominated by telcos that can capitalize on the continuing strong growth in China, India, and other low- and middle-income countries, including those in the Middle East.
A decade ago, these players’ expansion was driven by rising basic connectivity; now, they are enjoying growth from a fast-increasing middle class consuming ever more data and digital services. More broadly, their success is also driven by the digitalization of all aspects of everyday life, including accelerating enterprise digitization. This gives them better pricing power, which they have combined with cost-efficiency and capex productivity.
At the same time, some operators in mature markets—including Deutsche Telekom, Orange, SoftBank Corp, and KDDI—have delivered a strong TSR of roughly 15% to 17% over five years. Their success demonstrates that disciplined execution can generate attractive returns, even in slower-growth environments.
Driving Value Creation with AI
It’s impossible to say whether the sector has entered a new era of robust TSR and value creation. It is at the dawn of a new era for the optimization of internal processes, thanks to AI. Almost all telcos are running pilot projects and, in some cases, launching new AI-powered services.
However, we see limited future benefits from isolated, cost-cutting AI deployments.
Instead, the route to an AI-driven investor rerating is a CEO-led organizational transformation intended to create value and build growth engines. The telcos that rise in our listings in coming years will be those that rethink end-to-end processes, redesign their operating models, and develop new AI-enabled services to expand revenue pools.
In the consumer space, for instance, many telcos are deploying AI-powered chatbots to reduce help line service costs. That’s useful, but a true value creation perspective, would completely rethink the customer journey, improving cross-selling and creating personalized service offerings, including those from technology partners, to increase ARPU.
In the enterprise space, AI’s disruption is creating new opportunities. Telcos need to reimagine themselves as AI-powered, end-to-end digital partners. New offerings can include AI-optimized connectivity, such as network-as-a-service offerings that enable enterprises to flexibly access bandwidth and other services. Opportunities exist in sovereign cloud, too, with telcos ideally placed to provide the local, in-country cloud and AI services many governments are now demanding.
The goal: shifting the operating model to create an AI-first telco.
The Growth Agenda
AI is an essential part of the narrative, but leaders must also combine technological transformation with disciplined strategic moves.
Accelerating the Shift Toward Agile, Software-Defined Networks. These scale efficiently with demand. Initiatives such as Open RAN, which allows telcos to mix mobile equipment from different suppliers, also reduce costs through extra vendor competition.
Improving Capital Productivity. This is urgent. Declining returns on invested capital (ROIC) cut TSR, especially if the cost of capital rises. Spinoffs of fixed-line networks are one area of opportunity, transforming telcos into asset-light “servicecos” offering broader services. Further network sharing is another. Both face fewer regulatory burdens compared with outright M&A.
Pursuing Targeted M&A. Strategic M&A presents a critical strategy for driving value, offering a path to expansion, operational efficiencies, and resilience against industry disruptions. In-market consolidation, in particular, can completely reshape an operator’s financial profile for the better.
In some mature markets, signs indicate that regulators are becoming more open to further consolidation. This may allow operators with returns under their cost of capital to launch mergers that unlock fresh investment and value creation. This is not just a mature-market play; in India, in-market M&A has led to the top three operators enjoying 90% market share. India’s largest operators, Reliance Jio and Bharti Airtel, are projected to show very substantial ROIC improvement over the next two years.
Next Steps for Value Creation
Developed-world telcos may never match the value creation seen in China and India. They don’t need to. Effective deployment of the strategies outlined above—combining strategic clarity, operational excellence, and end-to-end AI reinvention—can deliver consistent, compounding benefits that investors will reward and that will maximize the chance that the sector’s value creation continues to improve.
