Why SMBs are the growth opportunity for telcos

Insights

• Telecom margins are under pressure, yet the small and medium businesses (SMB) segment remains a largely untapped growth opportunity.
• Small enterprises fall between two telco models built for other segments: consumer self-serve that is too shallow and enterprise contracting that is too complex.
• The model that works keeps the telco at the center of the customer relationship, with partners providing depth and expertise.
• Capturing the SMB opportunity requires shifts in the business model, financial model, and operating model.
• For telcos, the priority is to move SMBs from the periphery to the core of their growth strategy.

Telecom revenue growth is under structural pressure. According to GSMA Intelligence, global mobile operator revenues are projected to grow from $1.19 trillion in 2025 to $1.36 trillion by 2030 — a compound annual growth rate (CAGR) of roughly 2.7%. In high-income markets, average revenue per user (ARPU) growth is projected at just 1% over the same period - a decline in real terms. Consumers and businesses have reached a ceiling on what they will pay for connectivity, and subscriber growth alone cannot offset margin pressure.

Most operators have responded with cost reduction, infrastructure sharing, and selective bets on enterprise. Yet one segment has gone largely overlooked: SMBs. They are already connected, already paying, and still deeply underserved.

According to the International Finance Corporation (IFC), SMBs represent approximately 90% of all businesses globally, account for over 70% of total employment, and contribute around 50% of gross domestic product (GDP). The SMB label, however, covers three structurally different segments. Definitions vary by market and context, but the boundaries are broadly:

• Small office, home office (SOHO) with usually fewer than 10 employees: This segment behaves largely like a consumer — connectivity-first, self-serve, and not the primary value pool.
• Small enterprises with between 10 and 50 employees: This segment has multi-product needs, generates meaningful revenue per account, and has an expectation of hybrid engagement — digital self-serve for routine tasks, human support when it matters — yet is systematically underserved by current telco models.
• Medium-sized enterprises with between 50 and 250 employees: This segment is typically account-managed and partner-led — a structurally different commercial play.

The small enterprise segment is the real white space. Most already have a direct billing relationship with a telco. Yet what most operators earn from this segment extends little beyond a few SIM cards.

Why the opportunity stays uncaptured

SMB needs vary

SMBs are not a single market. Requirements differ by industry, digital maturity, and operational context. Some owners track nothing, others run business intelligence (BI) tools and workflow automation. Priorities diverge too: finance SMBs prioritize efficiency and system modernization; retail focuses on customer engagement and omnichannel tools. A single proposition cannot serve this range.

Data sensitivity adds further constraint. SMB owners are cautious about sharing business data with any new provider — a hesitation that becomes a barrier when telcos ask for business data before earning trust. Compounding this, most telcos do not engage directly with their SMB customers in any meaningful way. There is no regular conversation and no advisory relationship. For a segment that makes decisions based on trust and familiarity, that absence is itself a competitive disadvantage.

Packaging and channels miss the mark

Most telcos already carry the products small enterprises need. The gap is in how these are packaged and sold. Bundles are designed for the segments on either side — consumer packs are too shallow; enterprise bundles are too large and complex for a 20-person business. There is rarely a middle ground that lets a small enterprise start with connectivity, add security when ready, and layer in analytics as the business grows. Rigid packaging forces an all-or-nothing decision that time-poor owners default to declining.

The channel compounds this. Most telcos offer two options: self-serve digital or a full account manager. Small enterprises consistently show a strong preference for a hybrid of both - digital speed for routine decisions and human support when it matters. When the packaging and channel do not fit how they work, SMBs assemble the pieces elsewhere and the primary relationship moves away. In many markets, particularly across Europe, partners and resellers are already filling that gap by default.

Time is the real barrier to adoption

Low SMB uptake is often framed as a sales or awareness problem. Infosys client conversations point elsewhere. SMB owners cite time and capacity as the biggest barriers to adoption. Many defer or decline decisions because they are overloaded. Owners frequently run their business single-handed, manage peak seasons without support, and face hiring difficulties. All this leaves little room for evaluating new services.

Hyperscalers and local players take the relationship

While telcos have been slow to move, others have not. SMBs allocate a significant portion of their technology budgets to cloud services. That spending is flowing overwhelmingly to a small number of providers. In the final quarter of 2025, AWS, Microsoft Azure, and Google Cloud together accounted for over 65% of global cloud infrastructure spending, and all three report that startups and SMBs are their fastest growing segment. These providers increasingly own the application layer and the buying journey for SMBs.

Local managed service providers (MSPs) and information technology (IT) resellers are stepping into the trusted-advisor role, being available locally for interactions - bundling solutions, taking end-to-end accountability, and removing adoption friction. The MSP market is fragmented, local, and sector-specific — not a monolithic competitive force, but a distributed one that fills gaps wherever telcos leave them. For the time-poor small enterprise owner, a single accountable local partner matters more than any individual product.

Security is a missed opportunity

Of all the services beyond connectivity that telcos could offer SMBs, security is the most actionable entry point. The need is immediate, the anxiety is high, and the local provider with an existing billing relationship is better positioned than any hyperscaler to own it. Yet most telcos have not moved. SMBs invested $107 billion in cybersecurity in 2023, a figure forecast to grow at a 10% CAGR through 2028, by which point SMBs will account for 62% of all cybersecurity expenditure worldwide.

The vulnerability is acute. A survey of SMB owners across North America found that 74% self-manage cybersecurity without sufficient training. One in three experienced a successful cyberattack in the prior year, and one in five said a loss as small as $10,000 could put them out of business.

Some telcos are starting to respond. In March 2025, Verizon Business launched Trusted Connection, a zero-trust network access service combining networking and security into a single managed offering, designed specifically for mid-sized businesses without dedicated IT resources. Verizon's own 2025 state of small business survey, covering 600 SMB owners and decision-makers across the US, found that 47% had updated their cybersecurity solutions to protect their business in the past year. The demand is there.

The model that works

Telcos are not starting from zero. SMBs already spend more than $66 billion on IT solutions from telcos, and 80% say they would consider taking more IT services from their operator. Overall, SMB IT spending growth is projected to accelerate from 6% in 2024 to 8% by 2028. Telcos also bring regulatory familiarity and established market channels that are difficult for a global cloud provider to replicate at the local level. But those advantages alone are not enough. Capturing the full SMB opportunity requires three connected shifts: a business model shift from connectivity provider to outcome orchestrator, a financial model shift from average revenue per account (ARPA) to customer lifetime value (CLTV), and an operating model shift from human-only delivery to human and artificial intelligence (AI) working in parallel.

Business model shift: Telcos own the service layer, not every product

The orchestrator model works on a simple principle. Telcos own the billing relationship, service assurance, and customer accountability — the commercial layer that holds the relationship together. Hyperscalers supply the application depth, artificial intelligence (AI) capability, and cloud infrastructure that SMBs increasingly demand. Local IT providers bring the sector-specific expertise and in-person support that neither telcos nor hyperscalers deliver cost-effectively at scale. The SMB owner gets one interface, one invoice, and one number to call. The telco is accountable for all of it.

Vodafone Business demonstrates this in practice, combining partner solutions from Microsoft, Google, and others with its own service layer to retain the integrator relationship. Its V-Hub platform, offering free digital advisory content to SMBs across 14 markets, has attracted more than five million users – a strong signal of SMB appetite for a trusted digital advisor. Whether that engagement converts to commercial revenue at scale remains the real test of the orchestrator model. The commercial anchor is the telco. The partners multiply the offer.

Financial model shift: Shift the measure from ARPA to CLTV

Running SMB on ARPA prioritizes revenue measurement over customer relationship. A newly acquired account on a promotional rate looks identical to a long-tenured account on a full bundle. And when that promotional rate expires, the model offers no signal and no incentive to retain them.

The churn consequence is acute in the small enterprise segment specifically. Beyond the industrywide 31% annual business-to-business churn rate, small enterprises are more vulnerable to attrition than larger businesses. Cash flow pressure, business closures, and poor customer experience all drive switching. Infosys client conversations found that liquidity is fragile in many owner-managed businesses, where even a small number of late payments can create existential risk. In a low-growth market, losing these accounts is expensive and hard to replace.

According to a global telecommunications study conducted in 2025, covering 15,700 consumers across 31 markets, 95% of CLTV comes from customers retained for three or more years. Retaining an existing customer costs 10 times less than acquiring one. Global telcos currently capture only 60% of their full customer value potential. The small enterprise segment is where closing that gap is most achievable — high enough spend to matter, relationship-driven enough to retain.

Shifting to retention economics changes every downstream decision: modular bundles that grow with the account, proactive service intervention before churn signals appear, and human engagement at the moments that matter. For small enterprise owners where time scarcity and decision fatigue are the primary adoption barriers, an offer with low effort to buy, clear value, and easy expansion is the offer most likely to win.

Operating model shift: frictionless self-serve, with human intervention when it matters

Small enterprise owners want control and speed. They want to buy, manage, and expand their services digitally — without calling anyone, waiting for a callback, or navigating a complex portal. But when something goes wrong, or when a decision carries real financial weight, they want a human available immediately.

This is a hybrid experience that most telcos have not built for the SMB segment. The Frontier Telco framework describes the underlying model through the customer value orchestration layer — AI handling the routine, the proactive, and the scalable, while human advisors step in for onboarding, incident resolution, and high-stakes decisions. The SMB owner experiences a seamless journey that the telco delivers through two layers working in parallel.

In September 2025, Deutsche Telekom launched Voice AI Notes for SMBs, automatically recording, transcribing, and summarizing phone calls through Telekom's cloud system – returning hours to time-poor owners. In April 2026, Vodafone Business and Google Cloud launched an AI concierge on Gemini models for inbound calls and scheduling, alongside a managed detection and response service using Google's security analytics. In India, Jio's Haptik platform demonstrates what adoption looks like at scale: its WhatsApp and voice-based AI agents already serve 50,000 SMBs and are targeting between 300,000 and 500,000 subscribers over the next two years. Early adopters report 80% of repetitive customer support queries resolved automatically and between 20% to 25% increase in lead-to-sale conversions. In all three cases, AI delivers capability at scale. The telco holds the relationship and the accountability.

Four actions for telcos

1. Customize product and packaging to meet SMB requirements

SMBs do not need the most sophisticated solution on the market. They need the right one for their business — affordable, easy to adopt, and relevant to the problems they face day to day. Telcos that use industry language, reference sector-specific risks, and align with SMB workflows, close the credibility gap that broad offers cannot. Contextualization is the entry point.

The deeper opportunity is vertical-specific product development. Build for what and how small enterprises buy. TELUS in Canada built a healthcare platform through targeted acquisitions, combining specialist networks, clinical workflow integrations, and managed service delivery into a single proposition. Telcos that apply the same logic to SMBs — packaging connectivity, security, and workflow tools into sector-specific outcomes — build propositions that hyperscalers and MSPs cannot easily undercut on accountability.

2. Use policy pull

Governments in many markets are actively funding SMB digitalization, but most SMBs do not know these programs exist. Germany's Digitalbonus Bayern program funds up to 50% of eligible SMB digitalization and IT security expenses. In Singapore, Singtel partnered with Enterprise Singapore and IMDA to provide 49,000 SMBs with 12 months of complimentary security coverage and subsidized cybersecurity workshops, aligned directly with Singapore's SMEs Go Digital Day agenda. When governments train SMBs to buy managed digital outcomes, the default provider becomes whoever is simplest to adopt. Telcos that align early, and actively help SMBs navigate the subsidy landscape, convert public spending into commercial momentum.

3. Lead with outcome, not product

Bundle connectivity, security, and business tools into three to five clearly named offers with transparent and predictable pricing and minimal steps to adopt. SMB owners buy accountability: they want to know what they are getting, what it costs, and who to call when something goes wrong. Complexity at the point of purchase is a disqualifying factor.

4. Partner deliberately

Telcos do not need to build every capability. The role to own is integration and accountability, making a broad partner ecosystem coherent and accessible for the SMB owner. For instance, some telcos will build direct SMB relationships, while others will lean into reseller-led models, using MSPs as the primary route to market. Both are viable. The choice should be deliberate, because an undecided stance typically results in neither model working well.

The window is open, but not for long

The SMB value pool is large and growing. Market estimates put the SMB telecom voice and data services market at $44 billion in 2025, rising to $75 billion by 2035. The larger opportunity — security, cloud management, productivity tools, and analytics — is being claimed by hyperscalers, MSPs, and software-as-a-service providers.

Telcos that act now can reposition as outcome owners. That means propositions built for how SMBs actually work, pricing with no friction at the point of purchase, and partnerships with hyperscalers and local IT providers that extend capability without sacrificing accountability. AI handles the scale. Human advisors, and the empathy they bring, hold the customer before and after the sale. The assets are in place. The operating model needs to change. Every quarter of delay is a quarter in which the application layer, the trusted-advisor relationship, and the renewal conversation move further away.