Technology, Media & Telecommunications Practice

Navigating the three

horizons of 5G business
building
As 5G technology transforms industries, telcos’ ability to maximize the
opportunity will depend on transforming themselves from network
providers to outcome providers with a new approach to monetization.
by Shamik Bandyopadhyay, Pallav Jain, Jeremy Leing, and Stefan Prisacaru

February 2023
 Telcos clearly are excited—if levels of investment
are a reliable gauge of enthusiasm—about the
future that fifth-generation (5G) mobile networks
will bring. And with good reason: 5G’s faster
speeds, lower latency, and higher bandwidth have
the potential not only to delight customers with
seamless video streaming and lag-free video
games but also to enable next-generation tools and
platforms that draw on artificial intelligence, the
Internet of Things, edge computing, and automation
to transform how we live and work.
Enthusiasm alone, however, will not allow telcos
to recoup their investments in 5G, let alone thrive
in a rapidly evolving landscape. If telcos continue
their current approach to 5G monetization,
they are poised to regain just a fraction of the
$600 billion-plus they are expected to invest in 5G
infrastructure between 2022 and 2025 (Exhibit 1).
In the United States alone, telcos spent roughly
$100 billion to purchase 5G spectrum at auction
in 2021.1 Despite these substantial infrastructure
investments, the adoption and monetization of 5G
are still in their infancy.

Web <2023>
<5G Horizons business building>
Exhibit 1
Exhibit <1> of <3>

Mobile operators are expected to invest more than $600 billion in their 5G
networks between 2022 and 2025.

Estimated global 5G
capital expenditures,
Total = 650
by region, 2022–25, Asia–Pacific
$ billion 230

North America Europe

200 115

Latin America Middle East and Commonwealth of

45 North Africa Independent States 15
30
Sub-Saharan Africa
15

Source: GSMA Intelligence; Omdia

McKinsey & Company

1
FCC Public Reporting System, Completed Auctions, accessed December 16, 2022.

2 Navigating the three horizons of 5G business building

Getting 5G right is not just about recouping
investments; it requires capturing value from a new
phase of innovation across industries. Operators
have a choice: they can relegate themselves
to a minor role as this transformation unfolds,
or they can try to reposition themselves as 5G
business builders that serve as critical partners to
organizations seeking next-generation, 5G-enabled
use cases, such as automated manufacturing and
autonomous vehicles.
Telcos can make the most of the 5G opportunity
by working their way across three distinct horizons
of 5G business building: core connectivity, which
presents an opportunity to capture between
$10 billion and $20 billion by 2028; premium
connectivity, with an estimated value pool as large
as $30 billion to $50 billion by 2028; and platforms
and solutions, where we believe the value potential
is several times higher than in horizon 2 (Exhibit 2).
As operators build businesses in each horizon, they
Web <2023>
<5G Horizons business building>
Exhibit 2
Exhibit <2> of <3>
Most mobile operators need to shift their mindsets and business
approaches to advance along the three horizons of 5G business building
and monetization.
Horizon overview
Horizon 1
Core connectivity
Description Operators spur add-ons or
pure connectivity offerings
Key 5G-enabled Fixed wireless access (FWA);
offerings enhanced mobile wireless
Current number 32
of capable
operators globally1
Global scan of 100 operators, 42 of which are considered pre-horizon. Pre-horizon = no commercial 5G offering; horizon 1 = basic 5G service (eg, mobile, FWA);
1
horizon 2 = tailored network solutions (eg, network slicing, private network); horizon 3 = commercially available 5G end solutions (eg, V2X, AR/VR).
McKinsey & Company
2
Note: 100 largest telcos are based on TeleGeography’s GlobalComm database.
will encounter new challenges, customers, and
competitors. To adapt, they will need to shift their
mindsets and business approaches.
Currently, most operators are very early in their
5G journeys. Out of the 100 telcos with the most
subscribers in the world, the largest number (42)
are at a stage we call “pre-horizon,” meaning
they have yet to offer customers 5G connectivity.
Another 32 are focused on horizon 1, leaving
horizons 2 and 3 in nascent states.2 This provides
a long runway for telcos that move quickly and
strategically; they have a chance to take risks,
fail fast, learn from their mistakes, and incubate
new ideas. Operators’ business approach to
monetization in each horizon can set them up for
success (or failure) in later horizons.
In their pursuit of horizons 1, 2, and 3, the key
to monetizing 5G is for telcos to reimagine
their role, evolving from network providers to
Horizon 2 Horizon 3
Premium connectivity Platforms and solutions
Operators orchestrate premium Operators develop end solutions
connectivity solutions that support a variety of use cases
Edge computing; Augmented reality/virtual reality
private networks (AR/VR); computer vision; mobile
vehicle-to-everything (V2X);
Internet of Things
19 7
Navigating the three horizons of 5G business building 3
 solution orchestrators. Companies that own each
horizon stand to recapture much of the value that
eluded them over the past decade, when tech
players monetized the connectivity that telcos
made possible.
Horizon 1: Core connectivity
In horizon 1, telcos continue to be the core
connectivity providers but have an opportunity to
monetize a superior product. In doing so, telcos
can capture between $10 billion and $20 billion
by 2028.3 While the potential for individual telcos
will vary by geography, market structure, and
competitive intensity, success in horizon 1 could
boost wireless revenue by as much as three
percentage points.4
Here, we see two main avenues for monetization.
Telcos can upsell 5G access to mobile wireless
consumers, and they can launch new 5G-enabled
products, the most promising of which is fixed
wireless access (FWA).
What telcos have tried
Traditionally, telcos have treated new products and
services as add-ons that can produce incremental
revenue gains. This approach bundles new
offerings with existing ones to stem churn, increase
revenues, and meet the broader organization’s
key performance indicators (KPIs). This traditional
approach makes sense when applied to upselling
5G access to mobile wireless consumers.
Operators worldwide have begun bundling 5G-rich
apps with service plans, including video streaming,
music streaming, and cloud gaming services in
premium 5G plans. By allowing customers to select
differentiated speed tiers, some operators are
reserving the top speeds and highest throughput
for customers who value these features and are
3
McKinsey analysis based on Analysys Mason Fixed Wireless Market Size data, accessed February 7, 2023.
4
McKinsey analysis based on Omdia private LTE and 5G market forecast, December 2022, and Omdia enterprise edge ICT market forecast,
April 2022.
4 Navigating the three horizons of 5G business building
willing to pay for them. One European operator
allows customers to choose from three different
speed tiers, topping out at one gigabyte per second.
By offering 5G boosters, telcos enable customers
to temporarily increase network performance
for activities such as important video calls or
competitive mobile games; several Asian operators
have grown revenues by allowing subscribers to
purchase temporary connectivity boosts.
While the core mobile business still offers some
opportunity to monetize 5G incrementally through
strategies like these, the potential is limited. To
unlock growth in horizon 1, operators must also
adopt a less familiar approach to products and
services that are enabled by 5G network access.
A new approach
With 5G still in its early days, the best example of
a 5G product that can be separated from the core
business is fixed wireless access (FWA), which
provides homes and businesses with high-speed
internet access using radio waves instead of cables
or fiber. Multiple factors will determine whether an
FWA rollout is successful (see sidebar, “Success
factors for FWA”). But the biggest unlock will come
from treating FWA—and other promising products
or services that may emerge as 5G matures—as a
separate business with plenty of room to stumble,
learn, and grow. These new divisions will be more
likely to succeed if they’re equipped with sufficient
capital and people resources and given the
freedom to explore new ideas, develop new ways
of working, and adopt separate KPIs specific to
their offerings.
This approach will be unfamiliar to most incumbent
telcos. By learning how to stand up strong new
businesses in horizon 1 (which includes a mix of B2B
and B2C customers), they will establish a foundation
for success in horizons 2 and 3, where the most
value lies in B2B.
Success factors for FWA
Fixed wireless access (FWA) is a fast-
growing business for operators that offer it,
and adoption has been steadily increasing
(exhibit). FWA presents an opportunity
for telcos to deepen their relationships
with existing customers and to broaden
their customer base. Half of one North
American telco’s 5G FWA home internet
customers are new to the company.
2. Phased rollout. Because network
In addition to the broader success factors
that are key to rolling out any new business
in horizon 1—the core connectivity stage—
three considerations are critical to success
in introducing 5G FWA, specifically:
1. 5G network maturity. When customers
sign up with a home or business
internet provider, they expect a reliable
connection. Because FWA customers
must share the bandwidth that remains
after mobile users’ demands are met,
Web <2023>
<5G Horizons business building>
Exhibit
Exhibit <3> of <3>
Burgeoning demand for fixed wireless access gives telcos an opportunity
to acquire new customers and deepen relationships with existing ones.
Global 5G fixed-wireless-
access subscriptions, millions
Source: “Fixed wireless access subscription forecast: 2022–27,” Omdia, Dec 14, 2022
McKinsey & Company
operators would be well-advised to
ensure their 5G networks have the
excess capacity required to satisfy
FWA users. If operators introduce
5G FWA before their networks are
sufficiently mature, home and business
internet users may be disappointed—
harming the business.
capacity differs from place to place,
it makes sense for operators to pilot
5G FWA in geographical areas with
higher capacity. They can work out any
kinks in these areas before scaling up.
Typically, operators start introducing
5G FWA in rural and suburban areas,
where there are fewer competitors
and signal transmission is stronger.
Because customers in such areas may
have previously had access to only
6
5
0
2019
Navigating the three horizons of 5G business building
one internet service provider (ISP),
relied on satellite internet, or lacked
internet access, they are more likely to
welcome the opportunity to test-drive
the service.
3. Clearly defined business strategy.
Integrated telcos should consider
the potential impact of 5G FWA on
their existing ISP business, ensuring
the two products complement each
other and limiting loss in sales. FWA
is particularly useful for establishing
last-mile connections for customers
in hard-to-reach areas, where placing
fiber lines has been cost prohibitive.
Enterprise customers present an
additional opportunity, as FWA can
be quickly introduced when new
locations open.
2020 2021 2022
5
 Hallmarks and capabilities of such separate
businesses include the following:
— Dedicated product development, marketing,
and sales teams to drive growth. These teams
should be able to operate without concern
for how FWA fits into the bigger picture of
traditional telco offerings. They should have
autonomy to strategize and make decisions
without getting tangled in corporate red tape.
Good companies, in telco and beyond, often
use this approach to nurture new products
and businesses.
— Unique performance metrics. KPIs should be
designed to encourage teams to develop the
right product and test it in the right markets.
If the FWA business is beholden to the core
mobile business’s broader KPIs around revenue,
subscriber count, and quarterly targets, teams
will have the incentive to rush FWA into the
maximum number of homes and businesses as
quickly as possible. This effort could backfire,
disappointing customers in areas with overly
congested networks.
— Freedom to develop new ways of working.
Traditionally, operators fully develop products
before releasing them. Separation from the core
business gives telcos latitude to pilot working
prototypes with select consumers and then
refine the user experience before launching a
widespread rollout. One North American telco,
for example, tested 5G FWA in a few select
markets to refine its offering before gradually
expanding to additional markets on a path to
introducing FWA nationwide.
— A broader lens on the potential market. In
addition to selling FWA to existing customers,
a new unit can target households with limited
internet access. FWA, which can be less
5
“Building broadband’s future: Connecting every American,” NCTA - The Internet & Television Association, accessed February 13, 2023; BNP
Paribas Exane report, January 2022.
6
McKinsey analysis based on Omdia private LTE and 5G market forecast, December 2022, and Omdia Enterprise Edge ICT Market Forecast,
April 2022.
6 Navigating the three horizons of 5G business building
capital intensive than wired technology, can
be introduced in areas previously unserved
because of unfavorable economics. According
to NCTA, the Internet and Television Association,
as of 2021, approximately 12 percent of US
households were still considered “underserved,”
in that they had inadequate broadband service
and speeds.5
Horizon 2: Premium connectivity
In horizon 2, operators provide a higher-quality,
more reliable network experience tailored to solving
end users’ specific business needs. They do this
by leveraging private networks, edge computing,
and other technologies that 5G makes possible and
developing a robust ecosystem of complementary
partners. The value pool from horizon 2 could be
as large as $30 billion to $50 billion by 2028, with
successful telcos growing wireless revenue by up to
five percentage points.6
Here, economic value is primarily derived from B2B
relationships, with telcos’ role fundamentally shifting
from selling pure connectivity to selling customized
solutions. A company may be able to improve
its asset and inventory tracking, for example, by
running a computer vision solution on a private
network to track products across its warehouses.
Or it may be possible to improve the efficiency of
a production line by uploading video footage and
photos and analyzing them in real time to identify
bottlenecks and predict maintenance needs.
As in horizon 1, creating stand-alone businesses is
a critical first step. In addition, horizon 2 introduces
five more success factors:
1. Educating an immature market. While
businesses are largely aware of the advantages
of 5G core connectivity, they have less
understanding of the benefits 5G can bring
Even enterprises with mature IT teams
may not understand how changing
certain aspects of a network architecture
can help them meet business goals.
in horizon 2. Operators must create a market
for tailored network solutions by educating
businesses on the value these solutions can
create. Even enterprises with mature IT teams
may not understand how changing certain
aspects of a network architecture (hardware,
transmission media, etcetera) can help them
meet business goals.
An Asian telco set up a showroom to educate
manufacturing customers on next-generation
smart-factory solutions. The operator
demonstrated how robots using 3-D camera
images can transport objects and how high-
definition image transmission can improve
quality control and diagnose equipment
problems on production lines.
2. Consultative selling. To become a trusted
partner for enterprises, operators must
fundamentally shift their sales approach from
product centric (selling phones and plans) to
solution oriented (sitting down with customers
to design solutions). This approach requires not
only deep technical network expertise but also
deep industry knowledge: What matters most?
What are the critical pain points? Where is the
industry moving in the next five to ten years? A
new subbrand can make it easier for companies
to position themselves as knowledge partners
with expertise in leveraging technology to
achieve business outcomes.
3. Targeting new customers and decision makers.
Procurement heads have traditionally been
telcos’ primary customer points of contact.
However, for horizon 2 offerings, the points of
contact will change. Chief information officers,
business unit executives, and operations
executives will be the key decision makers for
such purchase decisions. These stakeholders
have more authority, hold varied functional roles,
and are more focused on business outcomes
than on any specific technology. To meet their
needs, telcos must reconsider the composition
of their sales teams.
Even identifying the new decision makers can
be a challenge. Traditional salespeople must
become lead generators, asking their contacts
about greater business needs and passing
leads to the technical sales team. Sales teams
must also change their approach to reach
stakeholders who may not clearly understand
what an operator has to offer. Some may
be outright skeptical, as operators are not
typically known for strategic partnerships of
this nature.
4. Establishing broad partnerships. Since
customers of 5G integrated networks have
varying technology preferences and expertise
needs, operators must forge a vast network
of partners. For example, an enterprise that
uses a particular brand of servers may be
unwilling to adopt private network solutions
Navigating the three horizons of 5G business building 7
 unless the telco has a partnership with the
company that builds the servers. As telcos
expand beyond their core business, they will
inevitably be unable to deliver every aspect of a
solution. Strategic partnerships with respected
companies can fill telcos’ capability gaps while
boosting credibility.
5. Competing against non-telco players.
Operators face a range of new competitors
in the network solution space, from hardware
OEMs to systems integrators. This requires
telcos to reimagine their competitive advantages
and market themselves to counter each
competitor’s chief assets. This would include
developing sales scripts that address typical
competitor-specific pushback and showcase
how they can provide a superior holistic
offering. For example, operators can highlight
systems integrators’ lack of network operations
experience and the limitations that network
equipment vendors face because they do not
have spectrum.
Enter the win room
All five success factors diverge markedly from
telcos’ typical way of doing business. One way to
introduce them effectively and quickly is to stand
up what we call a “proof-of-concept win room.” This
brings all stakeholders together around a single,
clearly defined goal to quickly align on high-potential
priorities and to launch and scale products ahead
of schedule. This tactic is based on the concepts of
private beta, borrowed from the tech industry, and
agile war rooms, which some companies use to drive
sales following a product launch.
Real customers are invited to participate in the
win room as a private beta, subject to the same
customer life cycle events as in a full-scale
deployment. Through agile, iterative cycles,
stakeholders identify pain points, which the
company can address by adjusting its strategy
to satisfy customers in real time. Teams using
win rooms can simultaneously solve issues with
products, pricing, partnerships, marketing and
sales, and launch readiness.
8 Navigating the three horizons of 5G business building
One western telco credits a win room for a pair
of successes. The company improved its time
to market by more than 25 percent in seven
months, and it created a pipeline of more than
100 actionable opportunities that helped accelerate
momentum following product launch.
Case study: Horizon 2 business building
A leading telco recently launched wide-scale
capabilities in horizon 2 when it introduced a suite
of network solutions designed to help enterprises
meet business goals through further digital
transformation. Instead of selling prepackaged
products, the telco works with customers to devise
solutions that address their specific needs.
The telco created a separate division for this
endeavor, as well as a robust ecosystem of
respected partners to enhance its capabilities and
credibility. After showcasing its capabilities through
partnerships with a few early customers, the telco
is leveraging testimonials from those customers to
drive growth.
The telco’s new division has its own go-to-market
motion, as well as educational materials explaining
how 5G integrated network solutions can affect
different types of organizations by, for example,
increasing productivity in manufacturing, improving
reliability and capacity in logistics, or managing
traffic flow in cities. By moving early and quickly, the
telco has positioned itself to emerge as a leader in
horizon 2 premium connectivity business solutions.
Horizon 3: Platforms and solutions
Horizon 3 is furthest from telcos’ core business and
therefore requires the most capability building. It
also has the potential to be the most lucrative, with
a value pool that could be several times larger than
the value at stake in horizon 2.
Whereas telcos in horizon 2 deliver private networks
and edge computing to enable solutions built and
supported by other players, telcos in horizon 3 must
position themselves as providers of end-to-end
solutions. Business development in horizon 3 is
still in its infancy, with little in the way of flagship
success cases or standardized approaches. Few
robust 5G solutions are available on the market
today, and off-the-shelf models won’t be a good fit
for many customers.
Promising approaches
Although horizon 3 is not easy to navigate, we are
seeing two high-potential approaches emerge: a
vertical approach and a platform approach.
Vertical approach. Telcos can select an industry
vertical in which end-to-end solutions have
the greatest value potential. After successfully
delivering to this industry vertical, they can leverage
this success to expand into new verticals. For
example, a telco might start with the manufacturing
industry, enabling smart factory connectivity
solutions before expanding into other verticals.
For an analogy, imagine an outdoor video camera
company leveraging its success in its core product
to take on the broader consumer home security
vertical. The company may expand first into smart
locks, then move in succession to connected alarm
systems, smart outdoor lighting, indoor cameras,
and an integrated neighborhood social app. The
result is a one-stop shop that leads in consumer
home security.
Platform approach. Instead of reselling, buying, or
even building point solutions, operators might focus
on building a 5G platform akin to the platforms that
currently exist for mobile apps, communication
services, and cloud-based software. An Asian telco
has created a platform that allows enterprises to
activate slices of its 5G network on demand and
access partner-created tools. Its marketplace, which
functions like an app store, offers solutions for smart
warehouse management, training that applies virtual
reality and augmented reality (VR/AR), equipment
diagnostics and maintenance, and more.
Lessons from other industries
Companies’ experiences in related industries
provide several lessons that may apply to success in
horizon 3, particularly when it comes to the platform
approach. Telcos planning for horizon 3 should
investigate ideas such as the following:
Owning the ecosystem. To defend against
homegrown solutions, it will be important for telcos
to build a robust “moat” that contributes to customer
loyalty. Ways to accomplish this include developing
a suite of channel and technology partnerships,
building infrastructure (including intellectual
property and capabilities) that is difficult to
replicate, and delivering proprietary data, analytics,
and intelligence for high-priority use cases.
Monetizing APIs and other building blocks. As the
platform is developed, operators might consider
offering a proprietary suite of APIs and plug-and-
play modules that customers can use to build
end solutions quickly. These can be monetized as
separate products.
Developing out-of-the-box enterprise solutions.
Telcos that start with a platform approach can
expand into verticals by bundling APIs to create out-
of-the-box point solutions that meet the complex
needs of enterprises in specific industries.
Driving upsell through user engagement. Telcos
can inspire a committed followership among
developers and platform users by organizing
hackathons, offering free trials, and establishing
teams of evangelist customers willing to help spread
the word about the product or service.
Getting started
To identify the right problems to solve, position
themselves as the solution, and empower
enterprises across industries to innovate in this new
frontier, telco leaders might embark on the horizon 3
journey by asking themselves several key questions:
— What should our overall strategy be in horizon 3?
Does a vertical approach, a platform approach,
or a combination of both make the most sense
for the business?
— Is there a vertical in our geography that is large
enough to make a vertical approach viable?
Navigating the three horizons of 5G business building 9
 — If we pursue a platform approach, is there
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creator and our telco, which is providing the
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— What are the capability gaps, across technology
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the best approach for closing these gaps? How
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— What should be our inorganic strategy
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opportunities could we target to give us a
jump start?
Shamik Bandyopadhyay is a partner in McKinsey’s Dallas office, where Jeremy Leing and Stefan Prisacaru are consultants;
and Pallav Jain is a senior partner in the Atlanta office.
The authors wish to thank Nimish Mittal for his contributions to the article.
Designed by McKinsey Global Publishing
Copyright © 2023 McKinsey & Company. All rights reserved.
10 Navigating the three horizons of 5G business building
As 5G matures, significant value is at stake.
Operators that strategically evolve from core
connectivity to platforms and solutions, building
new skills and capabilities along the way, will
position themselves to recoup their substantial
investments in 5G and maximize their share of a
value pool that could easily exceed $100 billion over
the next five years.
Telcos’ approach to building capabilities and
businesses in horizons 1, 2, and 3 will determine
whether they can capture this enormous
opportunity. The sooner telcos embark on the 5G
monetization journey, the sooner they can begin to
capitalize on this new phase of innovation. As 5G
technology transforms every industry, telcos have a
choice: they can remain network providers, or they
can reinvent themselves as outcome providers.