How Can Telcos Escape the Dividend Trap?

Rebuilding free cash flow, credibility, and growth in a yield-obsessed industry

The Great Telco Cash Illusion

For two decades, telecom operators sold investors a simple promise: reliable cash, stable returns, and the comfort of a quarterly check. Dividend discipline became a badge of honor, proof that the networks were steady, the customers loyal, and the business immune to disruption. The problem is that the world changed, and the math didn’t.

In 2024, the top ten global telcos, such as AT&T, Verizon, Deutsche Telekom, Vodafone, Orange, Telefónica, BT, BCE, Telenor, and Singtel, collectively generated more than $300 billion in operating cash flow. On the surface, that sounds solid. However, after accounting for capital expenditures, spectrum payments, and debt service, what remains is alarmingly thin. Nearly all of it is spoken for by dividends. The sector now pays out more cash to shareholders than it reinvests in growth.

According to BCG’s 2024 Value Creators report, 85% of the industry’s shareholder returns between 2019 and 2023 came from dividends, not market-value appreciation.