EY research across 10 markets globally found that customers are wary about the role artificial intelligence (AI) may play in their service provider interactions — with two-thirds wanting better explanations from connectivity providers about how it is being used. These fears among customers are arising at a time of heightened sensitivity around responsible usage of AI inside organizations. According to the 2024 EY Human Risk in Cybersecurity Survey, 39% of US employees are not confident that they know how to use AI responsibly.
For telcos, a further consideration around AI is that it is one of several factors adding to their cybersecurity risk burden. Telcos remain highly exposed to cyber-attacks, with the industry estimated to have been targeted by 57% of distributed denial of service (DDOS) attacks across all sectors in the first half of 2024, and damage to physical assets also in focus.
Cédric Foray, EY Global Telecommunications Leader, says: “As connectivity takes an increasingly central role in industrial digitalization, telecommunications companies should take care to identify risks that are emerging outside their organization, whether these relate to existing supply chains, changing customer needs or more complex policy and regulatory environments. This is particularly true of cybersecurity, where attack vectors and surfaces are evolving at speed. GenAI's impact on employee and customer experiences also requires attention to mitigate downside risks, while telcos should stay alert to evolving regulatory imperatives designed to build confidence in AI.”
Talent, reskilling and collaboration are critical for telcos
According to the EY Telco of Tomorrow study, 73% of telco leader respondents rate talent attraction and retention as the most important element of their people strategy, while talent and culture ranks the second top 10 risk, up one place from third last year. Reskilling and better collaboration are also cited as priorities by senior executives (50% and 42% respectively). However, redefined employee proposition and purpose – important to support talent attraction – are underscored as people priorities, with only 10% of telco leaders respondents of the same study viewing this as a critical element of their workforce.
HR functions are under pressure to adapt, as 85% of telco employee respondents believe HR will require major or moderate change over the next five years to meet the talent and strategic needs of the business, according to the EY Work Reimagined Survey. And while telcos surveyed allow fully remote working (41%), most telco employee respondents believe this presents challenges to collaborating with colleagues and using workplace technology.
The effectiveness of transformation programs is under scrutiny
Ineffective transformation through new technologies is a new entry this year, ranking third in the top 10 risks. A variety of emerging technologies will propel transformation in telecoms both now and in the future, according to the top 10 risks in telecommunications report. EY research shows that process automation and software-based networks are currently seen as the most important technologies in this regard — but also that AI is set to become the dominant transformation driver in years to come. These sentiments underline the opportunities at hand, but maximizing value from the transition to new technologies brings challenges of its own.
Adrian Baschnonga, EY Global Technology, Media & Entertainment and Telecommunications (TMT) Lead Analyst, says: “Telcos should carefully consider how best to phase emerging technology deployments, especially given the complex mix of software and hardware capabilities in scope, and the need to simplify legacy IT and networks. And telcos also face strategic choices specifically around AI on issues ranging from use case prioritization to the selection of open-source or proprietary large language models (LLMs) — as well as vendor and partnership decisions.”
Telcos face a challenging decision when it comes to selecting performance measures to evaluate the success of their transformation programs. While confidence in AI's transformative potential is high — 79% of telcos believe that it will double efficiency levels in five years' time — establishing effective key performance indicators (KPIs) is crucial for assessing the progress of technology transformation. This is especially important considering that 75% of telco CEOs respondents believe the burden of legacy IT prevents their organization from innovating at pace.
Value chain disruption is an emerging sector threat
Failure to mitigate value chain disruption is another new entry this year and ranks eighth in the top 10 risks, with threats from outside the sector being a growing area of concern among telcos. While established connectivity providers and mobile virtual network operators (MVNOs) are currently viewed as the leading sources of competitive disruption, 76% of telco leaders respondents believe hyper-scalers will be a source of disruption in five years' time, while more than one in four point (29%) to satellite operators. While these entities are also important partners, it is clear that senior executives are mindful of risks posed by other entities in the industry value chain.
Foray says: “As operators consider how best to mitigate the leading risks, they should continue to scan the horizon for new threats, while taking care to evaluate the evolving impact of existing risks on their organizations. Looking ahead, effective mitigation strategies will hinge on understanding the interrelationship between risks that may initially appear self-contained, and understanding how positive actions to address one challenge may help to mitigate others.”
The full list of top 10 risks in telecommunications for 2025 are:
- Underestimating changing imperatives in privacy, security and trust
- Inadequate talent, skills and culture management
- Ineffective transformation through new technologies
- Poor management of the sustainability agenda
- Inability to take advantage of new business models
- Inadequate network reliability and resilience
- Ineffective engagement with external ecosystems
- Failure to mitigate value chain disruption
- Inability to adapt to the changing regulatory and policy landscape
- Inadequate operating models to maximize value creation
