EY’s top 10 list of risks to telcos this year
What are the major risks to telcos’ businesses this year? EY has a new report out that identifies the top 10 major business risks that telecommunications companies are likely to face this year.
If anything, EY’s list highlights the tightrope that telecom companies have to walk as they are driven both to adopt new technologies, like artificial intelligence, and mitigate the risks to telcos that are associated with them. It also draws out the human aspects of an industry heavily focused on technology.
EY gave its list of risks to telcos as a “top 10” style list (you can access it here), but we’ve broken them down into four common themes across those 10 topics.
Business transformation-related risks. EY specifically called out a couple of new top-10 risks this year: What they described as “ineffective transformation through
new technologies”, where telcos may not effectively put new technologies to use to serve their businesses.
This is particularly relevant to artificial intelligence, which poses both benefits and risks—but it’s not the only tech that could end up being either a blessing, a curse, or maybe a bit of both, depending on their choices on how to apply AI, their partners, and how those and other AI-related decisions play out. EY also cites process automation and software-centric networks as other driving factors that are transforming telco’s businesses and their networks, but also pose potential risks.
Additionally, EY said that another risk to telcos’ business this year is that rising AI demand is predicted to put networks under strain and that AI applications “are driving a significant
increase in uplink traffic on 5G networks – with some industry watchers predicting
that this effect will ultimately push mobile data traffic beyond the levels that the
available network capacity can handle.” So despite telcos’ push to modernize their networks, the fact that AI is changing the traffic landscape even faster may ultimately pose a risk to network resiliency and reliability.
Strategic missteps. Several of EY’s identified risks to telcos focus on how the industry’s strategic approach to various topics and markets may end up putting them in a weaker position rather than a stronger one. The firm cited risk factors that included inadequate operating models to maximize value creation, as more telecom companies go “asset-light” and carve out and divest infrastructure including towers, fiber or data centers. EY said that 44% of telcos surveyed believe that the industry will “split into retail-focused “servcos” and wholesale-oriented “netcos” within the next five years. While there are benefits to such a split, EY said, such a shift also involves some fundamental “reimagining” and refocusing of the business, and execution that actually leverages the advantages.
EY said that other strategic risks include the inability to take advantage of new business models like networks-as-a-service and APIs because they are heavily reliant on intermediaries to educate customers and convince them to adopt these approaches, plus the fact that higher-value APIs rely on 5G Standalone and that network technology isn’t necessarily widely available to sell to customers. The firm also said that there are risks to telcos from ineffective engagements with external ecosystems and miscalculating value chain disruption—in that the partners that telcos are lining up, like hyperscalers and satellite companies, could actually end up being more disruptive than telcos and out-competing telecom companies for customers.
Mismanagement-related risks. This covers not effectively managing the “sustainability agenda“—which is a global, shareholder and customer priority—and increasingly, intense climate conditions causing more risk to infrastructure and services. It also covers the actual management of people, with inadequate management of talent, re-skilling and culture being cited by EY as #2 on its list of risks to telcos.
Risks related to navigating a changing world. That includes underestimating “changing imperatives in privacy, security and trust” (and relates to the companies embracing AI while their customers are skeptical and/or wary of it, and despite the fact that it adds to telcos’ cybersecurity risk burden and increases consumers’ likelihood of being scammed), as well as an “inability to adapt to the changing regulatory and policy landscape.”
