Top 10 risks for telecommunications in 2023

As the telecoms industry strives to stay resilient through challenging times, we examine the top 10 risks facing operators. Going into 2023, telecom operators can be heartened by their collective resilience amid the recent geopolitical and economic turbulence. But are telcos sufficiently attuned to the emerging risks confronting them? In this article, we consider how to mitigate them.

1. Insufficient response to customers during the cost-of-living crisis

The cost-of-living crisis is causing households to reevaluate whether they’re getting value for money. The EY Global Decoding the Digital Home Study shows that 45% of households believe they overpay for content services, and 44% think their broadband provider doesn’t do enough to direct them to the best deal. And some regulators are demanding that telcos do more to offer “social tariffs” to improve affordability.

2. Underestimating changing imperatives in security and trust

Telcos are struggling to stay ahead of growing cyberthreats: 46% of consumers believe that it is impossible to keep their personal data secure when online. At the same time, 39% of telecoms chief information security officers (CISOs) believe security aspects aren’t adequately factored into strategic investments. More positively, over half of CISOs think the pandemic has enabled cybersecurity professionals to raise their profile. However, the security function often faces relatively low levels of trusted consultation with other parts of the business.

3. Failure to improve workforce culture and ways of working

The views of employers and employees on workforce culture are diverging: Staff turnover is making employers more pessimistic about how the pandemic has affected company culture, but employees feel empowered through remote working. According to How workforce rebalancing is building pressure in the talent pipeline, 91% of Technology, Media & Entertainment, and Telecommunications (TMT) employees want to work remotely for two or more days a week, and 25% of TMT employers believe everyone should return five days a week. Telcos need to listen and respond to their people — or risk losing key talent.

4. Poor management of sustainability agenda

According to EY’s Global Climate Risk Disclosure Barometer the quality of telcos’ climate change disclosures has worsened year-over-year, while reporting of ESG metrics such as renewable energy consumption is often lacking. What’s more, 39% of telcos don’t disclose a specific net-zero strategy, transition plan or decarbonization pathway. Customer needs are also evolving rapidly: 47% of large businesses do not think that vendor 5G and IoT use cases adequately address their sustainability needs. Operators must raise their game if they are to adapt to changing stakeholder expectations.

5. Inability to accelerate efficiencies through digitization

Today’s inflationary pressures make it even more vital that telcos increase efficiency and agility. Yet the EY Tech Horizon Study finds that their ability to transform through new technologies is hampered by complexity in various forms. Human factors are also limiting progress, with operators citing the negative impact of remote working on collaboration as the top cultural challenge facing their transformation agendas.

6. Failure to ensure infrastructure resilience and reach

The EY Global Decoding the Digital Home Study shows that 28% of households frequently experience an unreliable broadband connection. The reliability challenge for operators is compounded by relentlessly rising data usage and continuing worries over the digital divide, with the pandemic having further polarized the digital haves and have-nots. Even in areas where networks are available, households struggle to afford packages, meaning more must be done to convert infrastructure coverage into take-up of services.

7. Inability to take advantage of new business models

Saturation in consumer markets means that many operators are prioritizing B2B growth opportunities. But this focus has yet to deliver a meaningful upside, partly because the proportion of revenues coming from higher-growth offerings, such as IoT and cloud, remains relatively small. There’s also a lack of alignment between telcos’ new offerings and what enterprise customers are now looking for, particularly in emerging service domains such as network-as-a-service.

8. Failure to maximize the value of infrastructure assets

Divestments, carve-outs and joint ventures are helping telcos reconfigure ownership models for various types of infrastructure. Activist shareholders are an important catalyst, with 63% of telcos saying that activist pressure has prompted a strategic review. But internal challenges persist, with most telco CEOs believing a clearer distinction between core and non-core infrastructure could help their divestiture plans and many believing they have missed opportunities to reimagine their core business when divesting.

9. Ineffective engagement with external ecosystems

The network infrastructure landscape is increasingly fluid. Various countries have imposed restrictions on high-risk vendors, and technological advances have spurred the entry of software-centric network suppliers. There’s also growing demand for private 5G networks and suppliers that offer ecosystem relationships to their business customers. All of these developments require telcos to escalate external collaboration. Yet only 11% of telcos view multiple partnerships as core to new business models.

10. Inability to adapt to changing regulatory landscape

Regulatory priorities are shifting, with growing focus on network supply chains, the digital divide and support for vulnerable customers. Fragmented regulatory approaches pose particular challenges, with many countries enacting or amending data protection rules, while growing regulatory focus on AI may add to risks relating to fragmentation. That said, digital policies can also create opportunities, such as through government support for infrastructure upgrades.