Top 10 risks for telecommunications in 2024

The telecoms industry occupies a unique position at the nexus of technological change, geopolitical strain, economic shift and societal development. As a result, it has a risk universe that’s arguably more complex and fast-changing than any other sector.

Against this backdrop of fast-moving change, we’ve focused our attention on the year ahead. Here we have identified what we consider to be the top 10 risks facing the sector in 2024.

Risk 1: Underestimating changing imperatives in privacy, security and trust

For telecom operators, the challenges around cybersecurity are mounting and the rise of Generative Artificial Intelligence (GenAI) is putting data governance under strain. The latest EY CEO Outlook Pulse finds that four in five telcos agree AI is a force for good, but more than seven in 10 believe they must do more to mitigate against AI “bad actors” and pay greater attention to the ethical implications of AI.

Risk 2: Insufficient response to customers during the cost-of-living crisis

The latest EY Decoding the Digital Home study finds that just one-third of households think telcos have been supportive during the cost-of-living crisis. Three-quarters of respondents believe broadband providers should offer more fixed-price guarantees, and almost half (49%) find explanations of price changes difficult to understand. These gripes are encouraging users to shop around, resulting in telcos losing control of the path to purchase.

Risk 3: Inadequate talent and skills management

Financial pressures are causing telcos to dial down their recruitment. In the EY 2023 Work Reimagined Survey, 55% of telecom employers say they’re freezing hiring, almost double the proportion across all sectors (28%). Tellingly, talent management dominates the people-related risks cited by telecom employers – with retaining talent, attracting new talent, and developing next-generation talent all ranked in their top five.

Risk 4: Poor management of the sustainability agenda

The EY Global Climate Risk Disclosure Barometer shows that the quality of telcos’ climate-related financial disclosures has not risen significantly over the past two years, despite substantial expansion in their disclosures’ coverage. And 43% of telecom and technology companies don’t yet disclose a specific net-zero, transition or decarbonization strategy. Why the slow progress? Limited prioritization is one key challenge and difficulty building internal consensus also acts as a drag.

Risk 5: Inability to take advantage of new business models

While many telcos target growth opportunities in the enterprise market, B2B services such as internet of things (IoT) and security still account for only a fraction of revenues. Key performance indicators (KPIs) for the B2B segment tend to be under-reported compared to B2C, making it hard to evaluate telcos’ progress against strategy. A further barrier to B2B success revealed by the EY Reimagining Industry Futures study is that telcos have a credibility gap as digital advisors. While 53% of large enterprises view telcos as IoT experts, just 22% regard them as digital transformation experts.

Risk 6: Inadequate network quality and value proposition

According to the latest global EY Decoding the Digital Home research, 26% of households experience an unreliable home broadband connection “often” or “very often,” and 29% say the same about their mobile data signal inside the home. While operators are taking steps to improve service speed and quality, customers distrust performance promises. Value propositions need attention: one in three find it difficult to correlate speed to performance, while half don’t feel faster speeds merit a premium price.

Risk 7: Failure to improve workforce culture and ways of working

In this year’s EY Work Reimagined Study, 30% of telco employees say they prefer working fully remotely and commuting only when required, compared with 23% across all sectors. This higher propensity to work remotely affects skills development, with access to learning and skills (47%) emerging as the top factor cited by telco employees for thriving as remote or hybrid workers.

Risk 8: Ineffective engagement with external ecosystems

Enterprises are more receptive to buying from telcos with ecosystem awareness and capabilities. The latest EY Reimagining Industry Futures Study finds that 71% of corporations prioritize 5G suppliers with ecosystem relationships. Yet, while most operators now use partnerships and business ecosystems to provide services, the EY Tech Horizon Study shows various factors are hindering their effectiveness. Causes for skepticism about ecosystems are topped by uncertainty over return on investment, followed by attachment to more traditional ways of driving growth and concerns over cybersecurity.

Risk 9: Inability to adapt to the changing regulatory landscape

Deep concern over compliance burdens comes across clearly in the latest EY CEO Outlook Pulse, with 61% of telco leaders believing regulatory risks will significantly impact their business’s performance over the coming year. Recent merger reviews have been contentious in some markets, and tax frameworks are also in flux. Another potential pain point is the embryonic regulation of AI, where some divergence is already emerging at the country level in terms of the balance between guidelines and planned legislation.

Risk 10: Failure to maximize the value of infrastructure assets

Telco efforts to release value from their infrastructure are gathering pace and scale. The EY CEO Outlook Pulse survey underlines the continued focus on infrastructure carve-outs, with 41% of telco CEOs saying they’ll pursue divestments, spin-offs and IPOs in the coming year and 61% seeking to form joint ventures or strategic alliances.

For the full report and insight into how to mitigate these risks please visit ey.com/telecommunications.