- Ineffective digital growth tops telecoms risk ranking
- Telcos face rising capex burden as a new wave of network investments emerge
- 5G presents an entry point for disruptors with unique competencies
With digital services now the leading priority for the telecommunications C-suite, it is little surprise that ineffective digital growth tops a new EY ranking, Top 10 risks for telecommunications operators. But as telcos prepare for the introduction of 5G, security requirements due to increased data protection regulation and the widening talent-skills gap are growing risks that demand a shift in approach.
Underestimating changing imperatives around privacy, security and trust is listed second in the risk ranking. With data protection scandals continuing to unfold across the globe, regulators are responding with a range of compliance requirements. And as the Internet of Things and the promise of 5G increases data flows, the risk landscape is intensifying. The latest EY Global Capital Confidence Barometer reflects this, with 47% of telecoms executives citing regulatory and government issues as the biggest threat to future deal-making over the next 12 months.
Tom Loozen, EY Global Telecommunications Leader, says:
“Gigabit infrastructure is set to unlock the power of intelligent connectivity and pressure is mounting for telco operators to claim first mover advantage. As 5G and the Internet of Things spur an increase in connectivity end-points, security concerns will become even more pronounced. In this climate, trust is now a key differentiator for telcos, and they should position security at the heart of customer interactions while keeping current with the evolving regulatory landscape.”
Telcos face digital skills gap and mounting capital expenditure burden
Ranked fourth is the failure to prioritize workforce planning. While telco operators recognize that digital skills are lacking in their organizations, only 3% see growing and retaining talent as a top strategic priority according to an EY survey of telco industry leaders. Another recent EY study further highlights this disconnect, with just 57% of European businesses aligning their people strategy with their digital transformation agenda. As technology cycles continue to gather pace, a holistic approach to workforce design and reskilling is critical to boosting telco productivity, preventing silos and delivering a superior customer experience.
The inability to combat the growing capital expenditure burden ranks fifth, as telcos contend with a new wave of network investment ― including 5G, low-power wide area networks and gigabit fiber. While network quality remains a fundamental differentiator, the report finds that rising capital intensity and a more diverse portfolio of network assets are making it increasingly challenging for telcos to achieve strong returns on investment.
Market leaders will navigate disruption to harness innovation
As demand for intelligent connectivity continues to escalate, failure to navigate evolving disruption scenarios (6th in the ranking) and to collaborate with strategic partners as a route to innovation (10th), are also highlighted as mission critical risks.
Loozen says: “While technologies provide an opportunity for operators to create a range of new experiences, they also present an entry point for nimble disruptors with unique competencies. As telcos move into the 5G era, a disciplined approach to strategic partnerships and targeted acquisitions of startups and industry verticals can be a route to diversification. Failure to harness these interactions within a comprehensive innovation framework could signal the demise of less aspirational operators.”
Other risks shortlisted in the ranking include inadequate portfolio management (seventh position), and insufficient engagement with industry verticals and the public sector (ninth).
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