- Sustaining network quality and positive customer perception is mission critical
- 78% of telco respondents rethinking digital transformation plans amid pandemic
- Geopolitical disruption, changing imperatives in privacy and articulating the 5G vision also among top risks
While telcos have largely risen to the challenge of withstanding a surge in network demand during the COVID-19 pandemic, pressure to maintain infrastructure resilience and expand reach emerges as the most pressing sector challenge. This is according to EY report, Top 10 risks in telecommunications 2020, which combines EY industry insights and consumer survey data to shortlist the most urgent threats facing today’s telcos.
With initial pandemic lockdowns across the globe triggering traffic spikes of up to 70%, 1telcos have successfully assumed an elevated societal role as connectivity providers. But with 42% of UK consumers stating that telcos should focus resources on maintaining broadband quality and 32% of US consumers citing concerns about home internet reliability, speed and connection2 since the pandemic began, telcos need to do more to sustain positive customer perception about the service they receive.
Tom Loozen, EY Global Telecommunications Leader, says:
“Overall, networks have withstood a sharp increase in home working, entertainment and schooling during the pandemic and telcos have commanded favorable customer opinion as a result. However, revenues are set to decline across most product categories and telcos must not become complacent. The journey to recovery will require new thinking and competencies, shifting the customer promise from speed to reliability, so telcos can thrive in the ‘new normal.’”
Realizing the transformation agenda amid geopolitical upheaval
The inability to scale digitization initiatives ranks second on the risk radar. The COVID-19 pandemic is accelerating this drive, with 78% of telcos now either re-evaluating or adapting the speed of automation and digital transformation programs.3 Despite this reappraisal, historical barriers remain – including inadequate skills in analytics and AI.
Failure to mitigate escalating geopolitical and competitive disruption lists ninth in the ranking and is a theme that underpins all of the top 10 risks. With network equipment supply chains increasingly being disrupted by global trade forces, there are concerns that 5G rollouts could be delayed although telcos in Southeast Asia have actually begun accelerating their launch of commercial 5G services. Thailand’s telcos was the first country to offer 5G services in May 2020, followed by Singapore’s telcos in August.
Articulate the 5G vision
According to the report, while different industries are at varying stages of their 5G investment journey, they all need support to realize the opportunities on offer. Indeed, 80% of enterprises across verticals want 5G providers to articulate a more coherent 5G vision, underlining the need for clearer dialogue.4 This risk of ineffective engagement with industry verticals and the public sector ranks seventh, and it is often due to low awareness of the benefits of 5G.
Sam Wong, Managing Partner, Asean Markets, Ernst & Young Solutions LLP, comments:
“5G, along with industrial IoT, provides an opportunity for telcos to create unique use cases and solutions that are industry-specific. The IoT value chain is evolving and telcos should expand their role beyond being the connectivity provider. Establishing alliances and partnerships in the ecosystem will be important. Telcos can leverage existing relationships with enterprise and public sector clients, and develop deep understanding of sector issues and requirements to effectively develop the right solutions. Growth in enterprise business is imperative for telcos to realize their 5G vision.
While 5G opens up many new opportunities for telcos, the industry needs to overcome several challenges before unleashing 5G’s full potential. A key issue telcos in Southeast Asia face is the lack of monetizable use cases beyond enhanced mobile broadband, which limits the return on investment. Other challenges to tackle include business transformation, CAPEX and OPEX optimization, and regulatory issues. Telcos will need to fundamentally evaluate their role in the context of the IoT value chain and ask how they can transform from ‘telecom service provider’ to ‘digital service providers’.”
Building trust now mission critical
Ranked fifth are risks associated with changing imperatives in privacy, security and trust. Less than half (47%) of UK consumers feel they are in control of their online data, and reports of privacy issues relating to contact tracing apps and video call platforms have heightened concerns during the pandemic.5 The report highlights that the sector typically underestimates the link between trust and revenue growth, with nearly half (46%) of telcos perceiving cybersecurity as either compliance- or crisis-driven rather than as a proactive endeavor.6
Loozen says: “Telcos’ relationships with government are deepening, with operators playing a pivotal role in pandemic response and recovery, positioning telecoms’ status as a national strategic asset more so than ever. Making the most of this more intimate relationship will require ongoing focus.”
Other risks listed among the top 10 include: failure to redesign workforce purpose and inclusion (third in the ranking); failure to improve capex efficiency and network returns (fourth); poor management of investor and stakeholder expectations (sixth); inability to adapt to a changing regulatory landscape (eighth); and failure to take advantage of changing market structures (tenth). Access the full report here.
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About the report
The Top 10 risks in telecommunications 2020 is part of an ongoing series of reports designed to pinpoint the most critical risks facing the telecommunications sector. The analysis draws on a sector research program, leveraging insights from EY industry and consumer surveys, and harnessing them with the evolving perspectives of sector practitioners. Risks are categorized using the EY risk radar, which organizes risk factors into four domains:
- Compliance threats: originating in politics, law regulation or corporate governance
- Operational threats: impacting the processes, systems, people and overall value chain of the business
- Strategic threats: relating to customers, competitors and investors
- Financial threats: stemming from volatility in markets, ecosystems and investments