Telcom sector faces rising risks in AI, ineffective transformation and evolving geopolitical environment 

• Privacy, security and trust are the top risks facing telcos, with responsible AI in focus
• Ineffective transformation through new technologies now ranks second 
• Evolving geopolitical environment is a new entry in fifth on the Top 10 risk radar, adding to external uncertainties facing telcos

SINGAPORE, 21 NOVEMBER 2025. Underestimating changing imperatives in privacy, security and trust remains as the top risk facing telecommunications companies in 2026, underlining the continued urgency of challenges in these areas for the industry. According to the annual EY report, Top 10 risks in telecommunications, telcos’ responsible artificial intelligence (AI) practices are falling short, while their cybersecurity functions feel under-prepared for a shifting threat landscape. And while a changing geopolitical environment brings new challenges, telcos can also take advantage of the drive towards digital sovereignty. 

The top 10 risks included in the 2026 report are:

1. Underestimating changing imperatives in privacy, security and trust

2. Ineffective transformation through new technologies 

3. Inadequate talent, skills and culture management

4. Inadequate network value proposition and performance

5. Insufficient adaptation to evolving geopolitical environment

6. Inability to take advantage of new business models

7. Ineffective engagement with external ecosystems 

8. Failure to respond effectively to changing customer needs

9. Poor management of the sustainability agenda

10. Inadequate operating models to maximize value creation

The EY Responsible AI Survey¹ reveals that only 59% of telco respondents globally state they have a robust methodology for identifying, assessing and mitigating the risks associated with AI, against 66% across all sectors. In terms of specific measures used to provide trust in AI systems, telcos are less likely to leverage internal audits, AI ethics policies and third-party attestations, compared with all other sectors.

A further cause for concern is that telcos’ cybersecurity functions are struggling to broaden their role and remit while responding to an evolving cyberthreat environment. The leading internal challenges cited by industry chief information security officers (CISOs) surveyed in a recent EY research study² are inadequate cybersecurity budgets (55%), difficulties in balancing cybersecurity with the speed of corporate innovation (40%), and a lack of cybersecurity input into cross-function leadership decision-making (36%). Increasing the strategic impact and influence of the cybersecurity function will require greater commitment across telecoms organizations.

Joongshik Wang, EY Asean Technology, Media & Entertainment and Telecommunications Leader, shares his observations on telcos in Southeast Asia:

“For telcos, responsible AI is about trust as much as it is about compliance. As operators in Southeast Asia embed AI into network optimization, new digital services and customer engagement, transparency and accountability become critical. In Southeast Asia’s competitive telecommunications sector, putting in place cybersecurity and data governance frameworks provides dual benefit – operational resilience and the ability to innovate safely for operators, and confidence and service reliability for consumers. Responsible AI practices will determine which telco can turn AI from a technical capability into a sustained business advantage.”

Ineffective transformation through new technologies

Challenges with transformation via new technologies rank second this year, with several factors hampering their efforts to scale up their AI plans. According to the EY Responsible AI Survey,³ the top concerns of telco CEO respondents globally around AI adoption include resource constraints and the difficulty of developing effective governance frameworks (both 55%), ahead of regulatory complexity (53%) and challenges around use case prioritization (40%). These uncertainties are resulting in companies taking dramatically divergent approaches to AI: while 33% are planning to accelerate future AI investments on the back of previous positive results, almost as many – 32% – are scaling back or reconsidering future AI investments.

Compounding these pain points, telcos globally also face ongoing pressure to decommission legacy IT systems and older network technologies –- vital if they are to increase levels of efficiency and agility.

The challenges around new technologies are compounded by the long-standing but fast-increasing pressures to decommission legacy IT and network elements. Network switch-offs are progressing in both mobile (2G/3G networks) and fixed-line (copper). During these transitions it is vital to manage and mitigate risks carefully to maintain network reliability and manage customer device and service upgrades appropriately.

Wang adds:

“In Southeast Asia, consumers now expect more reliable networks, bundled services, flexible financing options and integrated lifestyle offerings. To meet these expectations and stay competitive against cloud-native hyperscalers, telcos must modernize their legacy systems and networks to become more agile. This will enable them to evolve from traditional connectivity providers into builders of platforms, solutions and ecosystems that can power the digital economy.”

Inadequate talent, skills and culture management

Talent and skills rank third as the top risks facing telcos in the report. Telcos’ need to acquire new skills is being driven by developments ranging from the advancing automation of network and IT functions to in-house platform development and the integration of multi-vendor technology solutions. Industry research⁴ shows that these factors are driving up demand for specific skills, with the roles and capabilities where demand is greatest now led by cybersecurity (67%), AI and machine learning (65%), IT infrastructure (63%) and data science (60%). Crucially, many of these roles are especially difficult to fill, subject to barriers including limited availability of the relevant skills; too many companies striving to recruit the same people; and telcos’ inability to pay the competitive level of salaries being offered in sectors like tech or financial services. 

Backdrop of geopolitical tensions add to external uncertainties 

The external pressures facing telcos are exacerbated by the current geopolitical environment, which is a clear cause for concern, ranking fifth place on the top 10 risk radar. In the May 2025 edition of the EY CEO Outlook Study⁵, 22% of the telco leaders surveyed globally cite geopolitical tensions as a threat to growth in 2025, alongside broader macroeconomic uncertainty (18%) and related developments in trade and fiscal policies (13%). Telco CEOs are also sensitive to a range of global trade disputes, with 13% believing that the US-China tensions would have a big impact on their business.

While telcos’ direct exposure to the potential impacts of tariffs is relatively limited, the same is not true of their upstream suppliers such as device manufacturers and network vendors. An overwhelming 82% of telco respondents globally are confident of their ability to pass potential price increases onto customers, but increased device costs may add to lengthening handset replacement cycles. Against this background, geostrategic activities inside companies are on the increase: another EY study⁶ finds that 37% of geostrategic actions are being undertaken at multiple levels within organizations in 2025, up from 24% in 2021.

Wang concludes:

“Macroeconomic uncertainty and geopolitical shifts are now strategic realities, not short-term disruptions. To position themselves strongly in this environment, telcos should look at diversifying supply chains, modernizing infrastructure and staying close to consumer needs.”

The full report outlining the top 10 risks can be found here.

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Notes to editors

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About the report: purpose and methodology 

Top 10 Risks in Telecommunications 2026 is the latest in our ongoing series of reports designed to pinpoint the most critical risks facing the telecommunications sector. Our analysis draws on the EY insights program by leveraging insights from our primary and secondary research and enriching them with the evolving perspectives of our sector practitioners.

Footnote:

¹ EY Responsible AI Survey, June 2025 (975 industry executive respondents, including 59 from the telecoms sector)

² EY Global Cybersecurity Leadership Insights Study, May 2025 (551 C-suite and cybersecurity leader responses, including 53 from the telecoms sector)

³ EY Responsible AI Survey, June 2025 (975 industry executive respondents, including 59 from the telecoms sector)

⁴ TM Forum “Finding skills for the future: inside the telco talent revolution”, 2024 (Based on a survey of 48 telco industry executives

⁵ EY CEO Outlook Study, April 2025 (includes 60 telecoms respondents)

⁶ EY Geostrategy in Practice Study, April 2025 (based on a survey of 1,000 executives across all sectors)