A year ago, the global telecoms industry was facing two-sided impacts from COVID-19. On the one hand, operators had gained positive mindshare with customers by providing critical – and resilient – connectivity to households and businesses. On the other, the industry was suffering revenue declines across most product categories, driving down market valuations.
What a difference a year can make. Share prices across the industry have recovered in all regions. And while telcos still face significant challenges – heightened regulatory intervention, geopolitical tensions and rising capex burden – the recovery in their share prices means they’re now better placed to address them, at a time when demand for connectivity has never been higher.
Against this background, the EY Global Telecommunications sector team has identified and analyzed the top 10 threats confronting the industry in 2021 and beyond. As in previous years, we’ve used the EY risk radar to categorize these 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 related to customers, competitors and investors
- Financial threats stemming from volatility in markets, ecosystems and business investments
Risers and fallers
Looking across the top 10 risks, it’s informative to note how they’ve changed since last year’s analysis. What are the big risers and fallers? Which risks have retained their ranking, and why?
One risk that has held firm is “Failure to ensure infrastructure reach and resilience,” ranked number one in both 2020 and 2021. With customers more focused than ever on the quality of their connectivity, improving network coverage and quality remains the key issue for the sector. And the pressure is being intensified by governments’ drive to bridge the digital divide, extending networks into underserved areas while addressing service affordability and digital literacy.
However, lower down the ranking, there’s been a significant change. This year’s second-ranked risk is “Underestimating changing imperatives in privacy, security and trust,” up sharply from number five last time. Against a background of rising cyberattacks and growing pressure on operators, cyber teams’ customers are exhibiting greater concern over data security, while increasing time online during the pandemic has fueled worries over digital wellbeing.
A further big riser – this time from outside the top 10 in 2020 – is this year’s number four, “Failure to mitigate supply chain disruption.” While supply chain issues were previously part of the regulatory agenda, they’ve now become a risk in their own right, with developments such as the chipset crunch compounding existing complexities around policies toward “high-risk” network vendors.
Also new in the top 10 this year is “Poor management of the sustainability agenda” at number five. With activist shareholders increasingly involved in the industry and news flows zeroing in on sustainability issues, refreshing net-zero targets and embracing sustainability as a core strategic principle are now board-level priorities.