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 an 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%[1], telcos 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 connection [2] since the pandemic began, telcos need to do more to sustain positive customer perception about the service they receive.
Praveen Shankar, EY’s Head of Technology, Media and Telecommunications (TMT) for the UK & Ireland, says: “Since the outbreak of the pandemic, networks have coped well with the sharp surge in home working, entertainment and schooling and telcos have generated favourable customer opinion as a result. Yet making the most of their critical role in society will require new thinking and competencies. By improving network resilience and accelerating the digitisation of systems and processes, telcos can ensure they are well-placed to thrive in the future.”
Realising the transformation agenda amid geopolitical upheaval
The inability to scale digitisation 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. Meanwhile, technology players are moving to exert more control over value chains and new mobile entrants continue to drive down pricing to gain market share.
Adrian Baschnonga, EY Global Telecommunications Lead Analyst, says: “We are facing a perfect storm of geopolitical upheaval, with the COVID-19 crisis dampening global trade amid intensifying competition around 5G technology and ongoing trade disputes. As a result, country-level operating environments are diverging, and it is becoming ever more essential that telcos adopt agile risk frameworks that can adapt to specific market scenarios.”
Building trust and articulating the 5G vision are 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.[4] 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.[5]
At seventh position in the top 10 is ineffective engagement with industry verticals and the public sector, often due to low awareness of the benefits of 5G. According to the report, while different industries are at varying stages of their 5G investment journey, they all need support to realise 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.[6] The report also highlights the opportunity for the sector to strengthen its societal position more broadly.
Praveen Shankar says: “The relationship between telcos and government is deepening, with operators playing a crucial role in the response to the pandemic and recovery. This puts telecoms’ status as a national strategic asset more so than ever.”
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).
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:
1. Compliance threats: originating in politics, law regulation or corporate governance
2. Operational threats: impacting the processes, systems, people and overall value chain of the business
3. Strategic threats: relating to customers, competitors and investors
4. Financial threats: stemming from volatility in markets, ecosystems and investments
