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How telcos can navigate emerging risks and opportunities in 2025
In this episode of the EY Tech Connect podcast, Adrian Baschnonga, Cedric Foray and Christina Winquist delve into top risks that will shape the future of telecommunication companies in 2025.
In this episode, Christina Winquist is joined by Adrian Baschnonga and Cedric Foray to discuss the top 10 risks that telecommunication operators will face as they prepare for 2025. The conversation focuses on the evolving landscape of the telecom industry, highlighting critical issues, such as trust, digital skills and the implementation of responsible artificial intelligence (AI).
The speakers explore how telecom companies can effectively transform their operations and leverage new technologies to enhance efficiency and drive growth. They delve into the necessity of adapting to new business models and fostering strategic partnerships, while also addressing the importance of talent management in navigating these challenges. As the telecom sector continues to evolve, this episode provides valuable insights and actionable strategies for operators looking to thrive in an increasingly competitive environment.
Hear insights from:
Adrian Baschnonga, EY Lead Global Analyst for the Technology, media & entertainment, and telecommunications (TMT) sector
Cedric Foray, EY Global Telecommunications Leader
Moderator: Christina Winquist, EY Global Brand, Marketing and Communications Lead for TMT
Understanding the top risks for telecommunication operators in 2025
Insights into the impact of AI and digital transformation on the telecom sector
Strategies for managing cyber threats and regulatory challenges
Opportunities for growth through new technologies and business models
For your convenience, full text transcript of this podcast is also available.
Welcome to the EY Tech Connect podcast, where we have candid conversation about the most pressing priorities facing tech, media and entertainment, and telecommunication companies, and provide strategic insights on the key issues that matter to them. As industry ecosystems evolve in new directions, we use these discussions to reflect on how companies can not only take advantage of new opportunities but also tackle emerging challenges.
Christina Winquist
Hi, everyone. Welcome to the EY Tech Connect podcast. My name is Christina Winquist. I’m the Global Brand, Marketing and Communications Lead for the technology, media and entertainment and telecommunications sectors. Something we like to call TMT. I’m here with Adrian Baschnonga, Global Analyst for TMT, and our Global Telecommunications Leader, Cedric Foray. Today, we’re going to be discussing the top 10 risks for telecommunication operators that they’ll be focusing on in 2025, as they continue to manage an expanding array of threats, including trust issues, digital skills and responsible artificial intelligence (AI). So, I’m going to start with you, Adrian. Can you describe the annual top 10 program and what you're seeing in the market?
Adrian Baschnonga
Yeah, absolutely, Christina. So, our Top 10 Risks in Telecoms study — it’s an annual study. We do it every year. And it’s really based on what we’re seeing in the market, what we’re hearing from our clients in the sector. And it also bakes in a lot of the research that we conduct inside telecoms, inside TMT and also some of our firmwide program. And we consider risks through the lens of compliance, operations, strategy and also financial threats, too. We think about the market and how it’s evolving as a whole. We know that geopolitical forces are having a huge impact on the sector. We know the new technologies, AI principally, are also redefining the art of the possible in the sector. And we know that transformation programs are progressing at pace as telcos look for higher levels of efficiency, new avenues for growth. And if we think about the market and how telcos are performing over the last 12 months, there’s some cause for optimism. We have seen some share prices recovering in a number of regions. We’re seeing capital intensity starting to moderate. Obviously, there’s a lot of interest in potential new service offerings through things, like Application Programming Interfaces (APIs) at the moment. On the flip side, though, we’re seeing lots of cyber attacks. We’re seeing telcos still feel their way around a growing industry ecosystem. And there’s a degree of sort of regulatory fragmentation as well — some of which is prompted by increasing economic nationalism. So, a lot of forces at work in the sector, and they all feed into our top 10 perspective.
Winquist
Got it. Yes. Lots happening in the market, that’s for sure. Cedric, let’s discuss risk three around ineffective transformation through technologies and not being able to leverage things, like new generative AI (GenAI) technology as part of telcos’ transformation. Can you talk a little bit about this?
Cedric Foray
Yes, of course. So, this risk has been newly identified in the 2025 edition. The necessity to transform in order to greater internal efficiency and activate the new differentiator is critical. As Adrian just explained, the telecom sector is currently undergoing numerous transformations, adopting values in emerging technologies, such as process automation, software-based network and AI. Focusing on AI and GenAI, telcos face a strategic decision: how to get the full transformative power of AI and GenAI. We’re surveying this for scalable result. Where should we concentrate our GenAI deployment for maximum return? What is the optimal choice of large language model? Who should be the partners on this journey? And our clients are confident in the impact of AI. Eighty-five percent of telcos expect it to be the key driver of transformation in the coming five years. Seventy percent of them are either fully implemented GenAI or are running trials. But successful outcomes cannot be taken for granted. Telco will only realize this potential by changing processes and organization across the enterprise. The second topic is planning and sequencing emerging tech deployment in the optimal way is crucial, especially given the rich mix of in-scope software and hardware, and the need to simplify legacy IT and network. Data quality is also an important topic. And finally, implementing effective KPIs to monitor the transformation is critical. How can we assess employee engagement? How can we track the financial impact? How can we measure the transformation of legacy IT systems? Telco that can focus on the right GenAI deployments will shape the future of the industry and set the pace for others to follow. I'm very confident that we will see an increasingly concrete announcement regarding the financial impact of GenAI implementation in the coming months, and particularly during MWC.
Winquist
All right. Fantastic. And as part of this overall transformation, Adrian, telcos are seeking new revenue growth sources. Why do you think they are having difficulty taking advantage of new business models?
Baschnonga
Yeah, that’s a really interesting question, Christina, because I think what’s different about the last 12 months, the next 12 months and the next 24 months is telcos are really faced with this very promising new growth opportunity around application programming interfaces, so-called APIs. And that’s a market that’s set to be worth US$7 billion by 2028. And it really represents this shift to network as a service — so, really selling the network in a new way. And you have APIs based on subscriber identity, location, network quality; and these can all unlock new use cases for telcos, whether it’s gaming, whether it’s for production, and so on. And really a new growth opportunity for them. And when you ask CEOs, is this important to you? Is it a growth driver? You know, 92% agree that it is — in one of our recent studies. But there are challenges. So, there’s a need for the ecosystem, a service ecosystem, to form to deliver this. There'll be reliance on other parts of TMT. It could be network vendors, it could be hyperscalers, as well as application developers. And to ensure that all the different parts of this ecosystem come together, that’s a kind of work in progress. We're seeing promising moves made in terms of more partnerships vertically and horizontally, but there’s still work to do there. And if you think about some of the higher-value APIs that are based around quality of service at the network level, for example, they'll start to rely on things like 5G stand-alone networks. One of the challenges there is that these 5G stand-alone networks, they've been quite slow to appear. Rollouts are well behind traditional 5G that still has 4G baked into it. So, a few things to watch out for there.
Winquist
Got it. Cedric, when we look at risk two on inadequate talent, skills and culture management, what do operators need to do to mitigate the risk?
Foray
That’s a critical topic. Very important for transformation. We used to say at EY that you need to put human at the center of transformation. In a recent telco of tomorrow’s study, 73% senior executive operators rate talent attraction and retention as the most important element of their people strategy, and 30% coaching and reskilling as a priority. And you know, Christina, recruiting in technology, software and AI poses challenges for telco. They are competing with tech players. So, how can they answer their attractiveness compared with pure tech companies? So, the risk inverse skill gap and the insufficient resource to drive the transformation is clear. HR of telcos will require a major change in the next five years to support this transformation. So, how can we upskill employees and attract new profile to advance this new initiative? The new HR value proposition of telco will be important. So, they have to develop this new value proposition that includes access to advanced tools, training and social programs. There is also in our study — an interesting topic around remote working, which is still a strong demand from the new generation. Remote working presents some limitation, especially regarding collaboration and upskilling. So, some adaptation will have to be organized in the coming years, and it will be important to succeed in that transformation.
Winquist
Yeah, the people piece is really, really important. I agree. So, Adrian, value chain disruption and a new set of competitors, like mobile virtual network operators, MVNOs, and cloud providers present another risk. What is your advice for our telco clients?
Baschnonga
Yeah, that’s a really interesting question. Actually, that’s a new entry in our top 10 this year. This whole notion of value chain disruption, and that really comes on the back of our recent telco tomorrow’s study, where we asked CXOs, what do you see as the greatest disruptive threats? And we found that there was this interesting contrast between the current and the future state of the set. So, right now, other telcos, MVNOs — they tend to stand out as disruptors, usually because they're competing on price. But if you ask about potential competitors five years out, we see hyperscalers actually topping the list. And we also see satellite companies rising as a perceived threat. And I think in recent months, we've seen lots of news flow around things like direct-to-smartphone satellite services, where you can basically connect to satellite just by an ordinary phone. And one at the moment, a lot of the relationships here with satphones, for example, they tend to be quite collaborative relationships. I think if you look at the leadership community in the sector, they are starting to think actually, are there new pressure points potentially appearing in other parts of the value chain? And one antidote to this could be to spend more on innovation, try and insulate yourself, or even occupy a wider value chain position, which could be interesting responses. But here, there’s a bit of a challenge as well, because when you look at levels of R&D spending in the telecom sector, it stands at just 1% of revenues. And you look at other parts of TMT, it’s 15%, it’s 20%, if you're an equipment vendor or a hyperscaler. So, maybe some thought to be put into that innovation agenda and really how to sort of mitigate the potential for disruption in the future.
Foray
Agree, Adrian, on that one if I may add, in this competition with hyperscalers or tech players, the topic of bringing some scale between telcos will be important. And you talked about the network API topic, and the fact that some global telcos are now part and the same JV to build a common solution around network API. It’s really the way to growing enterprise risk.
Baschnonga
Yeah, absolutely. That’s a really interesting point. Can we see more horizontal partnerships? Telcos building scale across borders and really trying to sort of build out a global value proposition in some of these new areas. Absolutely, Cedric.
Winquist
Yeah, really fascinating. And all of these services affect all of our day-to-day lives because telecoms are so integrated in everything we do. If you guys were able to boil it down, what are the two to three next steps telcos absolutely should take in 2025 to set themselves up for success, not only now, but in the next few years?
Baschnonga
I mean, if I was to kick off, I'd say it actually builds on the last threats or risks that we outlined. Really look at threats affecting your ecosystem. So, obviously internally, but think about your supplier relationships. Are there third-party risks that you're exposing yourself to? Because I think, while telecoms is a critical sector, it’s also joined up to a number of other different sectors, either as customers or partners, for example. So, I think that’s one area that telcos should certainly be looking at.
Foray
And maybe on my side, to finish also on a positive note, so we clearly focus on the top 10 risks. But at the end of the day, it’s also 10 opportunities for telcos. And the question is really how to build this mitigation strategy and to take the full benefit around this risk. And focusing on the impact of people and technology transformation will be really critical to face the vast majority of this risk.
Winquist
Yeah, you're absolutely right. We talk about the risks, but they truly are opportunities for our telco providers. You're absolutely correct. Thank you everybody for joining us today on EY’s Tech Connect podcast. For more thought-leading perspectives, visit ey.com/TMT. And don't forget to review and subscribe. Have a fabulous day.
