Trust and talent issues lead telco sector risks, with ineffective transformation a growing concern

• Security and trust remain the top telco risk, driven by AI concerns and escalating cyberthreats

• Talent and culture issues now rank second as telcos double down on digital skills

• Ineffective transformation is a new entry in third, reflecting the importance of technology choices and ongoing performance management

Underestimating changing imperatives in privacy, security and trust remains as the top risk facing telecommunications companies in 2025. According to the annual EY report, Top 10 risks in telecommunications, telcos face substantial challenges to their status as data custodians.

EY research across 10 markets globally found that customers are wary about the role artificial intelligence (AI) may play in their service provider interactions — with two-thirds wanting better explanations from connectivity providers about how it is being used. These fears among customers are arising at a time of heightened sensitivity around responsible usage of AI inside organizations. According to the 2024 EY Human Risk in Cybersecurity Survey, 39% of US employees are not confident that they know how to use AI responsibly.

For telcos, a further consideration around AI is that it is one of several factors adding to their cybersecurity risk burden. Telcos remain highly exposed to cyber-attacks, with the industry estimated to have been targeted by 57% of distributed denial of service (DDOS) attacks across all sectors in the first half of 2024, and damage to physical assets also in focus. 

Talent, reskilling and collaboration are critical for telcos

According to the EY Telco of Tomorrow study, 73% of telco leader respondents rate talent attraction and retention as the most important element of their people strategy, while talent and culture ranks the second top 10 risk, up one place from third last year. Reskilling and better collaboration are also cited as priorities by senior executives (50% and 42% respectively). However, redefined employee proposition and purpose – important to support talent attraction – are underscored as people priorities, with only 10% of telco leaders respondents of the same study viewing this as a critical element of their workforce.

HR functions are under pressure to adapt, as 85% of telco employee respondents believe HR will require major or moderate change over the next five years to meet the talent and strategic needs of the business, according to the EY Work Reimagined Survey. And while telcos surveyed allow fully remote working (41%), most telco employee respondents believe this presents challenges to collaborating with colleagues and using workplace technology.

The effectiveness of transformation programs is under scrutiny

Ineffective transformation through new technologies is a new entry this year, ranking third in the top 10 risks. A variety of emerging technologies will propel transformation in telecoms both now and in the future, according to the top 10 risks in telecommunications report. EY research shows that process automation and software-based networks are currently seen as the most important technologies in this regard — but also that AI is set to become the dominant transformation driver in years to come. These sentiments underline the opportunities at hand, but maximizing value from the transition to new technologies brings challenges of its own.

Telcos face a challenging decision when it comes to selecting performance measures to evaluate the success of their transformation programs. While confidence in AI’s transformative potential is high — 79% of telcos believe that it will double efficiency levels in five years’ time — establishing effective key performance indicators (KPIs) is crucial for assessing the progress of technology transformation. This is especially important considering that 75% of telco CEOs respondents believe the burden of legacy IT prevents their organization from innovating at pace.

Value chain disruption is an emerging sector threat

Failure to mitigate value chain disruption is another new entry this year and ranks eighth in the top 10 risks, with threats from outside the sector being a growing area of concern among telcos. While established connectivity providers and mobile virtual network operators (MVNOs) are currently viewed as the leading sources of competitive disruption, 76% of telco leaders respondents believe hyper-scalers will be a source of disruption in five years’ time, while more than one in four point (29%) to satellite operators. While these entities are also important partners, it is clear that senior executives are mindful of risks posed by other entities in the industry value chain.

The full list of top 10 risks in telecommunications for 2025 are:

1. Underestimating changing imperatives in privacy, security and trust
2. Inadequate talent, skills and culture management
3. Ineffective transformation through new technologies
4. Poor management of the sustainability agenda
5. Inability to take advantage of new business models
6. Inadequate network reliability and resilience
7. Ineffective engagement with external ecosystems
8. Failure to mitigate value chain disruption
9. Inability to adapt to the changing regulatory and policy landscape
10. Inadequate operating models to maximize value creation

About the report: purpose and methodology

Top 10 Risks in Telecommunications 2025 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, harnessing them with the evolving perspectives of our sector practitioners.