The ever-changing requirements for privacy, security, and building trust will be the biggest risks that telecommunication companies will have to face in 2024. According to EY’s annual report, ensuring cyber resilience poses the biggest challenge, and generative AI puts the established data management strategies to the test. An overwhelming majority of the surveyed telecommunication sector (68%) believes that it is not doing enough to prevent unintended consequences of AI use. Meanwhile, 74% claim that they need to take more action to prevent this technology from being used for cyberattacks and other malicious activities.
EY’s report – Top 10 risks in telecommunications 2024 – reveals that according to 53% of telecommunication operators, the cost of breaching cybersecurity regulations in their organization will exceed $3 million in 2023 (a year earlier, 40% believed so). The growing number of threats is not the only concern of the industry – the development of AI affects such crucial areas as privacy and ethics. In the opinion of 78% of the respondents, businesses should focus more on these issues, which would include better personal data protection and reducing data collection.
Artificial intelligence poses both a chance and a risk to telecommunications operators, and the industry is aware of this. According to two-thirds of the respondents (68%), telco companies are not taking sufficient action to prevent unintended consequences of artificial intelligence use. Even more respondents from this sector (74%) believe that they should go further when it comes to preventing cyberattacks using AI. Importantly, the point of debate is not the validity of this technology’s use, as the industry realizes that there is no turning back from it.
Telecommunication companies are characterized by complexity, and their success largely depends on the operational performance of various business units. Artificial intelligence has become a promising tool for simplifying and optimizing many tasks, especially in improving customer service. Leading operators are already using AI to maintain their competitiveness and increase their efficiency. However, in the race to the top, it is important not to overlook basic aspects, such as ethical issues related to the functioning of artificial intelligence. It’s crucial that it does not generate false information and that it properly protects sensitive data, says Mateusz Mazur, Partner at EY and leader of the Cloud Enablement and IT Advisory teams.
Attracting talents and business development
Threats related to cybersecurity and AI are not the only risks the telco sector must face. Insufficient management of talents and employees’ skills also made it to the list of the top ten threats, taking a high third place. However, artificial intelligence greatly affects this risk, too – its development creates a greater demand for digital talents, which are in shortage. On the other hand, more than half of the telecommunication sector employers (55%) froze recruitment – that’s almost twice as much as in all other sectors (28%).
Another challenge is effectively utilizing new business models, including B2B services such as the internet of things. Telecommunication companies lack credibility as digital advisors. According to an EY study, while 53% of large enterprises view operators as experts in IoT, only 22% also see them as specialists in digital transformation. As a result, the telco sector struggles with selling additional advisory or software-related services to businesses.
Budget cuts limit the search for talents with key digital skills. Therefore, telecommunication operators must strive even harder to enhance the skills of their current employees, including in new, future areas of operation such as digital services. Shifting focus more towards B2B is challenging, but given the increasing use of AI solutions, it is a natural stage of telecommunication sector development. The industry has adequate resources and skills to become a trusted partner in the area of digitization and the internet of things for other companies, comments Tadeusz Kurdziel, Manager at EY, leader of the Telco team.
Consumers are looking for better offers
Last year’s leader on the list of the biggest threats, providing an appropriate response to consumers’ needs due to the increasing cost of living, is now in the second place. Thus, it remains one of the biggest challenges for the whole industry. While 16% of consumers are actively reducing their expenditure on fixed and mobile connectivity, as many as 60% admitted that due to high living costs, they are searching for the most attractive offers. The percentage of households using price comparison tools or asking friends and relatives for recommendations increased from 19% last year to 30% in 2023.
The EY study also reveals that only a third of households believe that telecommunication operators showed them support and understanding during the crisis related to increasing living costs. Meanwhile, according to three-quarters of the respondents, broadband service providers should offer more fixed price guarantees, and nearly half (49%) found explanations related to price changes hard to understand. These phenomena are especially noticeable in Western European countries. In contrast, on the Polish market in particular, these feelings have been muted due to the lowest rates for telecommunication services in Europe, resulting from price wars in previous years. Additionally, introducing combined packages for mobile, fixed, and IP television services allowed for discounts on bundled offers, which is highly rated by clients on mass and business markets.
The competition among mobile operators for customers is becoming increasingly fierce, and now there’s another crucial factor – customers’ specific requirements. On the one hand, they want to receive the most attractive price offers that fit into their home budget, and on the other hand, they greatly appreciate positive shopping experiences. The times when the customer was just a number are long gone. Now, the sales process should be individualized as much as possible, based on hyper-personalization that considers customers’ needs and expectations as well as their previous interactions with the brand. To effectively aggregate such large amounts of data, it is necessary to use AI and machine learning solutions, emphasizes Michał Kopyt, Partner at EY Poland, leader of the area of digital engineering.
The 10 biggest global threats to the telco sector in 2024:
1. Underestimating the changing requirements for privacy, security, and trust.
2. An inadequate response to customers’ needs during the cost of living crisis.
3. Inappropriate management of talents and employees’ skills.
4. Poor management of a sustainable development program.
5. Not utilizing new business models.
6. Inadequate network quality and value proposition for customers.
7. No improvement in culture and working methods.
8. Ineffective engagement in external ecosystems.
9. An inability to adapt to the changing regulatory environment.
10. Lack of maximizing the value of infrastructure assets.
About the report
The Top 10 risks in telecommunications 2024 report is part of a series of reports aimed at identifying the most burning risks facing the telecommunication sector. The presented analysis is based on EY’s sector research program (Decoding The Digital Home, EY Work Reimagined Survey, CEO Outlook Pulse, EY Reimagining Industry Futures, EY Sustainable Value Study, Tech Horizon Study, Global Climate Risk Disclosure Barometer, Global Cybersecurity Leadership Insights Study), utilizing observations from EY’s industry and consumer surveys, and comparing them with the opinions of practitioners in the telco sector. The results were categorized using EY’s risk radar, which divides risk factors into four categories: regulatory compliance risks, operational risks, strategic risks, and financial risks.
