EY Reveals Top Telco Risks: AI, Geopolitics & Transformation

The telecommunications sector is grappling with an increasingly complex risk environment, where challenges in privacy, security and trust remain the top concern. According to the annual EY report, Top 10 Risks in Telecommunications, ineffective transformation through new technologies and a volatile geopolitical landscape are escalating as significant threats. The report highlights that while many organisations feel underprepared for the shifts, the drive towards digital sovereignty presents unique opportunities for growth and strategic repositioning.

The report delves into the most critical of these challenges, highlighting the urgent need for strategic adaptation across the industry.

Privacy, security and trust remain paramount

Underestimating the evolving imperatives in privacy, security and trust remains the most critical risk for telecommunications companies in 2026. The industry faces urgent challenges, particularly in the domain of responsible AI.

The EY Responsible AI Pulse Survey reveals a concerning gap, with only 59% of telco respondents stating they have a robust methodology for identifying, assessing and mitigating AI-associated risks, compared to 66% across all other sectors.

Furthermore, telcos are less likely than their peers in different industries to leverage internal audits, AI ethics policies and third-party attestations to build trust in their AI systems.

Compounding the issue, cybersecurity functions within telcos are struggling to expand their role while responding to an evolving cyberthreat environment.

A recent EY research study identifies the leading internal challenges cited by chief information security officers (CISOs) as inadequate cybersecurity budgets, difficulties balancing cybersecurity with the speed of corporate innovation and a lack of cybersecurity input into cross-functional leadership decision-making.

To enhance the strategic influence of cybersecurity, a greater commitment is necessary from across telcos.

Cédric Foray, EY Global Telecommunications Leader, says: “Telcos appear to be lagging behind other sectors in adopting measures to improve trust in AI. Customer receptivity to AI is not a given, meaning greater focus on responsible AI frameworks is essential.

"As part of it, telco leaders should be engaging regularly with cyber specialists to ensure that their approach is strategically fit for purpose.”

The challenge of ineffective transformation

Ranking second on the risk radar is ineffective transformation through new technologies. Telcos are encountering significant hurdles in their efforts to scale AI initiatives.

According to the survey, telco CEOs’ primary concerns around AI adoption are resource constraints and the difficulty of developing effective governance frameworks (both cited by 55% of respondents). These were followed by regulatory complexity (53%) and challenges in use-case prioritisation (40%).

Such uncertainties are leading to starkly different investment strategies. While 33% of telcos plan to accelerate future AI investments based on positive results, a nearly equal portion—32%—are scaling back or reconsidering their plans.

The transformation pains are exacerbated by the persistent pressure to decommission legacy IT systems and older network technologies, such as 2G/3G mobile networks and fixed-line copper.

Managing the transitions is vital for boosting efficiency and agility, but it needs careful risk mitigation to maintain network reliability and manage customer upgrades effectively.

Bridging the talent and culture gap

Inadequate management of talent, skills and culture stands as the third significant risk. The industry’s push towards network automation, in-house platform development and multi-vendor technology integration is driving up demand for specialised skills.

Industry research indicates the most sought-after roles are in cybersecurity (67%), AI and machine learning (65%), IT infrastructure (63%) and data science (60%).

However, filling these positions is exceptionally difficult due to a limited talent pool, intense competition and the inability of telcos to match the competitive salaries offered by the tech and financial services sectors.

Adrian Baschnonga, EY Global Technology, Media & Entertainment and Telecommunications (TMT) Lead Analyst, says: “The telco skills shortage is becoming more pronounced, particularly as operators look to take advantage of new growth opportunities in areas like AI while ensuring they have the right competencies in place to create new customer value propositions.

"Given the ongoing competition for new talent, reskilling and upskilling initiatives are assuming ever greater importance, while telcos can collaborate with technology partners in new ways to mitigate talent gaps.

"Looking ahead, changes to workforce culture – including greater emphasis on collaboration – are just as important if telcos are to maximise the impact of new skills and capabilities across different corporate functions and lines of business”.

Adapting to an unpredictable geopolitical landscape

A new entry at fifth on the risk radar is insufficient adaptation to the evolving geopolitical environment, which is adding to the external uncertainties facing telcos.

According to the latest EY CEO Outlook Study, 22% of telco leaders identified geopolitical tensions as a threat to their growth.

Telco CEOs are particularly sensitive to global trade disputes, with 17% believing US-Japan tensions would have the most significant impact on their business, followed by US-China tensions at 13%.

While direct exposure to tariffs is relatively limited, upstream suppliers, such as device manufacturers and network vendors, are more vulnerable.

An overwhelming 82% of telco respondents are confident in their ability to pass potential price increases to customers, but rising device costs could lengthen handset replacement cycles.

In response, geostrategic activities within companies are increasing, with another EY study finding that 37% of such actions were undertaken at multiple organisational levels in 2025, up from 24% in 2021.

However, a changing world order does create opportunities. Famke Krumbmüller, EY-Parthenon EMEIA Leader, Geostrategic Business Group, says: “The challenges created by a changing geopolitical environment are balanced by some opportunities for telcos to generate new value. National technology sovereignty agendas offer telcos a potential upside.”

Cédric adds that the shift “opens the possibility for them to play a more explicit role as infrastructure champions enabling national technology sectors to flourish, following shifts in digital policies to favour developing sovereign cloud and AI infrastructure services.”

He concludes: “To stay resilient and competitive, operators must both anticipate and address emerging risks while continuously monitoring for new threats. It is essential to assess how current risks may shift over time and adapt strategies accordingly, recognising that the risk landscape is always evolving.”