EY Study: Why Telcos Must Prioritise Security

Artificial intelligence is bringing an age of advanced threats and the businesses of today are only as strong as their security teams. That is the message from EY’s Reimagining Industry Future study 2026, which places security as the leading attribute organisations look for in a provider, above price and performance.

The study's findings sharpen the focus on trust and compliance for telco companies. As enterprises accelerate investment in AI and analytics, they also place growing weight on data protection and cybersecurity. This could change how telcos position infrastructure and managed services in a competitive market.

“Several considerations feed into businesses’ technology investment plans and decisions, including new policies and laws governing data such as evolving cybersecurity requirements and emerging national digital sovereignty,” says Rob Atkinson, UK&I Technology, Media & Entertainment and Telecommunications Market Leader at EY.

“Fundamentally, providers can no longer rely on legacy offerings: they need to adapt their service portfolios and partner eco-systems at speed to stay abreast of fast-changing customer requirements.”

Sovereign cloud reshapes telco strategy

One of the clearest demands in telco is sovereign cloud, a a cloud computing environment designed to ensure data remains subject to the laws and governance structures of a specific country. This essentially means local oversight and compliance with national regulation in a particular data residency.

The study finds 17% of organisations already invest in sovereign cloud solutions and more than half plan to do so. The primary motivations are cybersecurity and tighter control over data for 61%. Building customer trust and meeting national regulatory obligations follow close behind.

Sovereign cloud presents both pressure and opportunity for telcos. Many already manage data centres and provide connectivity that underpins cloud services, and the expectation now extends beyond connectivity to assurance. This is proof that data remains secure and insulated from potential geopolitical shocks. 

“The move to sovereign cloud is forcing businesses to reappraise their supplier relationships, says Adrian Baschnonga, Global Technology, Media & Entertainment and Telecommunications Lead Analyst at EY.

“Service providers should carefully consider their go-to-market strategies in sovereign cloud, making sure that they meet their customers’ changing business objectives, while also exploring new ways to differentiate their offerings.”

Enterprises are asking tougher questions about where data resides, which laws apply and how resilient operations remain in the face of political tension or regulatory change, and vendors are facing deeper due diligence on compliance frameworks and long term viability.

The study indicates that reputation alone is no longer enough for telcos as their clarity of sovereign capabilities and audit processes become central to competitive positioning.

Security and AI redefine supplier value

As enterprise priorities are evolving so are the expectations of suppliers. Security is the single most important quality enterprises seek from telecoms and technology suppliers. which places telecoms operators in direct competition with IT and cloud players on risk management and regulatory alignment.

Close behind security is the ability to embed AI into service delivery. Enterprises want automated threat detection and analytics that support business outcomes. In some sectors like financial services and manufacturing, AI capability carries particular weight when selecting vendors.

The competition grows as respondents of the survey still rate IT and cloud providers more highly than telcos in delivering tangible business outcomes. A third of the participants see telcos primarily as infrastructure guardians, organisations that keep networks running and data moving. This holds truth particularly in healthcare and government, where reliability and compliance are critical.

Rob argues there is room for telcos to expand their role: “The outlook is positive for telcos that can enhance their role as security specialists, given B2B customers’ growing focus on vendor security credentials and the emergence of new security related services, such as sovereign cloud and fraud management APIs.”

An application programming interface, or API, allows different software systems to communicate. Fraud management APIs enable businesses to integrate tools that detect and prevent fraudulent activity. If telcos offered these services, their value would extend beyond connectivity into application layer security.

Enterprises call for better service engagement. Many want suppliers to demonstrate how they use technology internally and offer more agile sales interaction. The commercial relationship matters as much as the technical proposition.

Adrian says: “There is a real business demand for vendors that act as strategic collaborators, not just technology providers.

“Organisations are also keen to reduce complexity and are demanding more agile sales interactions and simpler product options.

“Service providers that can act as consultative partners, while also delivering smoother customer experiences, will gain positive traction in a crowded market.”

With over 43% of enterprises planning to consolidate vendors within the next year, competition has intensified.

The study sets out a direct challenge to telcos to strengthen their security credentials, embed AI into services and articulate sovereign cloud capabilities, while refining engagement models to match the expectations of enterprises.