• Consulting firm EY interviewed scores of C-suite telco executives
• Most telcos expect AI to deliver major near-term productivity gains 
• But operating model challenges might prevent telcos from making the most of the opportunities that AI offers

Talent shortages, operating model challenges and a lack of strategic clarity and “organisational readiness”, are the main barriers to telcos making the most of their AI-related opportunities, according to a new report from global consulting firm EY based on interviews it conducted with more than 90 C-suite network operator executives. 

The latest EY-Parthenon Telco of Tomorrow study, which it conducts every two years, found that 97% of top-level telco executives “expect AI to deliver major productivity gains within five years,” with the main areas of AI focus being customer care and issue resolution (92%), network optimisation (67%) and augmented and service personalisation (38% each), the consulting firm noted in this press release. Indeed, 78% of executives believe AI will double efficiency levels in the next five years, according to EY’s findings.

However, the telco execs identified a number of significant challenges, with more than half (54%) identifying budget constraints as a barrier, while 43% cited “insufficient current skills”. Leaders also point to a lack of alignment between technology and business strategy as a significant obstacle, while 34% “identify a lack of clarity around their strategic North Star as a key barrier to transformation”.

Cédric Foray, EY global telecommunications sector leader, stated: “Telcos are not short of growth opportunities. The greater challenge is whether they have the operating models, skills and strategic clarity needed to capture them. AI has the potential to reshape how telecom companies operate, but technology deployment alone will not determine success. The organisations that create the most value will be those that successfully align business strategy, talent development and operating model transformation.”

And creating value, rather than just thinking about efficiencies and improved productivity, is what telcos are most focused on as they evolve their AI-native telco strategies, as TelecomTV found out when it analysed the data in its first AI-Native Telco Index, which has just been published – see New report highlights telco focus on AI-native revenue opportunities.

So – what are these growth opportunities? It goes without saying these lie outside traditional connectivity services, though it seems not all senior telco executives are convinced of the opportunity as, according to EY’s study, only 50% of the executives interviewed identified “non-core services as a leading growth catalyst”, though that is an increase from the 34% reported in the 2024 edition of the Telco of Tomorrow study. 

“Reflecting this shift, 47% rank overhauling business models to accelerate non-core growth among their top strategic priorities for the next five years,” noted EY, which cited cybersecurity, sovereign cloud, AI infrastructure and GPU-as-a-service (GPUaaS) as key opportunities. “Many leaders believe telcos should focus on opportunities where infrastructure assets, trusted brands and customer relationships provide a credible competitive advantage,” stated EY. 

People pressures

The human resources factor is set to be at the heart of AI strategy-related changes, with EY’s telco respondents identifying “significant workforce disruption” during the coming years, with 69% expecting three-quarters of their workforce to be “either upskilled or replaced over the next five years as organisations adapt to increasingly AI-enabled operating models”.

That training of the telco workforce is absolutely critical for any telco wanting to become an AI-native operator, noted Philippe Ensarguet, VP of cloud and software engineering at Orange, during a recent interview with TelecomTV on the sidelines of the the AI-Native Telco Forum (ANTF) in Düsseldorf. Talking about what it takes to become an AI-native telco, he noted that “upskilling and reskilling is extremely important. Leading AI projects, supervising agentic AI systems is new… but it’s heavily connected with the networks, because you cannot automate and you cannot bring agentic [into the] system without having a very deep knowledge about what needs to be automated. So that’s the reason why, for me, job upskilling and reskilling is extremely important in the transformation that we are having,” stated Ensarguet.

But the telcos are not hopeful of being able to recruit the people they believe they need: “Only 31% of leaders believe the telecom sector will be among the most attractive industries for employees in five years,” noted EY (though that seems rather optimistic!). 

“The workforce challenge extends beyond reskilling,” stated Foray. “Telecom companies must also rethink organisational structures, redesign roles and processes, and develop new leadership capabilities to support the next phase of transformation. Leaders that simply add AI to existing ways of working risk missing much of the value. The opportunity lies in reengineering how work gets done across the organisation.”

- Ray Le Maistre, Editorial Director, TelecomTV