Telcos expect major AI driven productivity gains, but talent and operating model gaps threaten delivery

• 97% of telecom leaders expect AI to deliver major productivity gains within five years, but organizational readiness may hold them back
• Workforce transformation intensifies as 69% expect three-quarters of employees to be upskilled or replaced
• 50% view non-core services as a critical growth catalyst but disruption risks are growing

LONDON, Sept. 16, 2026 /PRNewswire/ -- Global Telecom company leaders see significant opportunities from AI, automation and new digital services, but many may be unprepared to capture the full value, according to the latest EY-Parthenon Telco of Tomorrow study. Conducted every two years and based on interviews with nearly 100 telecom C-suite leaders globally, the study highlights the strategic decisions shaping the industry.

While nearly all leaders expect AI to dramatically improve efficiency over the next five years, the study suggests that talent shortages, operating model challenges and a lack of strategic clarity could slow progress. The findings indicate that telcos are not short of growth opportunities but may lack the organizational readiness needed to capture them.

Cédric Foray, EY Global Telecommunications Sector Leader, says:

"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 organizations that create the most value will be those that successfully align business strategy, talent development and operating model transformation."

AI ambition is running ahead of organizational readiness

AI has become a defining transformation priority for the telecom sector. According to the study, 97% of telecom executives expect AI to deliver major productivity and operational performance gains within five years. Leaders are prioritizing AI across a range of business functions, with customer care and issue resolution (92%), network optimization (67%) and augmented and service personalization (38% each) emerging as the most common use case.

However, realizing these gains remains far from guaranteed. More than half (54%) identify budget constraints as a barrier to transformation, while 43% cite insufficient current skills. Leaders also point to a lack of alignment between technology and business strategy as a significant obstacle to successful transformation. Notably, 34% identify a lack of clarity around their strategic North Star as a key barrier to transformation.

The findings suggest that AI's value will depend not simply on technology investment, but on the organization's ability to redesign operating models and embed AI into core business processes.

Telcos face a workforce transformation paradox

Insights from executive interviews point to significant workforce disruption ahead. Nearly seven in ten executives (69%) expect three-quarters of their workforce to be either upskilled or replaced over the next five years as organizations adapt to increasingly AI-enabled operating models.

Yet attracting the talent required to support this transformation remains a concern. Only 31% of leaders believe the telecom sector will be among the most attractive industries for employees in five years.

Cédric says: "The workforce challenge extends beyond reskilling. Telecom companies must also rethink organizational 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 organization."

Telcos look beyond connectivity to cybersecurity, sovereign cloud and AI infrastructure

As growth in traditional connectivity services remains relatively modest, telecom leaders are increasingly looking beyond their core business for new sources of value.

Half of executives (50%) identify non-core services as a leading growth catalyst, up from 34% in the previous EY-Parthenon Telco of Tomorrow study in 2024. Reflecting this shift, 47% rank overhauling business models to accelerate non-core growth among their top strategic priorities for the next five years. Key areas of focus include cybersecurity, sovereign cloud, AI infrastructure and GPU-as-a-service.

Many leaders believe telcos should focus on opportunities where infrastructure assets, trusted brands and customer relationships provide a credible competitive advantage. Notably, 64% of executives view superior customer understanding as critical competency for future success, compared with 49% who cite network quality. Reinforcing this view, 80% believe digital infrastructure remains a core asset that telecom companies should own and manage.

Satellite operators and hyperscalers reshape the competitive landscape

The competitive landscape is evolving rapidly. Two-thirds (66%) of executives view satellite operators as a leading source of disruption within the next five years, reflecting concerns that advances in low-Earth orbit (LEO) satellite services could challenge traditional connectivity models, particularly in underserved and rural markets.

Meanwhile, hyperscalers are creating a growing strategic tension for the industry. While increasingly viewed as competitors in enterprise markets, they are also expected to become some of telcos' most important ecosystem partners as demand for AI infrastructure drives closer alignment between connectivity, cloud and computing services.

Adrian Baschnonga, EY Global Telecommunications Lead Analyst, says:

"Competition is increasingly coming from outside traditional telecom boundaries. Satellite providers are expanding their ambitions, while hyperscalers are simultaneously becoming both competitors and essential partners. This makes strategic positioning more important than ever as telcos determine where they can create distinctive value within increasingly interconnected ecosystems."

Read the full study to read the five actions telcos should keep in mind as they maximize transformation opportunities ahead.