The technology and digital world is becoming the world itself. We were recently reminded of this in a Financial Times article by Martin Wolf, who pointed out how eight of the world’s most highly valued companies are technology businesses. But what concerned me, was that none of these companies are European.
I believe, that if we are to strengthen Europe’s competitive position in these digital times, we need to finally unleash the potential of European telcos. Unfortunately, numbers describe a challenging scenario and regulation is not helping. This is bad news for all Europeans.
With 5G and fiber networks becoming the new springboard for all areas of the economy and society, all citizens, as well as big and small businesses, have a direct interest in a strong telecom sector. Investment in digital networks and services, more and more, is the irreplaceable tool to achieve sustained and sustainable growth.
Is Europe investing enough?
All Europeans have an interest in seeing this number grow and match the ambitions of the Gigabit Society objectives. Such objectives, as indicated by both the European Commission and BCG, will require at least half a trillion euros.
In the past year, according to new IDATE figures, CapEx growth has still been flat (+0.2 percent in EU28), but it confirmed a strong effort from operators to maintain previous investment levels at around €47bn per year. Estimates by Accenture Strategy indicate that this will not be enough to achieve a Gigabit Society, even in a scenario in which our sector keeps growing the Capex/Revenue ratio to the benefit of investment (on the rise for 6 years now).
We are proud that ETNO companies remain Europe’s broadband pillar, with 70 percent of the fixed investment. However, we cannot hide that regulatory reform has become the single most important bottleneck to increase the investment level. This is clearly indicated in several reports from analysts (Barclays, June 2017), but also in a 2017 Economic Investment Report by the EIB. Europe’s bank stresses that the lack of infrastructure investment is harming the Continent’s growth potential and that “regulatory pressure on allowed returns” is among the key causes.
What we deliver to customers (and what we could)
In terms of networks, relatively higher investment is delivering improved customer experience across technologies. Take-up of 4G lines has surpassed 3G lines for the first time only this year and fiber connections have continued to grow. Whether this is enough to create a Gigabit Society in Europe is another question. If we look at projections, Europe will have 178 million 5G subscribers in 2025. This will constitute only 10 percent of the total global connections, with Asia being the leader, with almost 1 billion, and US following with almost 330 million connections. The risk of lagging behind is pressing, as 5G will be much more than just another generation of mobile services, but it is meant to empower industrial sectors across the board.
In terms of digital services, telecom companies have embraced new offers, new business models and digital transformation. Users are eagerly taking up bundles whilst customer service increasingly becomes seamless with apps and AI (Artificial Intelligence). Furthermore, IoT (Internet of Things) offers are picking up and many telcos are offering more and more content.