The Telecom Europe situation is at an inflection point with its self-inflicted crisis of market fragmentation ravaging its financial health and global competition.
Leaders of the telecom industry in Europe are now pressured to demand more aggressive market consolidation, as it is the only viable path for them to obtain massive investments for the future of its networks and sovereignty.
Low EU Telecom Sector Health
According to the Kearney European Telecom Health Index, markets with just three leading mobile network operators (MNOs) achieve higher financial returns and investment capacity than those with four.
The weaknesses and limitations of Telecom Europe make it harder for European telecoms to invest in advanced networks and in addition, it limits profits.
“The reality is that we’ve probably reached the limit of just looking at prices for consumers. We really need to take into account the ability of companies to invest in a world that’s moving very fast,” Orange CEO Christel Heydmann told The Big Question.
In October, Orange made a partnership with Bouygues and Free to bid for rival SFR, to be able to gain scale. Such a move underlines the pressure the largest telecom companies in Europe face, as demand for cloud-based services and real time data keeps rising. Yet, the offer was rejected by SFR owner Altice France but talks continue.
70% of Europe’s population lives in countries with low telecom sector health. A phenomenon that’s creating more friction in the political and regulatory battle in the telecom Europe sector.
“It’s something we are engaged in trying to conclude, but there’s no guarantee that this non-binding offer will go to an end,” Heydemann highlighted how long negotiations slow progress across the telecom Europe sector.
On the other hand, regulators stay cautious. Some governments fear that mergers could weaken competition under EU telecom rules. Others argue that with no consolidation, Europe will struggle to fund modern telecom infrastructure.
5G, Cloud, and Risks of Becoming Utilities
5G coverage Europe is broad, despite the fact that operators struggle to earn strong revenues from networks.
While 5G Europe deployment grows, services linked to cloud and computing are slower to spread.
“Traffic continues to grow 10-30% every year on our networks. People consume more videos, artificial intelligence,’’ Heydemann explained.
In addition to the pressure on telecom operators in Europe, security challenges add to costs. Cybercrime and extreme weather events are forcing telecom providers in Europe to invest more in resilience just to maintain service quality.
But not everyone is on board, and that includes decisions and lawmakers.
Some member states and lawmakers are apprehensive of the consolidation, claiming it would inevitably lead to higher consumer prices and harden competition. With that, the stage would be full of readiness for the European Commission’s EU’s Digital Networks Act (DNA).
The EU’s DNA is a legislative package that will dictate whether Europe prioritizes today’s cheap connectivity or industrial capabilities for tomorrow. The Act will have the power to modify EU telecom regulations to help investment and new generation networks, but some EU states are afraid of rising costs for consumers.
They argue that reforming the European telecom sector is important since the industry provides the basis for many public and business and state security services in Europe. A slow adoption rate of cloud-edge technology in Europe could put it at a disadvantage despite its robust 5G accessibility.
“It’s normal to have this kind of resistance,” said Heydemann, highlighting the “huge difference in the reality of markets in every country in Europe… so we’re not saying that it’s going to be one-size-fits-all.”
The Telecom Europe sector is now faced with a choice to either change its model to fit the cloud-driven future, or if the region will just sit by as the economic next generation is dictated by Europe’s telecommunication sector.
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