Europe’s mobile networks risk falling further behind the world’s digital leaders unless investment conditions change quickly through targeted government campaigns, warns a GSMA study, which found the region’s operators are investing significantly less per connection than global peers, despite rising data usage and growing demands from artificial intelligence (AI), transport and industry.
Furthermore, the Mobile investment needs in Europe report from the global mobile trade association calculated that investment of as much as €475bn was required over the next decade to complete Europe’s 5G journey and regain digital leadership, but a €205bn funding gap is currently leaving critical infrastructure, innovation and resilience at risk.
The report was conducted by the investment arm of the trade body and is said to have come as Europe’s digital capabilities continue to lag behind leading global standards. It noted that while 5G standalone (5G SA) – essentially what it described as “full” 5G, with faster speeds, lower latency, and innovative services and features deriving from network slicing – is already available to 80% of the population in Greater China and almost 50% in India, in Europe, it reaches only 2% of citizens.
Much of the lag described by the GSMA is attributed to the more favourable investment conditions in these non-European markets. Indeed, the study discovered that capital expenditure (capex) per connection in Europe is just €35, compared with €70 for global connectivity leaders. The stark net result, stressed the GSMA, was that the European bloc remained unable to keep pace and compete.
And while mobile internet usage has increased every year since 2018 by an average of 27%, operator revenues were found to have fallen by an average of 3% per year over the same period, further restricting available investment capital. The GSMA also highlighted how the financial burden currently sits with the industry itself, with operators themselves putting up 85% of the investment into network infrastructure, according to other data from its intelligence arm.
The GSMA also regarded the new analysis as a timely update on the European Commission’s 2023 research into the likely cost of achieving the Digital Decade targets. This estimated that around €174bn, rising to more than €200bn, of digital investment was needed by 2030.
However, the GSMA warned that the operators have already invested €141bn since 2021 and Europe has not yet met those targets, while trailing further behind global 5G leaders. The report finds that of the current €475bn investment need to 2035, only 57% is currently forecast to materialise.
Of the aforementioned €205bn, the 43% deficit, around half was seen as needed to provide 5G coverage across Europe’s main transport routes such as road, rail and waterways. A further €35bn was seen to be required to extend 5G coverage to the entire European population, while €38bn was seen as appropriate to build greater network resilience and €28bn to underpin AI-based services and innovation.
What can be done to close the investment gap?
Looking at how the industry would close the gap and create the required investment conditions to unlock the remaining 43%, the report outlined three areas of major potential regulatory reform: in-market consolidation, effective spectrum management and addressing asymmetrical regulation.
Europe needs a significantly more pro-investment regulatory environment to secure the continent’s digital future and enhance global competitiveness Vivek Badrinath, GSMA
In addition, the GSMA observed that spectrum costs in Europe have almost tripled over the past decade and applying measures such as low-cost renewals could free up to €30bn in capital, with more than 500 licences due for renewal by 2035. The GSMA believes that long-term certainty offered by indefinite licences, such as those proposed in the European Union’s draft Digital Networks Act, would also lead to improved investment incentives.
The association also remarked that a range of current regulations, including around open internet access and net neutrality, the Cyber Resilience Act, and the European Electronic Communications Code, could impose additional costs and reduce revenue growth opportunities.
It suggested that a more balanced relationship between mobile operators and other players in the digital ecosystem could encourage investment in networks, and ultimately drive industry and innovation.
Ultimately, the GSMA said that realigning Europe’s investment environment through these policy reforms would allow the region’s capex per connection to potentially double over the coming decade and reach similar levels to those in North America and East Asia. This, in turn, could help deliver the real user and market benefits of 5G SA and ultimately 6G connectivity, and underpin Europe’s economy, resilience and innovation in the digital age.
“The numbers are clear: to support Europe’s digital ambitions and expectations, almost €0.5tn in investment into mobile networks is needed over the next 10 years, and only around half of that is currently likely to come through. Europe needs a significantly more pro-investment regulatory environment to secure the continent’s digital future and enhance global competitiveness,” said GSMA director general Vivek Badrinath.
“There are encouraging opportunities for policymakers, both in the ongoing review of the Merger Guidelines and in delivering on the promise of the Digital Networks Act proposals, correcting for its known shortcomings without watering down its more ambitious aspects. Inaction now is not an option with Europe’s digital future on the line.”
