02 February, 2022
The State of Digital Communications 2022
Europe reaches key 5G and fibre milestones, but lags global peers
• In 2021, for the first time, FTTH coverage in Europe has passed the 50% mark and reached 51.6% of the total next generation access (NGA) connections
• The percentage of population covered by 5G in Europe has almost doubled between 2020 and 2021, reaching 62% last year compared to 30% the previous year
• However, all global peers have much higher shares of the population covered, with the US reaching 93.1% and South Korea reaching 93.9% coverage in 2021.
Pandemic habits accelerate telecom trends: video is flooding networks
• The pandemic has accelerated the uptake of video services, especially streaming and video calling
• As a result, data usage in Europe has grown significantly since 2019. The fixed data traffic per connection was 191 GB/month in 2019, it was 293 GB/month in 2021 (+53% compared to pre-Pandemic) and it is expected to reach 454 GB/month in 2023
• Mobile data traffic per connection was 4.5 GB/month in 2019, it was 8.5 GB/month in 2021 (+90% compared to pre-Pandemic) and it is expected to reach 16.2 GB/month in 2023.
Uptake, usage, spend and revenues: Europe stays on the trail
• Uptake of 5G in Europe has been lagging behind: despite being available to 62% of the population, 5G in Europe constitutes only 2.8% of the total mobile connections, compared to 13.4% in the US and 29.3% in South Korea
• Usage is also lower in Europe: the average mobile data usage per capita per month, in 2020, was 8.52 GB in Europe, 10.62 GB in the US and 12.52 GB in South Korea
• Average spend per capita on telecoms in Europe is forecasted to be €33.8/month, lower than global peers (e.g., it is €71.7 in the US, € 36.1 in South Korea)
• Revenues in Europe are also lower than in other geographies. Mobile Average Revenue per User (ARPU) was €14.4 in Europe, compared to €37.9 in USA and €25 in South Korea.
Greener telecoms: fight to CO2 emissions continues, enablement picks up
• The telecom sector in embarked in a double challenge: reduce its own carbon footprint and enable traditional sectors of the economy in reducing their footprint
• In 2020, 75.3% of the total energy used by ETNO members was from renewable sources, up from 60.4% in 2017
• CO2e emissions of ETNO members in Europe were 2.77 kTonne, down from 4.67 kTonne in 2017
• Telecom services have been taken up from several “vertical” industries to reduce their own footprint, including use cases in smart buildings, agriculture and mobility
Telcos increase commercial activities in Edge computing, Open RAN, IoT, Big data, Security
• Telecoms are innovating beyond just networks. Key areas in which operators are investing and innovating in are: edge computing, open ran, big data, IoT, and security
• Europe can count 19 edge cloud offers announced and commercialised in 2021, compared to 10 in North America and 25 in Asia-Pacific
• Europe, in the period 2010-2021, has scored 9 patents in the field of “telecoms and analytics”, trailing the US (52), but
ahead of China (2) and India (5)
• The commercialization of security solutions by European telcos is also becoming tangible, with operators’ security retail revenue reaching €3bn in 2021 and expected to reach €4bn in 2025 (Western Europe)
• The growth of IoT is also confirmed, with active IoT connections expected to reach 352mn in 2023, up from 180mn in 2020. The sectors that are expected to contribute the most to such growth are automotive (119mn active connections in 2023) and utilities (50mn active connections in 2023).
Strength of the sector: policymakers must be aware of the strategic implications
• The European telecom sector has achieved a record CapEx of €52.5bn in 2020, up from €51.7bn in 2019, the highest for four years. This reflects investment efforts in fibre and 5G networks
• CapEx intensity (proportion of revenues devoted to CapEx) has reached its highest in recent history, hitting 19%. This is higher than any global peers in US, South Korea or Japan
• The increase of telecom investment and the resilience of the sector are desirable from a societal viewpoint and they are key to Europe’s “Open Strategic Autonomy” plans. Therefore, the sustainability of the sector should encourage strong policy action to dramatically improve the investment climate
• Key financial indicators show how the European telecom sector is suffering, or performing worse than global peers: the EV/EBITDA ratio of European telcos has fallen compared to the pre-pandemic period and the net debt/EBITDA rations have increased
• European telecom stocks have been consistently underperforming both the Stoxx Europe 600 index and the Stoxx Global 1800 telecoms index since Q1 2016
• Fragmentation of European telecom markets remains the highest among global peers, with 38 operating telecom groups in Europe, compared to 7 in the US, 4 in Japan and 3 in South-Korea
Read the full report at the link below.