- Working groups
Brussels, 2.2.2022 – As Europe works to strengthen economic growth through its strategic sectors, a new report shows that most Europeans have now access to a 5G and FTTH network. However, if compared with global peers, Europe is trailing in terms of roll-out, investment and financial strength of its telecom sector. These are some of the findings of the “State of Digital Communications” Report, launched by telecom association ETNO and prepared by research firm Analysys Mason.
5G and FTTH now reach most Europeans
Europe recorded its highest investment effort in four years, hitting €52.5bn in Capital Expenditure (CapEx) in 2020. Thanks to this effort, FTTH coverage has passed the 50% mark for the first time in 2021, and now reaches 51.6% of European households. Similarly, the share of Europeans reached by 5G has now doubled from 30% in 2020 to 62% in 2021. Uptake, however, is currently low, with only 7.4% subscribers using 5G in 2021, projected to grow to 18% in 2022.
Despite investment efforts, Europe continues trailing global peers, with 5G coverage of the population reaching 93.1% in the US and 93.9% in South Korea. This is reflected in the CapEx per capita, which is €96.3 in Europe, as opposed to €191.9 in the US and €115.4 in South Korea.
Revenues, uptake and fragmentation: weakening a strategic sector
The relatively slow pace of investment in strategic 5G and fibre networks is reflected by a weaker financial and market position compared to global peers. European telecoms, by way of regulation and lack of a single market, remain highly fragmented, with Europe accounting 38 operating telecom groups with over 500k subscribers, compared to 7 in the US, 4 in Japan and 3 in South Korea.
Similarly, European telecom revenues – which are highly regulated – are lower: in 2020, Mobile Average Revenue per User (ARPU) was €14.4 in Europe, compared to €37.9 in USA and €25 in South Korea. The demand-side is also weaker: the 2020 average mobile data usage in Europe was 8.52 GB, compared to 10.62 GB in the US and 12.52 GB in South Korea.
While there are exceptions, the overall European telecom sector shows a fall of the EV/EBITDA ratio, a rise of the net debt/EBITDA ratio and a sustained underperformance on stock markets.
Pandemic drives booming video habits
If we zoom in on Europe, however, the pandemic has dramatically accelerated a series of telecom trends. Video from streaming platforms and OTT video calling – especially for business – is driving surges in traffic. 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.
Innovation and greening efforts are accelerating
Data from the report shows that telecoms are increasingly investing in network and service innovation. Europe can count 19 edge cloud offers launched in 2021, compared to 10 in North America and 25 in Asia-Pacific. The sale of security solutions by European telcos is also becoming tangible, with operators’ security retail revenue reaching €3bn in 2021 and expected to climb to €4bn in 2025 (Western Europe). The growth of IoT is also confirmed, with active IoT connections expected to reach 353mn in 2023, up from 180mn in 2020.
Meanwhile, efforts to reduce the carbon footprint of the sector are showing: in 2020, 75.3% of the total energy used by ETNO members was from renewable sources, up from 60.4% in 2017. Similarly, CO2e emissions of ETNO members in Europe were 2.77 kTonne, down from 4.67 kTonne in 2017. In parallel, the report finds that telecom companies are working with industry vertical to enable them to dramatically reduce their own footprint through the uptake of digital solutions.