- Working groups
Brussels, 1 February 2023 – Europe has reached record levels of telecom investment, while progressing on both 5G and FTTH coverage. Despite this, new estimates show that the EU risks falling short of its “gigabit for all by 2030” target by 10%. These are some highlights from the “State of Digital Communications 2023” report presented today by ETNO, Europe’s leading telecoms association, based on research by leading research firm Analysys Mason. It comes as the European Commission is expected to launch a public consultation on the future of the telecom sector and its ability to invest in new networks.
5G and FTTH coverage rises, but gigabit targets and global competitiveness remain at risk
Despite the highest level of investment since 2016, Europe is at risk of missing the Digital Decade target on “gigabit connectivity for all”: even if telecom operators managed to keep their current record levels of investment despite high interest rates and a possible economic downturn, projections show that VHCN are on track to reach about 90% citizens in the EU, potentially leaving tens of millions Europeans behind.
In 2021, the total telecom Capital Expenditure (CapEx) reached a whopping €56.3bn in Europe. For sake of comparison, in the same period, tech companies invested around €1bn in infrastructures (i.e., large international and undersea routes, peering, transit and caching) and €16 bn in data centers.
At the end of 2022, 55.6% of the European population had access to FTTH networks, up from 50% in 2021. Similarly, 5G is now available to 73% of Europeans, up from 62% the previous year.
When it comes to the comparison with global peers, Europe remains behind. At the end of 2022, 5G coverage of the population reached 96% in the USA, 95% in South Korea, 90% in Japan and 86% in China. Similarly, Europe continues lagging all global peers on investment per capita adjusted to GDP: Europe invested €104.4 per capita in 2021, compared to €259.7 in Japan, €149.6 in the USA and €110.2 in China.
Telecom innovation: the jury is still out on edge cloud, 5G standalone and Open RAN
The move to intelligent networks ignited a fresh wave of innovation in the telecom sector. Edge cloud – the technology to bring data processing at the edge of networks and closer to users – is a prime example. According to new figures, Europe counted 18 edge cloud offers in 2022, second only to Asia-Pacific with 19 offers, and performing better than North America, with 5 offers.
When it comes to open RAN – open radio access networks that allow combining of different telecom vendors – Europe scored 6 trials in 2022, the same as China, followed by the US and South Korea with 3 trials, and Japan with 2. However, on the implementation side, the most significant open RAN deployments happened in Japan (Rakuten Mobile) and in the US (DISH Networks).
5G standalone is the most advanced form of 5G. By the end of 2022, Europe had increased the number of standalone networks to 4, compared to 3 the previous years. While the Asia-Pacific region still leads 5G standalone deployments with 15 networks in 2022, Europe has been performing better than North-America, which counted 3 networks.
Fundamentals of the sector: an industrial challenge for Europe
The fundamentals of the European telecom sector remain weak. This is not desirable from a policy viewpoint, as Europe works to achieve its digital sovereignty vision. The report finds that, on the stock market, Europe’s telecom shares have been consistently underperforming peers since 2018: the Stoxx Europe 600 index has performed worse than the Global 1900 for telecoms, but also than the shares of major tech companies.
From an industrial standpoint, it is relevant to note that the European telecom sector is facing very high levels of capital intensity at a time in which its debt is also rising: in 2021, the share of revenues re-invested was nearing 20%, while the debt/EBITDA ratio of ETNO members was at 2.53, the highest level since 2014.
Sustainability: lower emissions and a move to greener networks
When it comes to sustainability, telcos are greening their own networks, but also enabling other sectors to achieve their green targets through digital networks and services. If we look at the sector’s own operations, 83% of the energy used by telecom companies in 2021 derived from renewable sources, up from 71% in 2018. When it comes to emissions, European operators’ scope 1 and 2 GHG emissions per revenue have more than halved over time: from 5.11 CO2e in 2017 to 2.18 CO2e in 2021.
The transition to more efficient networks such as FTTH and 5G is seen in decommissioning announcements for legacy networks: in period 2023 and 2024, we expect 10 fixed networks per year to be decommissioned. When it comes to 2G and 3G networks, we expect 36 of them to be decommissioned in 2023 and 41 in 2024.
Lise Fuhr, Director General, ETNO said: “Europe’s digital leadership requires a strong telecom sector. This report sheds a light on the need to support operators who are investing in 5G and fibre networks. All European citizens must be included in our digital future”.
Rupert Wood, Research Director, Analysys Mason said: “The continuing poor health of the telecoms sector works against Europeans’ interest. Poor returns make the infrastructure investment needed to achieve the 2030 Digital Decade targets more challenging, and they dent hopes of a renaissance of innovation and skills in new digital communications technologies”.