TECH

European telecoms with declining profits and competitiveness

Competitiveness is deteriorating, profits are falling and investment is lagging, which is dragging other sectors back as well.

Declining profits and the international competitiveness of the European telecoms industry have long been a matter of concern among business players. While digital development has become a priority, players in the fragmented market are struggling to reverse the trend of falling profits, and many are now demanding a rethink of industry regulation and internal organization. A Brussels project called the Connectivity Package was launched earlier this year, which includes initiatives aimed at encouraging the deployment of fiber optics and 5G, shaping the decisions of national regulatory authorities and – surrounded by controversy – the companies that seize large network traffic. in infrastructure. prescribing its contribution to its costs.

According to a report published by the European Telecommunications Network Operators Association (ETNO), despite record investment, Europe still lags significantly behind global competitors in terms of investment and other factors such as 5G coverage. The implications of this are far-reaching, as they affect the overall competitiveness of other sectors and the achievement of the broader digital targets set by Brussels. The last two decades have seen significant changes in the telecommunications industry, most notably with the transition from fixed to mobile services and the increasingly diverse range of technologies and digital infrastructures offered by an ever-increasing range of service providers.

However, the sector's declining profitability is a growing concern for telecoms, with some blaming low investment rates and high levels of regulation. The development of new technologies, poor adaptation to new market conditions (such as retaining large numbers of employees) and increased competition in the telecommunications market certainly contribute to the problems. At the same time, discussions of the industry's current crisis are often based on comparisons with the situation in the early 2000s. But this is probably wrong, given the technological and market changes that have taken place since then, and the fact that the industry's success at that earlier date was somewhat artificial, as fixed and mobile operators enjoyed high margins and profits.

Political reasons, especially decisions taken at EU level, have also contributed to the current situation in the sector. In a report published in April, Vodafone mentioned spectrum policy, that is, the prioritization of short-term profit in frequency auctions and the levity in regulating technology giants, among the decisions that hinder the development of the sector in Europe. The fragmentation of the European telecommunications market is also often cited as a major obstacle and contributing factor to the region's backwardness.

According to Zach Meyers, a researcher at the Center for European Reform, two key factors have held back the single telecoms market. “Frequency allocations are still at the national level, which means that it is very difficult for companies to coordinate the deployment of a mobile network in different countries at the same time,” he said, adding that “different land acquisition regulations are also a real problem, but these are extremely difficult for obvious political reasons. difficult to solve”. According to Meyers, both factors, that is, jealously guarded national competences, make coordination between companies difficult when it comes to the simultaneous construction of networks in different countries.

But there are areas that the telecommunications industry has not yet addressed, namely the cloud market, many opportunities for innovation and new business have been lost. “The cloud market is currently dominated by US companies like Google, Microsoft and Amazon,” said telecommunications expert Innocenzo Genna. “The question is why telcos are not addressing this market. It’s a huge missed opportunity.” Investing in cloud computing can be a way to create new business models for the sector.

mundophone