ETNO-State of Digital Communications 2023
ETNO-State of Digital Communications 2023
ETNO-State of Digital Communications 2023
STATE OF DIGITAL
COMMUNICATIONS
2023
THE STATE OF DIGITAL COMMUNICATIONS | 2023
Published by:
ETNO
European Telecommunications Network Operators’ Association
info@etno.eu
www.etno.eu
Media & Inquiries: gropelli@etno.eu
Graphic design
Aupluriel
www.aupluriel.be January 2023
STATE OF DIGITAL COMMUNICATIONS | 2023
Content
Executive summary 4
Executive Summary
5G and FTTH: more local progress, but Edge computing, Open RAN and IoT:
we risk falling short of the gigabit ob- can telecoms innovation take off?
jectives
• Networks are, and will remain, the focus of tel-
• FTTH population coverage reached 55.6% in ecoms investments. However, indicators show
Europe in 2022, up from 50% in 2021. However, that operators are making major efforts to em-
current evidence suggests that European cov- brace innovation at both the network and service
erage is currently expected to reach roughly level.
90% by 2030, and will therefore risk falling short • When it comes to Open RAN, Europe scored 6
of the EU Digital Decade target on ‘gigabit for trials in 2022, the same as China, followed by
everyone’. This might concern tens of millions the US and South Korea with 3 trials, and Japan
Europeans. with 2. However, Europe still lags behind with re-
• 5G population coverage in Europe reached spect to the number of real-world Open RAN de-
73% in 2022, up from 62% in 2021. This means ployments, despite many trials having been es-
that Europe lags behind all of its global peers: tablished. The most significant deployments are
coverage is approaching 96% in the USA, 95% in Japan (Rakuten Mobile) and the USA (DISH
in South Korea, 90% in Japan and 86% in Chi- Network).
na. • There were 204 million active IoT connections in
• The Asia–Pacific block leads in terms of the Europe in 2021. We estimate that there will be
number of 5G standalone services with 15 ac- about 370 million (that is, almost twice as many)
tive services. Europe has 4 and North America in 2024 and 770 million in 2030. IoT is clearly an
has 3. area of significant growth.
• Cyber security services are another area of
growth. Retail revenue in Europe was €4.1 billion
Telecoms investment is at its highest
in 2022 and it is expected to grow to €5.2 billion
level yet, but that in Europe is lower by 2025.
than that elsewhere • 18 edge cloud offers were announced in Europe
in 2022, 10 of which came from ETNO members.
• Telecoms investment in Europe reached its The only region in which more offers were an-
highest level since 2016: in 2021, total telecoms nounced was Asia–Pacific (19 offers in 2022);
CapEx (fixed, mobile and others) reached €56.3 North America had just 5.
billion. ETNO members solidly remain Europe’s • European operators are under pressure to cre-
telecoms investment leaders, and represent ate short-term shareholder value in the face of
over 68% of the total telecoms investment in the stagnating average revenue per user (ARPU),
bloc. despite the significant potential for innovation in
• When considering fibre investment (FTTH and the telecoms sector. More investment capacity
FTTx) specifically, ETNO members continue to is needed to accelerate innovation, but the es-
lead. They have invested €194 per capita com- tablished current trends place additional pres-
pared to €139 for non-ETNO members. sure on many operators to sell or separate ser-
• Nonetheless, Europe continues to trail its peers vice and innovation-related assets.
worldwide in terms of telecoms investment. In-
vestment per capita adjusted to GDP was €104
in Europe in 2021 compared with €260 in Japan,
€150 in the USA and €110 in China.
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STATE OF DIGITAL COMMUNICATIONS | 2023
Telecoms operators and tech compa- Five decommissioning dates per year were an-
nies: who invests and who monetises? nounced for legacy networks (PSTN) in 2017.
This is due to increase to 10 in 2023 and 2024
• Telecoms operators and tech companies (also and 11 in 2025–2030.
known as content and applications providers • Europe’s telecoms sector is also speeding up its
(CAPs)) contribute to the European digital econ- transition to renewable energy sources. 83% of
omy in different ways. There is an acute discrep- the total energy used by the sector came from
ancy between the returns on investment in Euro- renewables in 2021, up from 71% in 2018.
pean telecoms infrastructure and the returns on • The use of renewables and the improved net-
investment of the largest services that run over work efficiency means that European operators’
this infrastructure. When it comes to internet ac- scope 1 and 2 greenhouse gas (GHG) emissions
cess, it is telecoms operators that shoulder the per unit of revenue went down from 4.42 CO2e
investment burden, while in terms of new value in 2018 to 2.18 CO2e in 2021.
creation it is tech companies that benefit the • This report also describes some key use cases
most. in which other sectors are “greened by” tele-
• New data shows that European telecoms opera- coms networks. These include smart utilities and
tors invested €56.3 billion in digital infrastructure green digitalisation, whereby the adoption of ICT
(mostly access networks) in 2021, while CAPs tools decreases the emissions of industrial sec-
invested roughly €1 billion in infrastructure such tors.
as large international/undersea routes, peering,
transit and caching. The remainder of CAPs’ Fundamentals of the sector: why they
digital infrastructure investment (around €16 bil- matter to Europe
lion) was devoted to data centres.
• The revenue per employee of ETNO members • The fundamentals of the European telecoms
was €0.46 million in 2021, compared to €2.33 sector remain weak, with significant uncertain-
million for Netflix, €1.46 million for Alphabet and ties ahead. This is not desirable from a public
€2.33 million for Meta. policy viewpoint, especially in face of Europe’s
digital sovereignty plans and the EU Digital Dec-
Sustainability: ‘greening of’ and ‘green- ade targets.
ing by’ the networks • Europe’s telecoms index has consistently under-
performed a series of benchmarks on the stock
market since 2018. The Stoxx Europe 600 index
• An essential action that operators can take when
for telecoms is lower than the Stoxx Global 1800
it comes to the greening of telecoms networks is
for telecoms, and is also lower than selected
to transition to next-generation networks, which
stocks such as Alphabet, Meta, Amazon and
are more energy-efficient than current networks.
Microsoft.
• The need to increase investment to achieve 5G
and FTTH objectives also means that European
telecoms companies have reached their high-
est investment intensity for many years (nearing
20% in home markets in 2021). This has practi-
cal consequences; the net debt/EBITDA ratio of
ETNO members is now 2.53, its highest since
2014. Similarly, the average EV/EBITDA multiple
(the measure of a company’s total value in re-
lation to its profits) for ETNO members was 5.7
in November 2022, as opposed to 17.4 for Mi-
crosoft, 12.5 for Alphabet and 20.3 for Amazon.
This shows that the European telecoms sector is
considered to be a low-growth industry.
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The capex intensity of the European telecoms sec- and all participants in the end-to-end digital com-
tor continued to increase in 2021, following a trend munications’ value chain have a role to play. The fi-
that has been in place for 6 years. Capex intensity in nancial health of the sector and the companies that
Europe is higher than that in much of the rest of the play the largest role in delivering on those European
world, partly due to low ARPU and partly because of economic and social goals should not be ignored.
the timing of FTTH roll-outs. ETNO members’ capex
intensity (excluding spectrum licences) reached a This report has been commissioned by ETNO to pro-
record high of 19.4% of revenue in 2021. Investments vide market context and a quantitative and qualitive
by other players (non-ETNO operators, third-party assessment of digital communications providers
infrastructure funds and entities that come from the within Europe and beyond. The report investigates
digital infrastructure/cloud side) are also at record five key areas.
levels. The fiberisation of the fixed local loop remains
the largest single element in operator capex; this re-
The first section of this report examines the
sembles a once-in-a-lifetime investment rather than
direct and indirect impact of the telecoms
a generational upgrade. Steady investment in mo-
sector on Europeans’ lives.
bile infrastructure, plus spiky payments for spectrum
licences, add to this rising capex. The second examines the demand for
telecoms and digital services from both
Barely 6 months after the end of the last COV- consumers and businesses.
ID-19-related lockdowns, European telecoms oper-
ators are not in a position of robust financial stability The third section looks to the future and
and may still have financial worries. The pandemic considers how operators can meet the
showed the importance of fast, reliable and secure challenges of sustainability, innovation
connectivity, but there has been no appreciable rev- and deploying fit-for-purpose networks.
enue upside. The pandemic accelerated the digitali- The fourth section details telecoms
sation and automation of service provision, but these innovations and Europe’s contribution to
opex benefits have been offset by the headwinds of their development and deployment.
inflation. The improvement in profitability (EBITDA)
sustained over the past 5 years has stalled and The fifth and final section reviews the
reversed. Growth in core revenue is hampered by financial performance of the telecoms
(sometimes artificial) competition, and it has proven industry, and highlights Europe-specific
to be difficult to grow revenue from adjacent servic- problems in relation to the global trends in
es rapidly, or in a way that does not dilute profitabil- the telecoms market.
ity. The telecoms industry remains highly leveraged.
Return on capital employed (ROCE), which meas-
ures profitability in relation to all of a company’s cap-
This report includes China as a comparator country
ital, has fallen over the past 4 years to a level that is
for the first time this year. This comparison is unavoid-
barely higher than (and in some cases lower than)
able because China is the world’s second-largest
the weighted average cost of capital (WACC) of op-
economy and is, especially in terms of supply-side
erators.
metrics, ahead of markets such as the USA, Japan
and Europe. However, readers need to be aware
These factors throw into question the long-term
that the characteristics of the Chinese market (that
profitability of the sector and the sustainability of in-
it is a managed economy, has infrastructure targets
vestments. Current macroeconomic uncertainties,
that are set and funded by state-owned institutions
particularly regarding the direction of interest levels,
and has state-influenced prices, for example) com-
compound these problems, and could serve to un-
pared with those of the other markets included in this
dermine the efficient roll-out of infrastructure.
report mean that the comparability of data presents
some major methodological limitations.
In this context, policy has to continue to address the
gap between areas of investment where a return can
be made and broader economic and social goals.
There are many ways in which this can be achieved,
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
SECTION 1
Supporting the
growing digital
society in Europe
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The European Commission (EC), in 2021, set targets for its Digital Decade programme for 2030 aimed at em-
powering and digitally transforming European citizens and businesses. The Digital Decade targets cover four
key areas (skills, government, infrastructure and business), which are illustrated as Europe’s digital compass.
Skills
• There should be 20 million ICT
specialists in Europe and the
proportion of these specialists
that are women should be higher
than current levels.
• 80% of the population should
have basic digital skills.
Business
• 75% of EU firms should use
cloud computing and AI in their
operations. The number of
‘unicorns’ should double.2
• 90% of small and medium-sized
enterprises (SMEs) should
be using automated, digital
processes for their business
operations.
2
Unicorns are private tech start-ups that are worth over $1 billion.
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
Europe’s infrastructure targets from the Digital Decade programme and the Connectivity for a European Gi-
gabit Society strategy prioritise gigabit connectivity and 5G coverage (Figure 1.2).
FIG 1-2 : Infrastructure targets of the Connectivity for European Gigabit Society strategy and the EC’s
Digital Decade agenda
The EC is supporting multi-country projects to encourage a combination of both private and public investment
in critical infrastructure in order to help meeting the Digital Decade targets. EU funding encourages private
investors to invest in complex, long-term projects that no single country could achieve by itself. Multi-country
projects support the telecoms market with investments for pan-European deployments of 5G corridors, block-
chain, processing and computing, cyber security and quantum computing infrastructure. However, these
projects remain at an early stage and operators are currently relying on IPCEI for innovative projects such
as Telco Cloud, for which funding is allocated through a complex and very lengthy screening process that is
poorly aligned with the speed of innovation.
Europe has been continuing to put people at the centre of its digital transformation since the Digital Decade
targets were first announced. The declaration on Digital Rights and Principles was released in January 2022
and is made up of six chapters including guidance on how to support solidarity and inclusion and how to
ensure freedom of choice online. The declaration emphasises universal European access to high-speed
connectivity and promotes the sustainability of next-generation networks and digital technologies that do not
excessively contribute to climate change. In addition, the declaration stresses that all market actors have a
duty to invest in the maintenance and expansion of the infrastructure required to bring the fruits of the digital
transformation to as many people as possible.
FTTH is the best networking technology for gigabit access because of its high speed, long asset lifespan,
low opex and energy efficiency. It is also resistant to obsolescence, because the future roadmap of FTTH
technologies will support speeds of up to 100Gbit/s. However, the initial capex required to roll out new FTTH
networks is greater than that for other networks.
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STATE OF DIGITAL COMMUNICATIONS | 2023
FTTH’s strengths as a fixed network technology explain why the EU and national governments are prioritising,
via both subsidies and policies, its deployment. For example, the Spanish government has championed FTTH
connectivity for a long time, even in rural areas, by using its EU-allocated regional development funds to roll
out FTTH network. Portuguese authorities will launch public tenders in 1Q 2023 to cover ‘white areas’ with
public-funded gigabit networks.
FTTH network coverage has increased to 55.6% of the European population, up from 50% in 2021 (Figure 1.3).
The increase in coverage in France and the UK between 2021 and 2022 was equivalent to 10% of the homes
passed in these countries in 2021. The number of non-FTTH next-generation access (NGA) networks has also
been growing. Indeed, 88.5% of Europeans have access to NGA connectivity (Figure 1.3), which reflects its
broad availability across most of the continent.
Europe remains ahead of the USA in terms of FTTH availability, on a par with South Korea but far behind Chi-
na (Figure 1.3). However, China implemented a powerful FTTH roll-out policy in 2013, in which all new builds
were mandated to have FTTH access. This, coupled with a high rate of house building in China, means that
near-universal coverage has been achieved in under 10 years.
FIG 1.3 : NGA and FTTH population coverage, China, Europe, Japan, South Korea and the USA,
2013–2022
99%
97%
100%
88,8%
90%
88,5%
80%
80,4%
70%
% coverage
57,4%
60%
50% 55,6%
40% 43,9%
30%
20%
10%
0%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
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FIG 1.4 : Coverage of gigabit-capable or gigabit-upgradeable networks and other FTTx networks
by leading, alternative and cable operators, China, Europe, Japan, South Korea and the USA,
2022f 3
100% 18% 8%
Coverage of premises
39%
80% 36%
60%
99%
90%
40% 85% 77% 80% 88% 87%
63% 58%
20% 39% 39% 40% 34%
13% 11%
0%
Leading operators
Other operators
Cable
Leading operators
Other operators
Cable
Leading operators
Other operators
Cable
Leading operators
Other operators
Cable
Leading operators
Other operators
Cable
3
Leading operators are historical incumbents who have traditionally been the largest players in their countries.
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The average fixed downlink speed in Europe increased from 143Mbit/s in 2021 to 169Mbit/s in 2022; this is
an increase of 18%. However, it remains significantly lower than that in other developed regions and nations
(Figure 1.5). Europe has lower legacy cable/HFC coverage than the USA, Japan and South Korea, so many
premises will be dependent on copper-based infrastructure and technologies whose maximum speed is limit-
ed until FTTH or any other gigabit-capable infrastructure is built out to areas outside the legacy HFC footprint.
This build-out is happening quite rapidly (see section 3-1), but average fixed broadband speeds will be held
back until this has been completed. New FTTH networks often support multi-gigabit access, at prices that are
affordable by consumers, so changes in individual areas can be dramatic.
FIG 1.5 : Average fixed downlink speeds, China, Europe, Japan, South Korea and the USA, 2022
300
250
246
234 230 226
200
Mbit/s
150 169
136
100
50
0
China Japan USA South Korea Europe Global
average average
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73% of the European population are currently covered by 5G networks, up from 62% in 2021 (Figure 1.6).
Europe’s coverage remains lower than that of China, Japan, South Korea and the USA, but 5G coverage
statistics are not always exactly comparable. There are two technologies that serve to boost 5G coverage
figures without adding much to the user experience compared to 4G. Low-band 5G (700MHz in most regions,
but 600MHz in North America) provides broad coverage and better indoor coverage than 4G, but does not
permit meaningfully faster speeds than those available via 4G. Similarly, dynamic spectrum sharing (DSS),
which allows 4G and 5G services to be provided simultaneously from the same infrastructure, also increases
5G coverage without necessarily offering faster connectivity. The European expansion of 5G networks in 2022
mainly focused on increasing 3.5GHz coverage, and the total coverage (that in some markets was increased
using DSS and low-band spectrum) has not grown rapidly.
FIG 1.6 : Percentage of the population covered by at least one 5G mobile operator, China,
Europe, Japan, South Korea and the USA, 2019–2022f
95%
94%
93%
100% 93%
96%
93%
90%
90% 86%
81% 82%
80% 73%
76%
Population covered by 5G
70%
62%
60% 55%
50%
40% 34%
30%
30% 24%
10%
0%
Europe USA Japan South Korea China
4
A member of the population is typically deemed to be covered if they have useable signal outdoors at their home loca-
tion, or if they are within range of a useable signal. We take these definitions to be effectively the same, but it is important
to note that there is nothing in either that guarantees indoor coverage. This depends on building materials as well as
factors that are more in operators’ control such as spectrum, power and equipment capability.
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STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 1.7 : Average mobile downlink speeds, China, Europe, Japan, South Korea and the USA,
2022
300
250
244
200
Mbit/s
150 172
128
100
92
50 76 76
-
South Korea China USA Europe Japan Global
average average
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The prices that European consumers pay remain very low by global
standards
European operators’ average revenue per user (ARPU) for both fixed and mobile services remains lower than
that in many comparable markets. ARPU is never an exact proxy for prices, but these are also low. These low
prices are good for end users, but they limit the telecoms sector’s ability to grow at a time in which capital
intensity is rising. This modest revenue is primarily due to strong competition, which has been exacerbated
by a tough regulatory environment leading to artificially low prices.
Mobile ARPU in Europe is €14.7; this is substantially lower than that in the USA, Japan and South Korea
(Figure 1.8). A high level of retail competition, the prevalence of fixed–mobile convergence (FMC) in Europe
and the limited number of operators selling 5G at a premium has led to the erosion of mobile prices in recent
years, though prices in 2021 were similar to those in 2020. Conversely, prices in most of the other markets
included in this report have risen (+4% in China, +5% in South Korea and +1.5% in the USA) over the past
year. Prices fell by 1% in Japan, but this was largely because of a new entrant. These changes in ARPU are
recorded in local currency and do not take inflation into account. Operators in both South Korea and China
have managed to sell 5G at a premium.
FIG 1.8 : Mobile ARPU (excluding from IoT SIMs), China, Europe, Japan, South Korea and the
USA, 2021
40
35
37,37
30
25 27,86
26,17
ARPU (€)
20
15
14,71
10
9,26
5
0
Europe USA Japan South Korea China
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European fixed broadband ARPU has held up against price erosion better than that for mobile services; it
grew by about 1% between 2020 and 2021. Low fixed ARPU in South Korea and in China is a result of FMC,
in which broadband services tend to get subsidised by mobile services. Fixed ARPU in these countries and
in Japan remained largely unchanged between 2020 and 2021. The US fixed broadband market has, until
recently, been dominated by cable operators, with limited competition, thereby resulting in very high ARPU
levels compared to those in the rest of the world (Figure 1.9).
FIG 1.9 : Fixed broadband ARPU, China, Europe, Japan, South Korea and the USA, 2021
60
50
50,6
40
ARPU (€)
30
26,2
20
21,8
10 13
4,9
0
Europe USA Japan South Korea China
ARPU for mobile and fixed services in China is significantly lower than that in Europe, even though China is
highly advanced in terms of mobile and fixed infrastructure and service take-up. We must take the following
factors into consideration when comparing Europe to China.
• Chinese operators are majority state-owned. The Chinese government stopped setting retail telecoms
prices in 2014, but it continues to provide ‘guidance’ for operators on setting prices as part of its broader
policy targets. The fundamental purpose of this guidance is to improve connectivity speeds while reduc-
ing prices. The government does sometimes request that prices should fall.
• Chinese national operators are federations of regional operating companies that can set prices in relation
to regional economic conditions.
• Average national income levels and labour costs remain significantly lower than in the other comparator
countries.
European operators have increasingly turned to FMC as a consumer strategy. FMC subscriptions involve
offering a single contract for both fixed broadband and mobile services. This allows operators to upsell (that
is, increase the average spend per customer), increase customer loyalty and reduce churn. However, not
every operator can win at FMC because they cannot all upsell services. Nonetheless, the strategy tends
to erode single-service ARPU because the bundled services are sold at a discount compared to selling
both services individually. Mobile contracts in Europe tend to get sold using FMC strategies to retain or
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
acquire home broadband subscribers (especially for FTTH). This tends to drag down the price of mobile-only
subscriptions.
The effect of FMC can be seen when comparing Europe to the USA; the USA has a higher ARPU and a lower
penetration of FMC plans. However, there is significant national diversity when it comes to FMC penetration,
even within Europe. Broadly speaking, MNOs in countries with lower rates of FMC adoption, such as the
UK and Italy, are less active in the fixed market, which reduces the attractiveness of offering FMC bundles
because they would have to acquire wholesale access to existing fixed infrastructure. Conversely, mobile
contracts are added on top of FTTH subscriptions in the European nations with the highest FMC penetration,
such as Spain, France and Portugal, and FMC now accounts for over 45% of broadband connections (an
extraordinary 73% in Spain).
FMC is also very common in China, and accounts for approximately 75% of broadband contracts. Chinese
operators do not typically report whether revenue originated from fixed or mobile contracts, but they most
commonly market data-heavy mobile contracts that come with discounted FTTH subscriptions, meaning that
mobile services are driving FMC take-up, unlike what is typical in Europe.
Differences in actual mobile usage between countries are not as significant as ARPU differences. South Korea
has the highest mobile data usage (16.21GB per capita per month), while Europe has the lowest (11.45GB
per capita per month) (Figure 1.10). This does not mean that Europeans use mobiles less intensively than
users in other regions; it means only that European attach their devices to mobile networks less than in other
regions. This is driven by many factors, but the main cause is the smaller number of mobile-only households,
which itself the result of low broadband prices.
FIG 1.10 : Average spend per gigabyte of mobile data used and average mobile data usage per
capita, China, Europe, Japan, South Korea and the USA, 2021
3,5 18
2 10
2,15
1,5 1,75 8
1,43 6
1
4
0,5 0,67 2
0 0
Europe USA Japan South Korea China
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The overall spend on telecoms per capita in Europe remains lower than that in Japan, South Korea and the
USA (Figure 1.11).
FIG 1.11 : Average spend per capita on mainstream telecoms, China, Europe, Japan, South
Korea and the USA, 2008, 2015 and 2022f
90 84,1
80
73,1
70
58,9
Spend per capita (€/month)
60 55,2 53,8
50 45,1
41,5 34,8 42,1 41,7
40 34,8
30,2
30
20 14,2
9,2
10 4,3
0
Europe Japan South Korea USA China
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Europe has had the lowest telecoms spend as a proportion of GDP for 15 years. Telecoms spending as a
proportion of GDP is declining in all of the markets in this report (Figure 1.12). However, the decline in GDP
(with no sudden uplift in spending) caused an increase in telecoms spend as a proportion of GDP in 2020 in
all regions, though the underlying trend resumed in 2021. Japan appears to be an outlier; it has a particularly
resilient telecoms spend that remains at about 2% of GDP, largely because GDP has flatlined. This stands
in contrast to Western Europe, where telecoms spend has declined while GDP has significantly increased,
thereby leading to a strong decrease in the proportional telecoms spend.
FIG 1.12 : Telecoms spend as a proportion of GDP, China, Europe, Japan, South Korea and the
USA, 2007–2023f
3%
Telecoms spend as a proportion of GDP
2,5%
2%
1,5%
1%
0,5%
0%
2022f
2023f
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
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STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 1.13 : Europe Harmonised Index of Consumer Prices (HICP) and Japan, South Korea and
USA Consumer Price Index (CPI) for infrastructure-based services, 2015–2Q 20225
175
165
155
145
2015 = 100
135
125
115
105
95
85
2015 2016 2017 2018 2019 2020 2021 Q2-2022
5
The HICP and CPI published by the OECD and EC use a ‘basket of goods and services’ to measure inflation as the aver-
age change over time that people pay. This basket of goods and services uses a standardised set of products, albeit one
that is updated annually to match changes in demand and usage. For communications, this includes wired and wireless,
telephone and telefax equipment and services, including services bundled with pay-TV. The CPI for communications in
Japan has not been reported by the OECD since 2020.
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Energy accounts for a fairly small percentage of operators’ overall costs (3–3.5% for integrated fixed–mobile
players before the energy crisis). Energy price rises represent an increase in direct input costs for operators
so will reduce profits, but they are also a catalyst for other rising input costs. Operators face strong upward
pressure on labour, equipment and raw material costs. This has been reflected in the EBITDA margins
for ETNO operators (Figure 1.14). Indeed, aggregate EBITDA margins fell in 2021 (prior to the invasion
of Ukraine) after several years of efficiency gains and several European operators indicated lower-than-
anticipated EBITDA margins in 2022 because of energy-related pressures.
FIG 1.14 : Aggregate EBITDA margin, ETNO members at the group level, 2015–2021
40%
35%
36,4%
35,5%
34,5%
30% 32,3% 32,8% 32,1%
29,5%
EBITDA margin
25%
20%
15%
10%
5%
0%
2015 2016 2017 2018 2019 2020 2021
ETNO members have played a key role in supporting Ukraine since Russia’s
invasion: temporary reductions of inter-operator roaming rates, free prepaid SIM
cards, financial donations, adapted termination on mobile calls from Ukrainian
operators, free Wi-fi at gathering points for refugees.
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STATE OF DIGITAL COMMUNICATIONS | 2023
Telecom ARPU, particularly for mobile services, typically remains fairly flat during periods of low inflation, and
increases in usage (reflected in the data plans that consumers buy) tend to reflect decreases in unit prices.
This could pose a problem in inflationary times because it suggests that willingness to spend is elastic, and
that telecoms will become the networked utility that inflation forgets. The danger is that spend will remain
static while input costs for operators increase, and that consumers that face price rises for essentials will see
telecoms as a more controllable element of their spending. At the time of writing, it is rather too early to see
whether this was already happening in 2H 2022.
However, some telecoms service contracts allow the operator to raise prices by CPI + a fixed percentage
in the middle of a contract. It is more likely that operators will use this facility in inflationary times, and it is
also more likely than not that operators will follow, rather than compete against, any larger operator that
does increase prices in line with inflation, though there are examples where the opposite has happened.
The rush to maximise the conversion of homes passed by new FTTH networks into subscribers exerts some
downwards pressure on prices, and many new players may resist price rises for this reason.
No consumer welcomes price rises, but operators’ ability to invest in modern, fit-for-purpose networks is at
stake. The operating profit (EBIT) margin of European telecoms has declined quite rapidly in the past 3 years
(see section 1-3) and the future well-being of the European consumer or business may suffer as a result.
ETNO members have played a key role in supporting Ukraine since Russia’s invasion. Telecoms networks
are essential for communication and co-ordination among both refugees and those trying to help them, and
operators have provided free services and technical support. For example, they have introduced significant
temporary reductions of inter-operator roaming rates, thereby allowing customers from Ukraine that are staying
in the EU and those EU citizens with relatives in Ukraine to call and text for free or reduced prices. They have
also provided free prepaid SIM cards and have directly donated money to charitable and governmental
organisations working to support displaced Ukrainians. Operators have also adapted termination on mobile
calls from Ukrainian operators.6
Operators have used their technology and resources in other ways to help refugees. All operators with a
significant mobile presence close to the Ukrainian border, primarily in Poland, Romania, Moldova, Poland and
Slovakia, have increased their capacity and provided free Wi-Fi at gathering points for refugees.
ETNO members had provided free services worth over €11 million to Ukrainian refugees and people trying to
reach those still in Ukraine by the end of March 2022. This was made up of a combination of free calling and
the provision of data roaming services at no or reduced charge.
Network infrastructure resilience is vital during times of emergency to help societies to cope with crises and
start to recover. It is more important than ever that reliable and fast access to the internet is maintained during
crisis situations as more and more services move online and citizens’ interactions with governments become
digitised, in line with Digital Decade targets.
6
European Commission (2022), Joint Statement by EU and Ukrainian operators to help refugees from Ukraine stay con-
nected
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 2.1 : Distribution of value added, ETNO members at the group level, 2021
-1%
Salaries
33%
Interest
billion To shareholders
Depreciation and amortisation
7% Retained profit
4%
9%
24
STATE OF DIGITAL COMMUNICATIONS | 2023
Operator shareholders are often institutional investors such as pension funds, so the steady profitability of
major European telecoms operators has important social benefits. ETNO members regularly distribute an
important share of their net profit to shareholders. Indeed, dividend payments in 2021 were equivalent to
about 64% of net profit from 2020. This distribution level is in line with the market average, but is lower than
that for utilities such as energy. Net profits for ETNO members (excluding the impact of one-off asset sales
but including impairment charges) declined by 46% between 2020 and 2021, and dividend pay-outs as a
proportion of 2021 net profits exceeded 100% hence the negative value in the distribution of value added in
Figure 2.1.
ETNO members paid around €40.9 billion in direct taxes (tax on earnings and other direct taxes) and indirect
taxes (VAT and salary deductions) for their European operations in 2021; this is equivalent to about 22% of
their revenue base (Figure 2.2).
Figure 2.2 : Total direct and indirect tax, ETNO members (Europe only), 2021
17%
VAT
Salary deductions
11%
€40.9 48% Tax on earnings
24%
The ‘other taxes’ category includes property taxes and telecoms-specific charges such as recurring
spectrum licence fees (but not the prices paid at auction), fees for using numbering resources, specific
taxes on telecoms assets (such as pylons and copper), universal service costs, the cost of financing national
regulatory authorities and obligations to finance other sectors (such as public TV). The prices paid at auction
for spectrum licences are not strictly a tax, but they have a similar function. European operators have paid
€29.3 billion on spectrum licences since 2018.
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
Europe suffers from an ICT skills shortage (as do other regions); this has been compounded by high
employment levels in some countries, thereby making it harder to recruit due to the smaller pool of potential
applicants. Internal upskilling programmes have therefore become essential for operators.
Figure 2.3 shows the revenue per employee for ETNO members and comparable operators in China, Japan,
South Korea and the USA. As the labour force evolves, so should productivity. Indeed, ETNO members
have seen modest increases in productivity in recent years, and the gap between ETNO members and
US operators can be explained by economies of scale and the very great difference in ARPU. CAPs such
as Alphabet, Meta and Netflix enjoy higher productivity than ETNO members, but the skill sets that they
require are more software-centric and therefore command substantially higher remuneration. It is nonetheless
noteworthy that continuous growth in productivity (termed the platform effect) is no longer guaranteed, and
consequently neither is job security. For example, Meta shed 11 000 staff (13% of its entire workforce) in
October 2022.
FIG 2.3 : Revenue per employee for ETNO members, operators in China, Japan, South Korea
and the USA and selected CAPS, 2018–2021
2,5
Revenue per employee per year (€ million)
2,35
2,33
2,0
1,5
1,46
1,45
1,30
2,07
1,19
1,0
1,39
0,87
0,83
1,20
0,81
0,31
0,32
0,32
0,73
0,5
0,19
0,81
0,17
0,72
0,16
0,46
0,43
0,45
0,0
China Japan ETNO USA South Alphabet Meta Netflix
members Korea
26
STATE OF DIGITAL COMMUNICATIONS | 2023
The overall female share of the workforce has remained roughly stable among European operators, though
the proportion of managers who are women has grown. Many ETNO members have established pipelines for
female talent development and are aiming to increase the conversion of female employees into managers over
the course of their careers. This is important because there is no automatic link between a high proportion of
female staff and large number of female managers. Indeed, Japan and China are particularly stark examples
of this (Figure 2.4).
FIG 2.4 : Estimate average share of women in the workforce among ETNO members and
operators in China, Japan, South Korea and the USA, 2021
45%
40%
41%
Female share of employment
35%
34% 35%
30% 33% 33%
25% 29%
28%
20%
21%
15%
17% 17%
10%
5%
ETNO USA Japan South Korea China
In some markets women occupy a similar proportion of management roles to the proportion in the total work
force. 29% of managers in Europe are female, compared with 35% in the USA, 21% in South Korea and 17%
in both China and Japan. The gap between the total proportion of female employees and the share of female
managers is smaller among ETNO members and operators in the USA than among operators in Asia. Indeed,
China has the highest rate of women in the workforce (41%), but joint lowest proportion of female managers
(17%). Different companies define management positions differently, but most include middle manager roles
and above, though some may only include more senior management. It is worth noting that this overall
management figure does not reflect the presence of women at the highest levels of European operators.
Many ETNO members have set specific targets for the proportion of women in management roles. For example,
Orange plans to fill 35% of senior leadership roles with women by 2025. Altice Portugal has committed to reach
the Portuguese national target of having 40% of senior management positions filled by women by 2030 and
Telia intends to achieve a 50/50 gender balance in its extended leadership team by 2025. ETNO operators
have also committed to initiatives aimed at growing the number of women in technical and digital roles. For
example, Elisa has worked with Women4CyberFinland, an organisation that trains and mentors women that
are aiming to work in the cyber security industry in Finland, which has traditionally been dominated by men.
Swisscom is trying to encourage young women to take engineering roles by running Digital Days for Girls that
showcase the diverse range of technical roles that women can take on in telecoms.
27
THE STATE OF DIGITAL COMMUNICATIONS | 2023
7
Home markets are the countries in which the operator is the historical incumbent. The definition includes lines of busi-
ness that serve multinational enterprises, but excludes mainstream operating businesses based in other countries. Com-
parator operators outside Europe have few mainstream operating businesses outside their home markets, and hence a
comparison on the basis of ‘home markets’ is appropriate.
28
STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 3.1 : ETNO member capex (excluding spectrum costs), home markets, rest of Europe and
rest of the world, 2016–2021
60
50
13,5
12,9 14,5 10,3 11,9
40 12,2
Capex (€ billion)
9,5 10,1
30 10,5 7,3 8,7 10
20
-
2016 2017 2018 2019 2020 2021
FIG 3.2 : ETNO member capex in Europe only (excluding spectrum costs), plus total capex in
Europe, 2016–2021
60 56,3
51,8 51,7 52,5
48,3 48,9
50
40
Capex (€ billion)
30
10
10,7 10,3 10,6 11,0 11,5 12,7
0
2016 2017 2018 2019 2020 2021
29
THE STATE OF DIGITAL COMMUNICATIONS | 2023
ETNO members’ capital intensity continues to rise and is now nearing 20% in home markets. The figure in
Europe is significantly higher than that in the USA, Japan and South Korea, and is only fractionally lower than
that in China (20.3%) (Figure 3.3).
FIG 3.3 : Capital intensity in home markets, ETNO members and comparable leading operators
in China, Japan, South Korea and the USA, 2016–2021
35%
Capex as a proportion of revenue
30%
25%
20%
15%
10%
5%
0%
2016 2017 2018 2019 2020 2021
30
STATE OF DIGITAL COMMUNICATIONS | 2023
ETNO members’ high capital intensity must also be understood in terms of their proportionately lower ARPU
and revenue. The actual investment per capita is lower than that in the other countries included in this report,
even when adjusted for GDP per capita (Figure 3.5).
FIG 3.5 : Capex per capita, China, Europe, Japan, South Korea and the USA, 2021
300
259,7
250
Capex per capita (€bn)
200
149,6
150
117,4 110,2
104,4 237,5
100 210,7
50 104,4 116,3
30,7
0
Europe USA Japan South Korea China
European telecom
operators invested a
record of €56.3 billion in
2021, the highest level
since 2016.
31
THE STATE OF DIGITAL COMMUNICATIONS | 2023
Another way of looking at this is to consider the ratio of capex to EBITDA (Figure 3.6). This is quite high,
especially when one considers the improvement in ETNO members’ EBITDA and EBITDA margins between
2017 and 2020 due to increased operational efficiency (not revenue increases). In fact, ETNO members
had the highest average EBITDA margins of all groups included in this report in 2021 (35.3%); they were
fractionally higher than those of US operators (33.1%), higher than those of Chinese operators (28.7%) and
substantially higher than those of Japanese and South Korean operators (26.7% and 20.8%, respectively).
Nevertheless, it must be noted that the state’s ownership and direction of Chinese operators makes their
reinvestment level higher and, conversely, their cash conversion lower.
FIG 3.6 : Capex/EBITDA ratio, ETNO members and peers in China, Japan, South Korea and the
USA, 2017–2021
80%
70%
60%
Capex/EBITDA
50%
40%
71,5%
71,3%
70,7%
63,4%
63,3%
58,4%
60,6%
58,4%
60,6%
30%
52,1%
52,4%
52,0%
52,1%
53,4%
53,8%
53,9%
52,4%
50,6%
49,7%
43,2%
39,3%
46,5%
36,4%
33,8%
34,5%
20%
10%
0%
2017 2018 2019 2020 2021
32
STATE OF DIGITAL COMMUNICATIONS | 2023
Fixed/FTTH capex
Fixed access (dominated by new FTTH builds) accounts for most of the current growth in telecoms capex
and ETNO members accounted for 57% of fixed access capex in 2021. Fixed network capex is distributed
among a greater number of players than mobile capex; emerging regional infrastructure players and new
local players compete with traditional telecoms operators (Figure 3.7). Moreover, the structure of the market,
among ETNO members and altnets, is characterised by co-investment by infrastructure investors.8
FIG 3.7 : Split of fixed capex between ETNO members and other operator types, Europe, 2021
23%
ETNO
€22.5
Cable
11% billion 57%
Altnet
Wholesale-only
9%
Several new and growing wholesale-only players are active at a regional level, but only a few have national
ambitions (OpenFiber in Italy and FastFiber in Portugal). In addition, there are a large number of new, mostly
quite local, altnets with a vertically integrated business model (their number reaches the high double digits
in the UK). The role of utilities and municipal infrastructure providers in using their existing construction
knowledge to build new FTTH networks is also growing. They have played a prominent role in Nordic countries
and Switzerland for a long time. Recent examples include Vattenfall’s joint venture with Eurofiber to create an
FTTH network in Berlin and NTE’s investment in long-distance fibre networks.
Further infrastructure-based competition in FTTH will come from cable operators, several of which (including
Virgin Media O2, Virgin Media Ireland, SFR, Telenet and Vodafone Germany) have signalled, and in some
cases embarked upon, upgrades to FTTH in part or all of their networks. Some of these have also suggested
that they may enter into the wholesale market.
FTTH markets are beginning to show signs of consolidation and rationalisation. Several alliances, for example
in Austria, Germany, Spain and the UK, were created in 2021 and 2022 between fibre infrastructure providers
based on reciprocal access to each other’s FTTH networks. For example, CityFibre and Toob in the UK have
a strategic partnership that allows CityFibre wholesale customers to use Toob’s network, and Toob can sell
services through CityFibre’s network.
8
The splits are based on consolidated accounts rather than on equity.
33
THE STATE OF DIGITAL COMMUNICATIONS | 2023
The cumulative amount spent per capita on FTTH in Europe is high and rising (Figure 3.8). The EU has
encouraged infrastructure-based competition in FTTH networks, which inevitably means that there is a
degree of overbuild and that investment does not flow to certain areas. However, overbuild also bakes in a
higher degree of network resilience because there are multiple FTTH connections to the same area, thereby
preventing a single point of failure from disrupting data traffic. The level of FTTH-on-FTTH overbuild was
1.37 aggregate premises passed to 1 unique premises passed at the end of 2021; this ratio will only grow
as cable operators start to upgrade to FTTH. The total cumulative investment on all FTTx by the end of 2022
was the equivalent of €646 for every premises in Europe (including those not yet covered), which works out
at €333 per member of the population, €194 of which was invested by ETNO members in their home markets.
FIG 3.8 : Cumulative FTTH capex per capita, ETNO and others, 2015–2022f
350 7
7
300
7 132
250
7 111
200 7
€ per capita
87
7 73
150 57 74
7
74
7 43
73
100 34 71
27 66
59
52 120
50 42 101
69 83
40 48 58
32
0
2015 2016 2017 2018 2019 2020 2021 2022f
ETNO FTTH ETNO other FTTx non-ETNO FTTH non-ETNO other FTTx
34
STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 3.9 : Direct capex on digital infrastructure, total European telecoms sector and CAPs, 2021
60
50
56,3
40
94% of CAP capex on
digital infrastructure is
€ billion
30 spent on datacentres
20
17
10
0
Telecoms CAP
There is very limited overlap in terms of what digital infrastructure asset classes telecoms operators and CAPs
invest in, and they may be said to be largely complementary. However, operators and CAPs do enter into
voluntary commercial agreements that work both ways.
35
THE STATE OF DIGITAL COMMUNICATIONS | 2023
SECTION 2
Demand for
digital services
36
STATE OF DIGITAL COMMUNICATIONS | 2023
In general, digital services can be broken down into those that are sold directly to consumers (B2C) and
those that are used by businesses (B2B). There is overlap in terms of the sorts of services sold, but the mar-
kets operate very differently.
Revenue patterns
Consumer service revenue at an operator group level increased by 1.3% year-on-year in 2021 (Figure 4.1).
This is a very small increase, but is nonetheless a departure from the continuous shallow revenue decline pri-
or to the pandemic. The pandemic had a significant impact on revenue in 2020 due to the reduction in travel
and associated roaming revenue, as well as consumers’ financial uncertainty, which affected their ability to
pay for services. Competition and regulation continue to put downward pressure on prices, but the ongoing
importance of fast and reliable connectivity means that the telecoms market is more resilient to demand
shocks than other sectors where spending is less discretionary. The 2021 increase should be understood as
a rebound; it is difficult to imagine that retail B2C spend will grow significantly over the next few years.
FIG 4.1 : Consumer telecoms service revenue and year-on-year growth, Europe, 2013–2025f
176 2%
174
174 1%
172 0% Year-on-year revenue growth
172
170
Revenue (€ million)
14
15
16
17
18
19
20
21
f
22
23
24
25
20
20
20
20
20
20
20
20
20
20
20
20
20
37
THE STATE OF DIGITAL COMMUNICATIONS | 2023
Mobile ARPU in Europe is likely to remain at around €14.7 for the foreseeable future (Figure 4.2). The decline
of mobile ARPU since the onset of the pandemic demonstrates that increasing usage does not translate into
higher revenue and, as discussed in section 1-1 above, FMC is becoming increasingly common among
operators and contributes to mobile ARPU erosion. Mobile operators in most regions have also struggled
to charge premium prices for 5G services, thereby offering little support for reversing the trend of declining
ARPU through the use of faster technologies.
Fixed broadband ARPU has consistently remained at about €21–22 for the past 10 years, despite the sizeable
investments in FTTH upgrades (Figure 4.2). As in the mobile market, strong retail competition, exacerbated
by a legacy of regulation that focuses on incentivising resale over investments, limits operators’ ability to raise
prices significantly for FTTH services. However, they are still able to charge a small premium on average.
FIG 4.2 : ARPU for mobile and fixed broadband services, Europe, 2013–2025f
25
20
ARPU (€/month)
15
22,1
22,2
22,3
21,9
21,9
21,9
21,9
21,6
21,6
21,8
21,5
10
22
22
16,2
15,4
15,4
15,2
15,2
15,1
15,1
14,7
14,7
14,7
14,6
14,7
14,7
5
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022f 2023f 2024f 2025f
38
STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 4.3 : Operators’ B2B and B2C revenue and the B2C share of the total telecoms revenue,
Europe, 2017–2023f
300 100%
90%
60%
150 50%
40%
100
169 169 30%
168 167 165 167 169
20%
50
10%
0 0%
2017 2018 2019 2020 2021 2022f 2023f
39
THE STATE OF DIGITAL COMMUNICATIONS | 2023
Mobile connections
5G coverage is beginning to grow rapidly in Europe,
albeit from a low initial base (just 7.3% of the popu-
lation was covered in 2021). It is estimated that the 5G covers 73% of
5G population penetration will reach 67% in Europe
by 2025 (Figure 4.4), which represents an enormous Europe, but uptake
increase from the current situation. 4G coverage, remains low:
which is almost universal in Europe, is expected to
begin to decline as operators move their networks only 6.4% of all
over to 5G infrastructure; we expect that it will fall to mobile connections
55% by 2025.
in Europe are 5G.
140%
120%
50% 67%
33%
19%
100% 1% 7%
Penetration
80%
60%
40
STATE OF DIGITAL COMMUNICATIONS | 2023
5G connections require upgraded mobile devices (most commonly new-generation smartphones) to access
5G connectivity. As such, the conversion of 5G coverage into 5G subscriptions in Europe continues to lag
behind that elsewhere in the world. The 5G share of all connections is the highest in Asia–Pacific; over half
of Chinese and more than a third of South Korean mobile connections use 5G. The 5G share of mobile con-
nections in Europe has grown to 6.4% as of 1Q 2022, up by 3.6 percentage points from last year’s report
(Figure 4.5). As such, we expect that the absolute number of 5G connections in Europe will grow from 31
million in 2021 to 361 million by 2025.
FIG 4.5 : 5G share of all mobile connections, China, Europe, Japan, South Korea and the USA,
1Q 2022
70%
60%
5G proportion of total connections
50%
40%
30% 58,4%
20% 37,9%
29,1%
10%
16,3%
6,4%
0%
China South Korea USA Japan Europe
However, the 3.6-percentage point growth in Europe is much lower than that elsewhere in the world. In the
same period, the share of 5G connections grew by:
Coverage in Europe and the lower levels of mobile usage may be partly responsible for making Europeans
less inclined to upgrade to 5G-ready devices, though both factors vary significantly across the continent.
41
THE STATE OF DIGITAL COMMUNICATIONS | 2023
250
16 18
200 14 15
12 13
10
Connections (million)
22 29 37 46 57 68 82
150 5 5 5 5
36 4
36 36 4
37 4
37
100 37
35 37
44
52
57
59
60
50 58
77
66 55 45 36 27 19
0
2017 2018 2019 2020 2021 2022f 2023f
Operators’ strategies regarding their existing cable and copper networks will vary, but the use of both tech-
nologies will fall significantly as gigabit-capable connectivity becomes increasingly important. The number
of FTTH connections is set to grow the fastest out of all technologies, but FTTH will only represent 41% of
connections by 2023. This demonstrates the importance of continuing to support other connectivity access
solutions because more than half of Europeans will still use them in 2025.
42
STATE OF DIGITAL COMMUNICATIONS | 2023
Fixed–mobile convergence
FMC will increase in importance across Europe, mostly due to competition and M&A activity. It is a strategy
that operators have pursued because it can help to minimise customer churn (which is typically high in mobile
markets) and reduce costs.
FMC continues to account for a minority of contracts (Figure 4.7). Nonetheless, the FMC share grew from
31% in 2020 to 33% in 2021, and FMC is particularly common among fixed broadband subscriptions (it ac-
counted for over 37% of subscriptions in 2021). However, this European average masks large national varia-
tion. The FMC share of contracts is expected to grow across most of Europe, but few countries will reach the
same levels of penetration as Spain, France and Portugal, which have high FMC market shares.
FIG 4.7 : FMC share of fixed broadband subscriptions and contract mobile SIMs, Europe,
2015–2025f
60%
50%
50% 47%
43%
40%
40% 37% 36%
39%
Penetration
34% 34%
33%
31% 31%
30% 29%
300% 26% 27%
25%
24%
23% 22%
200% 19%
16%
10%
0%
2015 2016 2017 2018 2019 2020 2021f 2022f 2023f 2024f 2025f
43
THE STATE OF DIGITAL COMMUNICATIONS | 2023
1000
Total FBB and mobile traffic (EB per year)
900
95
800
74
700
600 57
500
400 40
780
28 703
300 19 576
11
200 398
7 315
4 253
100 191
99 141
0
2014 2015 2016 2017 2018 2019 2020 2021 2022f
9
The 2022 estimate is based on 2Q 2022 data
44
STATE OF DIGITAL COMMUNICATIONS | 2023
During the pandemic, consumers relied proportionately more on residential fixed services than on mobile
networks. As a result, fixed data traffic grew more quickly than it had in previous years. Mobile data traffic
growth accelerated only in those countries with a high proportion of mobile-only consumers; it decelerated
in others. Data traffic is currently undergoing a post-pandemic correction in Europe. Evidence from other
advanced economies suggests that fixed and mobile traffic growth rates will eventually converge and that
mobile networks will account for 10–15% of all data traffic on average (but with substantial variations).
Hours of usage have a natural limit, but there is a continuous supply of novel applications and services and
of more bandwidth-hungry video formats that push demand up. This means that mobile operators need to
walk a very fine line. On the one hand, they must offer larger mobile data deals to meet consumer demand
and match competition, which in turn risks further reducing consumer incentives to use home Wi-Fi. On the
other hand, the increase in data traffic stretches the sector and its viability because operators are required
to fund continuous build-outs in the face of a limited ability to monetise traffic because a few very large tech
companies extract most of the value from internet access.10 Indeed, a report published in May 2022 by Axon
Partners Group for ETNO (based on Sandvine data) indicated that content originating in six hyperscale
businesses (Alphabet, Amazon, Apple, Meta, Microsoft and Netflix) accounted for 56% of all data traffic
worldwide.11 The proportion in Europe is unlikely to be greatly different.
It is still unclear what the future impact of virtual and augmented reality will be on bandwidth demand, and
hence on telecoms infrastructure. A recent study suggested that VR users in the metaverse will require more
than five times as much data than if they were streaming traditional HD video.12
10
GSMA (2022), The Internet Value Chain 2022.
11
ETNO (2022), Europe’s internet ecosystem: socio-economic benefits of a fairer balance between tech giants and tele-
com operators.
12
Arthur D Little (2022), The metaverse: what’s in it for telcos?
45
THE STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 5.1 : Penetration of CAPs’ services, ETNO members and Western Europe, 2017–2025f
100%
80%
60%
Penetration
40%
20%
0%
2017 2018 2019 2020 2021f 2022f 2023f 2024f 2025f
46
STATE OF DIGITAL COMMUNICATIONS | 2023
Messaging apps will continue to be the most common form of CAP service used by consumers. These apps
are used during about 80% of mobile connections and penetration is still growing. The penetration of voice
and video apps is also rising, but growth rates are starting to slow.
Market conditions suggest that CAPs might struggle to become any more competitive with their monetisation
strategies. Some CAPs that have established themselves as the largest players in their space have started
to come up against new challengers (for example, Disney+ to Netflix) in the past 2 years. This, added to the
reality that some types of digital service applications are reaching near-saturation levels, means they will
need to find further revenue streams over time. Some CAPs are now implementing, or planning to implement,
new strategies to monetise online services; these include paid-for premium services on top of their existing
free, advertising-funded products. Examples include Twitter Blue, Telegram Premium and Snapchat+. Others
have already implemented price rises, price tiers or usage restrictions (for example, Netflix).
Traditional pay TV is still (just) the largest component of the B2C video market. It accounted for 54% of
the total market in 2021, but made up 84% as recently as 2016 (Figure 5.2). This share will continue to
decline slowly and will be overtaken by that of third-party video streaming in 2024, but traditional pay TV will
nevertheless remain a significant part of the market. Operators’ video streaming services still account for a
much smaller market share than either third-party streaming video or traditional pay-TV services, but revenue
from these services is expected to almost double between 2021 and 2026.
FIG 5.2 : Revenue from traditional pay TV, operator video streaming and third-party video
streaming services, Europe, 2016–2026f13
80
70
60
35,1
50 33
Revenue (€ billion)
30,7
27,9
24,7
20,9
40 12,5
16,3
7 9,4
5,1
30 0,7 1 1,5 2,3 2,9 3,8 4,7 5,5 6 6,5 6,9
20
30,9 30,9 30,5 30,5 29,8 29,6 29,1 28,6 28,3 28 27,8
10
0
2016 2017 2018 2019 2020 2021 2022f 2023f 2024f 2025f 2026f
13
Traditional pay TV includes broadcast and linear IP television channels to which customers subscribe and pay a set
amount for a certain subscription length. Operators’ video streaming refers to operator-run streaming services, such as
MagentaTV from Deutsche Telekom. Third-party video streaming mostly consists of services such as Netflix and Disney+
that are not operated by the businesses that own the networks over which the service is delivered to the consumer.
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National pay-TV players (some of which are telecoms operators) continue to play a key role in the delivery of
sports video. Demand for sports is frequently national rather than international in character, which ties in with
operators’ national footprints. Moreover, rights are most frequently granted at a national level. High-quality
live-streaming of major events to tens of millions of viewers can also be a technical challenge for the parties
involved. Telecoms operators must handle large amounts of data traffic that is simultaneously sent to the last
mile or edge network infrastructure, while CAPs must guarantee service quality.
Nonetheless, CAP giants are entering the market for live-steaming major events, too. Amazon now streams
the English Premier League in the UK, and will be sharing the rights to the UEFA Champions League in
2024–2025 with BT Sport. BT Sport itself was the subject of a carve-out that was completed in 2022, and is
now 50% owned by Warner Bros Discovery, itself a recent carve-out from US telco AT&T. This entry of a CAP
provider into national sports delivery showcases the changing TV environment; telecoms operators now have
to compete with giant multinational streamers for key events.
ETNO members continue to generate the vast majority of their revenue from their core product: connectivity
(Figure 5.3). However, the core (connectivity) share of the total revenue declined slightly from 85% in 2017
to 83% in 2021, while the non-core proportion doubled from 3% to 6%. The pay-TV share remained stable
at 12%, which demonstrates its resilience as a revenue creator even as the take-up of third-party video
streaming services grows rapidly.
FIG 5.3 : Breakdown of total revenue, ETNO members, Europe only, 2017–202114
3% 4% 4% 5% 6%
100%
90% 12% 12% 12% 12% 12%
80%
70%
Share of revenue
60%
50%
30%
20%
10%
0%
2017 2018 2019 2020 2021
14
Core services include all connectivity products and services that operators provide, such as voice, while non-core re-
fers to all other services, such as security, cloud and IoT products. Pay TV has been split out as neither core or non-core,
and covers both traditional and OTT TV subscriptions that operators sell to customers through their platforms.
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STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 5.4 : Examples of ETNO members’ external data monetisation services in a range of verticals
Government Smart cities, traffic monitoring, BT (BT Business), Telenor (BDSG), Telia
digital behaviour, mobility and (Crowd Insights) and TIM (Cloud Hub)
disease surveillance
Manufacturing Smart factories, automation, remote Telia (IoT Platform), A1 Telekom (A1
robotics, supply chain monitoring, Digital), Elisa (IndustrIQ) and Deutsche
environmental surveillance and Telekom (IoT Cloud)
health and safety
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B2B services
B2B connectivity revenue has been flat for many years, but is forecast to rise significantly over the next 3
years (Figure 5.5). This will be driven by a combination of factors, including pandemic-induced shifts in
working practices, because remote working requires a greater spend on connections and higher-quality
connectivity. Revenue is estimated to reach €100 million by 2025, up from €93 million in 2021.
FIG 5.5 : Operators’ B2B connectivity services revenue and year-on-year growth, Europe,
2014–2025f
120 3%
2%
100
1%
80
Revenue (€ million)
0%
60
100 -1%
95 97 99
92 92 92 91 91 91 91 93
40
-2%
20
-3%
- -4%
2014 2015 2016 2017 2018 2019 2020 2021 2022f 2023f 2024f 2025f
The pandemic also changed businesses’ services requirements; they moved from on-premises telecoms
equipment with dedicated connections to virtual private networks (VPNs) and software-defined, wide-area
networks (SD-WANs) to enable accessible and safe remote working. Secure-access service edge (SASE)
has emerged as a concept as an extension to operators’ SD-WAN strategies. SASE includes packaging SD-
WAN connectivity with cloud security products and provides an opportunity for operators to increase their
B2B security revenue and defend connectivity spending. Building SASE is part of a broader growth strategy
that enables operators to make use of their long-standing relationships with businesses and bundle core
connectivity services with non-connectivity and ICT services.
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STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 5.6 : Non-connectivity-related B2B services revenue and operators’ market share, plus a
data table for non-connectivity-related B2B services revenue, Europe, 2014–2025f
180 18%
160 16%
140 14%
Revenue (€ billion)
Market Share
120 12%
100 10%
80 8%
60 6%
40 4%
20 2%
0 0%
2014 2015 2016 2017 2018 2019 2020 2021 2022f 2023f 2024f 2025f
Unified communications SaaS (public cloud)
IaaS/PaaS (public cloud) Security
Co-location and hosting Enterprise mobility
Operator 2014 2015 2016 2017 2018 2019 2020 2021f 2022f 2023f 2024f 2025f
Unified
0.9 1.3 1.7 2.2 2.7 3.4 4.0 4.7 5.3 5.9 6.6 7.2
communications
SaaS
11.4 16.5 21.7 25.3 29.6 35.0 40.1 46.1 53.1 59.1 64.7 70.1
(public cloud)
IaaS/PaaS
3.5 4.6 5.9 7.5 9.5 12.2 15.3 18.9 22.6 26.4 30.3 34.1
(public cloud)
Security 11.4 12.6 13.3 14.2 15.3 16.6 17.6 18.8 20.2 21.6 23.0 24.4
Co-location
9.8 11.8 13.8 16.0 18.5 20.8 22.0 23.1 24.3 25.3 26.2 27.1
and hosting
Enterprise
0.8 1.0 1.1 1.3 1.5 1.7 1.9 2.2 2.6 2.9 3.3 3.6
mobility
Desktop
0.1 0.2 0.2 0.2 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.4
management
Total 37.9 48.0 57.7 66.7 77.4 90.0 101.4 114.2 128.4 141.6 154.5 167.0
Operators’ share of the enterprise ICT market is continuing to fall, from 16% in 2014 to an estimated 12% in
2025. The market is growing sufficiently quickly that operators’ revenue will continue to grow in absolute terms.
However, revenue for IT specialists, especially those that are active in the rapidly growing SaaS market, will
increase more rapidly, thereby lessening operators’ share of the total market.
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Many specialist cyber security firms supply a wide variety of commercial, off-the-shelf cyber security products
for businesses and consumers. However, the fast-growing area of mobile security, part of the wider area of
mobile device management, is one area in which operators may have a particular advantage. When a mobile
user is browsing the internet via mobile data, they are already using an operator’s network, so it is easier to use
that operator for security than to protect an unrelated laptop. Operators have made a number of acquisitions
of cyber security firms in recent years to improve their expertise in this area. Examples include Telefónica’s
purchase of cyber-resilience firm Govertis in 2020, Orange’s acquisition of full-service cyber security
company SCRT and Telsys SA in 2022 and BT’s acquisition of a large stake in cyber-risk quantification firm
Safe Security in 2021. These purchases allow cyber security companies’ technical expertise to be combined
with operators’ large customer bases, thereby creating a highly profitable revenue opportunity because the
marginal cost of additional software subscriptions is close to zero.
Operators received a boost to their cyber security revenue during the pandemic because many organisations,
faced with a hugely increased attack surface due to remote working, quickly upgraded their security solutions.
Growth will not continue at that pace (growth was flat coming into 2022), but it will steadily increase over time,
and the total European revenue will exceed €5 billion by 2025 (Figure 5.7).
5
5,2
4,9
Retail revenue (€ billion)
4 4,5
4,1 4,1
3,7
3 3,4
0
2019 2020 2021 2022f 2023f 2024f 2025f
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STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 5.8 : Number of active IoT connections by vertical industry, Europe, 2021–2030f
250
Number of active connections (million)
200
150
100
50
0
Agriculture
Automotive
Finance
Health
Industry
Retail
Smart buildings
Smart cities
Tracking
Utilities
Miscellaneous
2021 2024f 2027f 2030f
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The rate of growth in the number of IoT connections fell during the pandemic but is predicted to resume its
rapid rise over next 10 years. The average year-on-year growth in the number of IoT connections worldwide
fell from 30% in 2019 to 23% in 2021, with operators in China grew faster in 2019 than others but those in
Europe performing better in 2021.
The number of IoT connections will grow the fastest in the smart buildings sector which represents a
combination of government initiatives to create smart cities, automate aspects of building management,
increase energy efficiency and minimise carbon emissions. This diversity of IoT use cases is accompanied
by a wide variety of connection technologies. Diversity is required because the connectivity needs of an air
conditioning controller are different to those of a passive road traffic monitor, which means that operators
need to be able to provide many different connection options to take full advantage of the IoT opportunity.
Operators’ IoT connectivity revenue is expected to continue its steady growth, and will reach €4.7 billion
per year by 2030 (Figure 5.9). IoT connectivity revenue is expected to account for 3.4% of operators’ total
mobile service revenue in 2030, up from 1.6% in 2021. Revenue is growing more quickly in China than in
Europe; Telefónica is the only operator outside of China to experience a higher rate IoT revenue growth in
2021 and 2020 than in 2019. All three of the main Chinese operators reported IoT revenue growth of more
than 20% in 2021, and this is primarily attributed to the increase in the availability of 5G and the use of device
management platforms.
FIG 5.9 : Operators’ IoT connectivity revenue and the IoT share of mobile service revenue,
Europe, 2017–2029f
5 4%
3
2,5 2%
4,7
4,3
2 4,0 1,5%
3,6
3,3
1,5 2,9
2,6 1%
2,1 2,4
1 1,8 1,9
1,4 1,6
0,5 1,2 0,5%
0 0%
2017
2018
2019
2020
2021
2022f
2023f
2024f
2025f
2026f
2027f
2028f
2029f
2030f
Total IoT connectivity revenue IoT share of total mobile service revenue
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STATE OF DIGITAL COMMUNICATIONS | 2023
Demand is undergoing
a post-Pandemic
correction, but growth
trends continue and
more is in store with the
metaverse coming.
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
SECTION 3
How network
providers can help
to deliver a new
digital future
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STATE OF DIGITAL COMMUNICATIONS | 2023
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
100%
89,1%
90%
Proportion of total premises passed
80%
70%
60%
50% 39,6%
38,7%
40%
30%
16,1%
20% 9,4%
10%
0%
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023f
2024f
2025f
2026f
2027f
2028f
2029f
2030f
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STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 6.2 : Additional unique FTTH premises passed forecast over 2023f–2028 as a proportion of
all premises passed in 2022, Europe and the USA
35%
Additional unique FTTH premises passed as
30%
% of total - baseline 2022
25%
20%
29,6%
15%
26,2%
27,0%
23,3%
23,7%
21,5%
18,6%
19,2%
10%
13,1%
13,4%
5%
6,7%
6,8%
0%
2023f 2024f 2025f 2026f 2027f 2028f
USA Europe
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
The 250 million premises passed by FTTH will be covered by an average of about 1.5 FTTH networks by
2030, but this leaves 30 million premises that will not be served by a wired gigabit network. This goes against
the targets set out in the Digital Decade programme. Figure 6.3 shows a projection of the total costs required
to cover 90%, 96% and 99% of premises with FTTH, with an estimate of what would have to be covered by
public money.
250
200 7,5
Spend (€ billion)
15,0
18,4
150
67,3
100
25,8
50 89,9 22,4
12,2
11,0
0
Private Public
Additional to 99%
The cost of FTTH per premises passed will rise to several thousands of euros to cover the last 10% of prem-
ises, so 5G FWA and hybrid solutions may be more commercially prudent than FTTH. However, achieving
genuinely gigabit services in remote areas using 5G FWA may also come with considerable additional costs.
These include costs due to:
Figure 6.3 does not include the final 1% of very-hard-to-reach premises. The capacity and coverage of
low-Earth-orbit (LEO) satellite constellations by operators such as SpaceX Starlink (USA), Amazon Kuiper
(USA), AST SpaceMobile (USA), Telesat Lightspeed (Canada) and OneWeb (UK) have exploded since 2021.
Indeed, the total global capacity at the end of 2022 will be over 10 times higher than that at the end of 2021.
In addition, the EU has its own initiative, IRIS2, which is meant to enter into service in 2024. The fundamental
purpose and business models of these satellite operators extend into many fields, but the rapidly falling cost
of satellite bandwidth may make it a more-viable complementary connectivity solution for the last 1% of prop-
erties, even if satellite broadband performance does not match that of terrestrial broadband.
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STATE OF DIGITAL COMMUNICATIONS | 2023
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Regulators in most European countries have now assigned spectrum (via auctions in nearly all cases) in the
3.4–3.8GHz band (the most important band for 5G mobile), and many have assigned spectrum in the other
two principal bands for 5G, 700MHz and mmWave. Figure 6.4 shows the allocation of spectrum in the 5G
bands as of November 2022.
FIG 6.4 : Assignment of spectrum in the main 5G bands, Europe, November 2022
Country Spectrum assigned in the Spectrum assigned in the Spectrum assigned in the
700MHz band (MHz) 3.4–3.8GHz band (MHz) mmWave band (MHz)
Albania 0 0 0
Austria 60 390 0
Belgium 60 370 0
Bosnia 0 0 0
Bulgaria 0 300 0
Croatia 60 320 1000
Cyprus 60 400 0
Czech Republic 60 400 0
Denmark 80 390 2850
Estonia 0 390 0
Finland 60 390 2400
France 60 310 0
Germany 60 300+100 local 0
Greece 60 390 1000
Hungary 50 390 0
Iceland 40 300 0
Ireland 0 340 0
Italy 75 200 1000
Latvia 80 150 0
Lithuania 40 300 0
Luxembourg 60 330 0
Malta 0 300 0
Montenegro 0 0 0
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STATE OF DIGITAL COMMUNICATIONS | 2023
Netherlands 60 0 0
North Macedonia 0 0 0
Norway 60 400 0
Poland 0 0 0
Portugal 60 (10 unsold) 400 0
Romania 0 345 (85 unsold) 0
Serbia 0 0 0
Slovakia 60 390 0
Slovenia 75 380 1000
Spain 60 (15 unsold) 380 0
Sweden 40 320+80 local 0
Switzerland 70 300 0
UK 80 390 0
The amount of spectrum assigned varies considerably between countries in Europe, though there are now
few countries where an assignment in at least one band has not been made. There are also major differences
in the conditions of the licences in terms of coverage and roll-out speed. These vary from effectively no
coverage conditions in countries such as Finland, Sweden and the UK to a very tightly defined set of conditions
in Germany.
The ITU’s minimum technical requirements to meet the IMT-2020 criteria for radio interfaces are at least
100MHz of contiguous spectrum per operator. The aggregation of non-contiguous blocks of spectrum is
possible, but 100MHz of contiguous spectrum enables faster networks and allows for more-efficient network
operation. 19 of the 36 European countries listed in Figure 6.4 have at least 1 operator with 100MHz of
contiguous spectrum, while 18 have at least 2 operators and 16 have 3 or more.
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The prices paid for mid-band spectrum (3.4–3.8GHz) in Europe have not been especially high compared to
those in Canada and the USA, though US licences are indefinitely renewable after an initial 15 years, thereby
making direct comparison difficult (Figure 6.5). Nonetheless, the prices paid in Europe have varied greatly:
Italian operators paid nearly eight times more per megahertz per member of the population (MHz/pop) than
Finnish operators. This variation was due to differences in the amount of spectrum available to bidders in
some cases.
FIG 6.5 : Prices paid for spectrum in the 3.4–3.8GHz band, normalised to a 20-year duration,
worldwide
2
1,622
1,80
1,60
1,40
0,987
EUR/MHz/pop
1,20
0,697
0,650
1
0,80
0,378
0,358
0,296
0,270
0,258
0,60
0,178
0,167
0,164
0,145
0,142
0,138
0,128
0,103
0,102
0,086
0,085
0,073
0,079
0,056
0,055
0,055
0,054
0,054
0,048
0,036
0,035
0,028
0,023
0,024
0,40
0,003
0,20
0
South Africa
Spain
Hong Kong
Portugal
Austria
Ireland
Sweden
Finland
Romania
Czech R (2017)
Croatia
Latvia
Bulgaria
Canada
USA - C-band
USA - 3.45GHz
USA - Taiwan
Italy
South Korea
Switzerland
Germany
France
UK (2018)
Luxembourg
Denmark
Norway
Hungary
Slovenia
UK (2021)
Cyprus
Czech R (2020)
Australia (2017)
Australia (2018)
USA - CBRS
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STATE OF DIGITAL COMMUNICATIONS | 2023
Regulators have evaluated the ways in which to ensure that spectrum regulation facilitates the use of 5G for
these use cases. Regulatory approaches range from spectrum being earmarked for B2B use or for private
networks (as in Germany and Sweden, for example) to obligations being placed on MNO spectrum owners
to support industrial requirements such as improved indoor or remote site coverage.
These two approaches tally with the two basic models for private networks:
• where the industrial network user deploys a private network using either dedicated local spectrum (where
available) or unlicensed spectrum, and an operator or vendor potentially plays a role in building, integrat-
ing and managing the network
• where the industrial network user takes a configurable slice of an existing public network; this model can
be deployed on 4G and 5G non-standalone networks via software upgrades, but it is an integral feature
of future 5G standalone networks.
Spectrum reservations or specific obligations may generally reduce investment for operators, there is a
role for them in both private networks models. Existing operators act as experienced network builders and
integrators in the first model, without being traditional licensed operators. Virtualisation introduces new ways
for new types of enterprise users to expand the geographical presence of their networks in the second model,
without commissioning new physical network infrastructure; in other words, it offers considerable scope for
capex avoidance.
These models can coexist under some circumstances, and the geographical coverage of the networks will
define which approach works best to a great extent. Nevertheless, consideration has to be given to whether
the first model acts to the detriment of not only of the second, but also of more traditional mobile use. Setting
aside spectrum for local use cases, where take-up by industries could be quite weak, could have an impact
on the quality of networks enjoyed by the majority of users.
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In this section, we analyse operators’ ongoing efforts to minimise their own contribution to climate change,
how they are optimising the networks to help their customers and suppliers to make a positive environmental
impact and how they are driving towards lower energy consumption and lower energy costs in their own
networks.
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STATE OF DIGITAL COMMUNICATIONS | 2023
The total energy used by ETNO members is fairly stable. There was in a non-organic increase energy
consumption at a group level in 2020 brought about by a major acquisition outside Europe (Figure 7.1). The
proportion of this energy usage that comes from renewable sources has been steadily growing at a group
level, and now accounts for 79% of the total.
FIG 7.1 : Scope 1 and 2 energy consumption from renewable and non-renewable sources, ETNO
members at the group level, 2018–2021
40
35
21%
Energy consumption (TWh)
30 31%
33%
40%
25
20
15
79%
69%
67%
10 60%
0
2018 2019 2020 2021
Renewable Non-renewable
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
Energy usage fell in 2020 and 2021 in ETNO members’ European operations alone (Figure 7.2). The impact
of investments in renewable energy can clearly be seen: 83% of energy came from renewable sources in
2021, based on the market definition of scope 2.15
FIG 7.2 : Scope 1 and 2 energy consumption from renewable and non-renewable sources,
ETNO members, Europe only, 2018–2021
25
20
Energy consumption (TWh)
15
10
71% 76% 79% 83%
0
2018 2019 2020 2021
Renewable Non-renewable
15
There are two different ways of defining scope 2 emissions: the location method and the market method. The location
method involves only looking at the overall emissions of the grid of the country that operations are located in, while the
market method focuses on the specific supply mixture that an operator buys. Because of the greater level of granularity
and the frequency with which operators have bespoke supply agreements, most operators use the market method for
reporting their scope 2 emissions.
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STATE OF DIGITAL COMMUNICATIONS | 2023
ETNO members’ GHG emissions, including those generated outside of Europe, fell by 39% between 2020
and 2021, based on the market definition of scope 2. Emissions per unit of revenue fell to half of the 2017
value. This indicates that operators’ strategies for increasing their use of renewables and pursuing energy
efficiency is succeeding, despite increasing data usage.
FIG 7.3 : Scope 1 and 2 GHG emissions and emissions per unit of revenue generated,
ETNO members at the group level, 2017–202116
9 0,040
7
0,026 0,030
0,026
6
0,025
5
0,016 0,020
8,54
4 7,89
6,84 7,01 0,015
3
4,30 0,010
2
1 0,005
0 0,000
2017 2018 2019 2020 2021
16
tCO2e refers to tonnes of carbon dioxide equivalent. This serves as a fungible measure because there are many dif-
ferent kinds of greenhouse gas. kgCO2e per € refers to the kilograms of carbon dioxide equivalents that are generated
to create €1 of revenue.
The slight rise in emissions in 2020 is attributable to the integration of Sprint into T-Mobile in the USA. The steep fall in
2021 is due to the elimination of T-Mobile USA’s scope 2 emissions based on the market definition in that year.
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Operators’ emissions within Europe have fallen consistently year-on-year (FIG 7.4). Additionally, the carbon
intensity of revenue generated has followed a similar decline; emissions per unit of revenue roughly halved
between 2017 and 2021.
FIG 7.4 : Scope 1 and 2 GHG emissions and emissions per unit of revenue generated,
ETNO members, Europe only, 2017–2021
6 0,040
0,027 0,030
4 0,023
0,025
0,020
3 0,020
0,016
5,11 0,014
4,42 0,015
2 3,79
2,94 0,010
1 2,18
0,005
0 0,000
2017 2018 2019 2020 2021
Telecoms operators will also enable changes in our society that lead to greater reduction in GHG emissions
than can be made in operators’ own operations. Some operators have set ‘enablement’ targets to measure
how communications may offset the negative impact of each kilowatt hour of energy used or tonne of carbon
dioxide from the communications user. Reducing or eliminating the use of transport and logistics by imple-
menting remote communications is the clearest enablement use case; others include smart city, buildings
and metering solutions.
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STATE OF DIGITAL COMMUNICATIONS | 2023
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 7.5 : Selected scope 1 and 2 and scope 3 emission reduction targets,
ETNO members at the group level17
The practical details of achieving net-zero scope 3 emissions will involve greater levels of operator involve-
ment with equipment suppliers and large customers. Operators can use their influence to try to promote more
environmentally friendly and energy-efficient methods for manufacturing, transport and storage.
17
This table refers to net-zero targets as announced by companies and does not take into account if these targets have
been validated against the Science Based Targets initiative (SBTi) Net-Zero Standard. To check progress in SBTi, click
here https://sciencebasedtargets.org/companies-taking-action
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STATE OF DIGITAL COMMUNICATIONS | 2023
23% of Deutsche Telekom’s energy needs are now covered by these PPAs, which it primarily uses
outside of Europe. It is easier to access 100% renewable supplies without having to commit to
long-term PPAs within Europe because there is a higher level of renewables in the energy mix. In
addition, Deutsche Telekom has embarked upon on-site generation projects such as the Dittenheim
solar farm that it built with Ericsson, in which solar panels were integrated with mobile broadband
towers to provide up to two thirds of the electricity required during peak demand periods.
Operators are working to ensure that the justified focus on net zero does not eclipse other important environ-
mental issues. They are turning to the principles of the circular economy to help to reduce their environmental
impact. The circular economy refers to a model of economic activity in which there is not a linear movement
from raw materials to waste, but instead, the maximum effort is made at every level of the value chain to reuse
and recycle, and thereby to reduce the amount of materials and resources required.
Waste, particularly e-waste, has traditionally been a challenge for the telecoms industry. E-waste refers to
electronic refuse (principally mobile phones, computers and tablets), which is difficult to recycle and reuse.
However, operators have taken the lead over the past few years, and many now have active phone exchange
programmes and are making outreach efforts to educate consumers about how they can limit their contri-
bution to environmental degradation. Examples include Orange’s RE programme through which it provides
extensive support to consumers to trade in their old phones for refurbishment or recycling, thereby limiting
the growth of e-waste.
Operators are also using waste quotas to keep themselves accountable and ensure that they meet their tar-
gets for reducing the amount of equipment that is sent to landfill. More broadly, the growing implementation
of a resource hierarchy is helping to limit unnecessary waste. This hierarchy puts ‘rethinking’ at the top and
ultimately ends in ‘refuse’. Operators can implement new design principles to stop waste from occurring as
part of the rethinking process and can then focus on ensuring that the waste that is generated is disposed of
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
as responsibly as possible. Recycling and extending the life of advanced network equipment is an expensive
and complex process, and governmental and EU support is essential to make it economically and environ-
mentally efficient.
Radio access networks (RANs) account for over half of operators’ electricity use, and each successive gen-
eration of mobile technology requires more energy to function. 5G thus presents a paradox: it is more en-
ergy-efficient than earlier generations, but it will add an additional layer of energy consumption until legacy
generations are switched off. Operators and vendors are highly aware of this issue and there have been
several developments aimed at reducing the energy burden (such as 5G deep sleep mode). Future iterations
of 5G, especially any roll-out that increases the number of active elements (such as massive MIMO antenna
arrays, radio units and cell sites), threaten to increase power usage even more.
There are numerous ways to minimise the additional energy usage of 5G networks in the short term. Indeed,
many equipment manufacturers and operators are working on novel software upgrades to improve network
efficiency. The aim of these approaches is to more closely align power consumption with real-time usage;
‘smart sleep’ functions that power down equipment during periods of low usage are good examples of this.
Ericsson now offers a Micro Sleep and Low Energy Scheduler Solution that can reduce energy consumption
by up to 15% as part of its 5G software package. Using advanced, liquid-based cooling at base stations is
another important approach.
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STATE OF DIGITAL COMMUNICATIONS | 2023
2G networks will be decommissioned after 3G networks in most cases (or not at all), despite being an older
and slower technology. This is because 2G is still very important for IoT functions and basic voice services,
while 3G has been mostly replaced by 4G and 5G. As a result, the 2G shutdown will proceed slowly in many
countries, while there are expected to be 45 decommissioned 3G networks in Europe by 2025 because these
networks will become increasingly obsolescent and expensive to run (Figure 7.6).
70
Count of decommissioning of 2G/3G networks
62
60 56
54 54 54 55
50
41
(cumulative)
40 36 46
45 45
30 45 45 45
24
37
20 32
13
22
10
12 16
1 9 9 9 10 11
0 1 2 4 4
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
2G 3G
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Research suggests that MNOs who are currently maintaining a full suite of 2G, 3G, 4G and 5G services via
separate base stations could lower their mobile network energy consumption by up to 40% if they switch off
both 2G and 3G.18 Most ETNO members are planning to shut off their 3G networks by 2028.
However, upgrading to FTTH and decommissioning copper networks and copper-based technologies could
have a more profound impact on energy consumption than any remedy in the RAN. Different operators have
very different network structures, so the total amount of energy that they can expect to save varies consider-
ably, but moving from a copper-based network to FTTH-only infrastructure is likely to reduce energy use by
80% on average. Indeed, BT indicated in 2022 that an FTTH/GPON line uses only about 12% of the energy
of an FTTC/VDSL line (excluding the CPE).19
So far, most decommissioning efforts have focused on PSTNs (Figure 7.7). This in itself can reduce energy
consumption by up to 10%, but multiple operators plan to shut down their copper networks nonetheless. De-
commissioning copper networks typically involves shutting down exchanges, which FTTH requires (generally
80%) fewer of. A fully modernised fixed access network would therefore account for under 10% of an integrat-
ed operator’s energy usage. Moreover, new FTTH roll-out technologies and engineering techniques, such as
shallow trenching (slot-cutting) and using existing aerial infrastructure (poles), could drastically reduce the
carbon impact of the construction itself. However, these benefits will only be realised with the right policies.
12
Count of decommissioning of PSTN networks
10
8
(cumulative)
6
11 11 11 11 11 11
10 10
9 9 9
4
5 5 5
2
0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
18
For more information, see Analysys Masons’ Decommissioning legacy networks will be key to reducing operators’
energy usage.
19
See also Telefónica (2022), Connectivity solutions’ Life Cycle Assessment, which states that the environmental impact
of FTTH per unit of data is 18 times lower than that of copper, and that the environmental impact of 4G/5G is 7 times lower
than that of 2G/3G.
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STATE OF DIGITAL COMMUNICATIONS | 2023
Telenor and Telefónica will be the first operators to shut down their copper networks in 2025 (Figure 7.8),
though many others are planning progressive shutdowns over the course of the 2020s, with most aiming
for a complete shut-off by 2030/2031. These include Orange France and Altice Portugal, both of which are
targeting 2030.
Operator Year
Telenor 2025
Telefónica 2025
Telia Company 2026
Self-generation is one option, but it is likely to be small-scale unless operators truly diversify into the business
of power generation itself. TIM is building new photovoltaic plants with an installed power of around 10MWp
(megawatts-peak). It anticipated that these plants would produce 3GWh in 2020 and around 13GWh per year
at full capacity. However, this is only equivalent to 0.8% of TIM’s total energy consumption.
Self-generation schemes have their uses (and could be a means of guaranteeing supply in times of crisis),
but PPAs are more likely to deliver on the twin aims of energy reduction and environmental benefits. These
long-term contracts (usually 10–20 years) both facilitate the construction of energy-generating capacity by
providing lenders with security and guarantee a stable price for energy over that period. Taking out PPAs
mirrors the way in which operators themselves solicit long-term commitments to FTTH builds from anchor
tenants in many respects.
Operators that are moving to make their networks dependent on renewable technologies are helping to fund
a virtuous circle in which electricity generators have a better return on renewables and so maintain a higher
level of investment and innovation.
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SECTION 4
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STATE OF DIGITAL COMMUNICATIONS | 2023
Innovation in Europe is seen as being key to ensuring the modernisation of the EU industry in terms of tech-
nology, products, services and business models. As such, the EC has various policies to support innovation.
It announced a new European Innovation Agenda in July 2022 to position Europe as a leader in innovation.
The EC’s latest European Innovation Scoreboard (EIS), a policy to monitor and measure innovation across
Europe, found that the EU’s innovation performance improved by 10% between 2015 and September 2022.
ETNO members have been at the forefront of developing Open RANs, and several firms have contributed to
the setting of technical specifications via the O-RAN Alliance and ETSI. However, their deployment activity
has so far been largely confined to small-scale trials; the main Open RAN deployments in the world are from
Rakuten Mobile in Japan and Dish Wireless in the USA at the time of writing (Figure 8.1).
FIG 8.1 : Open RAN trials and deployments in China, Europe, Japan, South Korea and the USA,
2022
6
Open RAN trials and deployments
4
6 6
2
3
1 2 2
0
Europe US Japan South Korea China
Implementing Open RAN can be complex because multiple vendors’ products must be integrated into a sin-
gle network. As a result, it is larger operators that have started to test and deploy Open RAN first, including
players such as Deutsche Telekom, Orange, Telefónica, TIM and Vodafone.
Telefónica has successfully concluded several trials and aims to deploy Open RAN across 50% of its network
by 2025. It aims to have 1000 active Open RAN sites across Germany by the end of 2022, as well as numer-
ous smaller networks in the UK via its O2 subsidiary.
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Deutsche Telekom has successfully completed an Open RAN trial in north-eastern Germany that showcas-
es Europe’s first integration of massive MIMO (mMIMO) radio units using O-RAN open fronthaul interfaces
to connect to virtualised RAN software. It also operates an Open RAN lab (‘i14y lab’) in Berlin as part of a
consortium funded by the German government, which enables the development and testing of open and
disaggregated network components.
TIM has deployed Open RAN in parts of its 4G network in Italy and is planning to introduce it in its 5G network
as well. Vodafone has launched Open RAN in multiple countries across Europe, including Italy, the Nether-
lands, Romania, Spain and the UK. It aims to have 2500 active Open RAN sites by 2027 and hopes that 30%
of its network will use Open RAN by 2030. Orange plans to use solely Open RAN in new networks from 2025
and operates an Open RAN Integration Centre in France to test new Open RAN technologies.
Cloud computing plays a key role in the function of Open RAN, and some operators have taken advantage of
this to build DIY private clouds to support their Open RAN deployments in order to avoid vendor lock-in. This
method has been used by TIM in Italy and Vodafone in the UK.
However, 5G networks must be fully implemented to realise these benefits, which means that 5G standalone
(SA) networks need to proliferate. Most current 5G networks are 5G non-standalone (NSA) due to their lower
roll-out costs. 5G NSA networks use upgraded 5G antennas on existing LTE (4G) evolved packet cores,
whereas 5G SA networks use a new 5G mobile core.
5G NSA networks can deliver 5G mobile services, but the full capabilities of 5G can only be delivered using
5G SA networks. 5G SA enables services with low and/or guaranteed latency, which opens up the possibil-
ity of delivering a range of applications beyond best-efforts mobile broadband. 5G SA’s potential to enable
network slicing has attracted particular attention. Network slicing is defined as using common infrastructure
to create separate, end-to-end virtualised networks that can then be used for specialised functions. For
example, a network slice that prioritises minimum latency and maximum reliability could be created for re-
motely controlled vehicles, while another slice that targets greater connection density and energy efficiency
could be used for IoT applications. The logical and dynamic isolation of FWA traffic from mobile broadband
is probably the simplest use case and is already in use in some (non-European) countries. The Oslo public
transport network is an example of non-5G network slicing in a real-world environment; Telia helped to trans-
form the communications-based train control system to a radio-network-controlled system rather than rely on
analogue signalling.
Four operators have deployed commercial 5G SA services in Europe as of 2022 (Figure 9.1); this is only one
more than in the previous year. All except one is still small-scale, and the initial focus for two has been to
isolate FWA traffic rather than to provide more-specialised functions or to enable third-party services to use
the network. There have been several other active commercial trials. 5G SA deployments have been subject
to delays, and not just in Europe. Not all operators are interested in developing these capabilities. However,
the number of deployments in Europe is likely to increase significantly from 2023; indeed, Orange and A1
Telekom Austria have imminent roll-out plans.
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STATE OF DIGITAL COMMUNICATIONS | 2023
16
14
15
12
5G SA networks
10
4
4
2 3 3 3 1
0
Europe Asia-Pacific North America Middle-East Latin America Sub-Saharan
and North Africa
Africa
4 operators have
deployed commercial
5G standalone
services in Europe in
2022. A significant
increase is
expected for 2023.
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The extraordinarily high speeds that XGS-PON technology enables act as a differentiator in hyper-compet-
itive markets. There are currently few practical uses other than downloading and uploading very large files
very quickly. However, the combination of these technologies with new ultra-wideband Wi-Fi6E and Wi-Fi7 will
offer a radical step-change in the kind of bandwidths and latencies that are available at an affordable price to
end users and devices. The widespread availability of multi-gigabit and sub-1ms links to individual devices,
when combined with edge cloud, creates the kind of infrastructure fabric that could foster truly innovative
extended reality (XR) services for consumers and businesses.
Optical access technologies also serve an important longer-term purpose because they allow operators to
converge the hitherto separate networks for B2B dedicated links and for mobile x-haul into a single technol-
ogy platform. Next-generation xPON radically reduces the cost of x-haul through the use of shared network
infrastructure, thereby opening up opportunities for densified and virtualised local mobile networks that would
otherwise have been commercially unviable.
Network slicing is not confined to mobile networks; operators are exploring the ability to isolate virtual slices
for special purposes on optical access networks. The ability to use network slicing to offer wholesale access
in a way that grants the virtual network operator (the wholebuyer) a high degree of operational autonomy
without heavy capital outlay is of particular interest.
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STATE OF DIGITAL COMMUNICATIONS | 2023
Many of the data centres used for cloud computing are now based in Europe following significant expansion
in recent years (Figure 11.1). For example, Oracle opened a second French cloud region in Paris in June
2022.
FIG 11.1 : Percentage of leading public cloud providers’ data centres in Europe, 2022
40
35%
35
Percentage of data centres in Europe
30%
30
25 24%
19%
20
16%
15
10
0
IBM Azure Oracle Google Cloud AWS
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Operators worldwide are spending increasing amounts on both cloud computing and wider IT in order to
manage the growing level of information complexity that comes with 5G networks. The split of their costs
between in-house spending and external spending is changing; the proportion of opex that is spent in-house
is expected to decline radically over the next 5 years to US$22 billion (€20.5 billion) in 2027, while external
spending is likely rise to US$50 billion (€46.5 billion) (Figure 11.2). This shift is being driven by cloud com-
puting firms’ high level of specialisation, which allows them to offer a far more cost-effective service than can
be achieved with operators’ internally developed proprietary systems. Spending is not expected to grow
indefinitely and will probably start to level off in the late 2020s when as many processes as possible have
been moved to the cloud.
FIG 11.2 : Operators’ cloud and IT opex, in-house and external, worldwide, 2020–2027f
80
Operators' opex on cloud and IT (US$ billion)
70
60
36
50 20 31 38 46
22 50 50
40
30
20 40 39
36 34
30
26 22 22
10
0
2020 2021 2022f 2023f 2024f 2025f 2026f 2027f
Inhouse External
Edge cloud computing is a form of distributed computing that involves bringing data processing nearer to
end users. It is accomplished by spreading edge nodes that act as local data centres across a geographical
area, which requires significant upfront investment. Increasing the number of edge nodes throughout Europe
is a major goal of the EC’s Digital Decade programme; indeed, the EC is targeting 10 000 edge computing
nodes across the EU by 2030.
Operators are in a good existing position to increase the scale of edge computing in Europe because they
already own and operate thousands of connectivity sites within densely populated and commercial areas.
Edge computing nodes can be built next to towers and cell sites, thereby helping to further reduce latency
and operational costs.
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STATE OF DIGITAL COMMUNICATIONS | 2023
Multiple ETNO members have pursued edge computing projects and have often partnered with technical
specialists to deliver cutting-edge solutions and to improve their own networks. Operators are also working
together under the EC-sponsored framework of the Important Projects of Common European Interest to drive
forward European investment in cloud developments. This type of project offers great advantages in terms
of scope, co-operation and EU innovation, but its internal validation processes stand in the way of enabling
a rapid time to market.
FIG 11.3 : Announced and commercialised edge cloud offers, by global region, 2022
20
18
16
Edge cloud offers
14
10
12
10
19
8
4 8
1
5 5 5
2
3
2
0
Asia- North Rest Europe Asia- North Rest Europe
Pacific America of World Pacific America of World
Telefónica announced a partnership with 5G enterprise firm Pente in 2022 to offer an integrated edge com-
puting and 5G cloud service that provides cloud computing and automation of business processes.
Orange provides an enterprise edge computing solution called Intelligent EdgeFabric (IEF) that enables
cloud applications to be run at the edge, with edge nodes providing a bridge between the central cloud and
end devices. IEF is set up to be easily integrable with AI/ML, meaning that enterprises can increasingly auto-
mate their processes as their models are trained on real data emanating from the edge nodes.
TIM is aiming to increase the role of AI in edge computing, so has contributed to the AI@EDGE project that
aims to automate 5G network components. Edge computing is particularly suited to this task because it can
achieve the near-zero latency that is required to make live networks function in real time.
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
Enterprise spending on edge cloud computing is expected to grow rapidly worldwide, and will exceed
US$30 billion (€28 billion) by 2025 (Figure 11.4). Spending will be the greatest in North America, but enter-
prises in emerging Asia–Pacific and Western Europe will also spend over US$5 billion (€4.7 billion) each.
FIG 11.4 : Enterprise spending on public edge computing services, by region, worldwide,
2019–2025
40 000
35 000
Spend (US$ million)
30 000
25 000
20 000
15 000
10 000
5 000
-
2019 2020 2021f 2022f 2023f 2024f 2025f
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STATE OF DIGITAL COMMUNICATIONS | 2023
Operators are collaborating to improve the AR/VR experience, which is critical to the success of the metaverse.
For example, the Niantic Planet-Scale AR Alliance is working to build a comprehensive AR platform that can
be used on multiple different headsets, and Deutsche Telekom, EE and Orange are contributing members.
Telefónica started to work with Qualcomm in September 2022 to develop a new XR ecosystem based on
Qualcomm’s Snapdragon platform and running through Telefónica’s fixed and mobile networks. The aim is
to offer a range of applications offered through the ecosystem and to bring new people into the metaverse
by offering a user-friendly introduction to XR experiences. Orange Spain launched its own metaverse store
also in September 2022, with which consumers can interact via VR headsets. It includes digital avatars of
salespeople to help end users to find the right product.
Most operators are using the metaverse to capitalise on their technical advantage in connectivity provision,
but some are now starting to explore the possibility of taking on a more active role in other elements of the val-
ue chain. For example, Telefónica is part of the Alaian Alliance of operators and has been working to create
metaverse use case standards that maximise the interoperability between various applications and devices.
It is also aiming to develop standardised network technologies that can be used to connect headsets from
a range of vendors; this is vital to ensuring a wide take-up of metaverse apps. Operators’ enthusiasm for the
metaverse is illustrated by the wide array of events that they have held in the metaverse, though most oper-
ators believe that the primary economic impact of the metaverse will not be felt until the late 2020s, thereby
limiting its immediate relevance for revenue generation.
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STATE OF DIGITAL COMMUNICATIONS | 2023
Operators are
collaborating to improve
the Augmented Reality
and Virtual Reality
experiences, which are
critical to the success of
the metaverse.
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SECTION 5
The continuing
poor financial health
of the telecoms sector
is not in Europe’s
strategic interest
The European telecoms sector continues to struggle to translate demand for its
services into financial robustness. Its market valuations have underperformed, its
debt is high and its ability to make adequate returns on the high level of capital
employed is questionable. This situation is not in Europe’s strategic interest, mainly
because it contributes to weakening the sector’s ability to swiftly invest in resilient
networks, but also because it is leading to the sale of service-related assets, which
are highly relevant in terms of the overall innovative potential of the European
economy.
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STATE OF DIGITAL COMMUNICATIONS | 2023
FIG 14.1 : Stoxx Europe 600 index, Stoxx Europe 600 index for telecoms and Stoxx Global 1800
index for telecoms, where the value in 1Q 2016 is set to 100, 4Q 2015–3Q 2022
140
120
100
Index
80
60
40
20
2016
2016
2016
2016
2017
2017
2017
2017
2018
2018
2018
2018
2019
2019
2019
2019
2020
2020
2020
2020
2021
2021
2021
2021
2022
2022
2022
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
Stoxx Europe 600
Stoxx Europe 600 Telecommunications
Stoxx Global 1800 Telecommunications
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
Both general European stock prices and global telecoms stocks have suffered over the past year, but Eu-
ropean telecoms firms did not benefit from a post-pandemic rise. This contributed to a widening of the gap
between their share prices and broader European market movements, although this ratio appears to have
stabilised over 2022 (both indices have fallen).
Operators are generally concerned that part of their historical value as service providers is continually being
lost to CAPs (particularly hyperscalers). Part of operators’ value has also been lost to pure infrastructure plays
(sometimes called under-the-floors) such as towercos and fibrecos (much of this has actually been the result
of operator sell-offs). All three groups (that is, CAPs/OTTs, telecoms operators and infrastructure plays) lost
substantial stock value in the first three quarters of 2022 (Figure 14.2). Of course, these falls must be seen in
the context of general economic woes; the falls in CAPs’ stocks are also a market correction.
FIG 14.2 : Stoxx Europe 600 index for telecoms, Stoxx Global 1800 index for telecoms and
stock values for hyperscalers and towercos, where the value in 4Q 2018 is set to 100, 4Q
2018–3Q 2022
400
300
Index
200
100
-
20
20
20
21
21
21
18
19
19
19
19
20
21
22
22
22
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
1Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
2Q
4Q
1Q
2Q
3Q
92
STATE OF DIGITAL COMMUNICATIONS | 2023
Enterprise value/EBITDA multiples for European telecoms stocks remain low, though the aggregate value for
ETNO members increased from 4.7 to 5.0 over the last full financial year and the unweighted average grew
from 5.8 to 6.3 (Figure 14.3). These low multiples reflect an ongoing lack of market confidence in the potential
for sustainable long-term growth in European telecoms revenue.
FIG 14.3 : Enterprise value/EBITDA, ETNO members and other operators, worldwide, end of
the last full financial year as of November 2022
16
Enterprise value/EBITDA
14
12
10
8
6
4
10,9
14,7
14,0
2
6,1
5,1
4,6
4,8
5,3
7,1
3,9
4,7
7,2
3,6
6,8
7,0
6,2
5,6
6,3
4,8
7,9
4,6
7,3
0
A1 Telekom Group
BT
Deutsche Telekom
Elisa
KPN
Orange
Proximus
Swisscom
Telefonica
Telenor
Telia
TIM
Iliad
Tele2
Vodafone Group
AT&T
NTT
Singtel
SKT
Telstra
Turkcell
Verizon
ETNO Other Europe Rest of World 2020 value
European telecom
companies have
underperformed
peers on market valuation,
investment, returns and
debt ratios. This is a
strategic weakness for
Europe.
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
The business model used by most European operators seeks to benefit from tying the provision of physical
connectivity to the service layer. The physical layer mostly consists of network infrastructure such as towers
and cables, whereas the service layer increasingly resides in software. Markets appear to regard this as an
inefficient means to maximise the value of these assets. As a consequence, they tend to punish communica-
tions businesses (in Europe and elsewhere) that are not focused on one or the other, and they have doubly
punished telecoms businesses in Europe where pro-competition regulation has made it harder than else-
where to gain advantage in the service layer via the connectivity business.
FIG 14.4 : EV/EBITDA multiples, ETNO members, selected hyperscale CAPs and major
telecoms infracos, worldwide, 2021 and 17 November 2022 20
40
35 32,4 33,6
30,6 30,1
30 28,3 34
32
EV/EBITDA
25 21,8
20,3 20,3 20,5 20
20 17,4 15,9 15
15 12,5
10 6,6
6,3 5,7 6,5
5
0
on
tle
*
ft
et
ex
er
O
fli
et
so
ab
as
az
ln
N
et
M
To
ro
el
ET
ph
C
Am
N
ic
n
an
Al
M
w
ic
ro
er
C
Am
2021 17/11/2022
20
The ETNO data is based on the unweighted average among members.
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STATE OF DIGITAL COMMUNICATIONS | 2023
Operators’ net debt continues to grow. Indeed, net debt as a proportion of EBITDA has grown for the past 5
years for ETNO members at the consolidated group level (Figure 14.5). Structurally persistent high levels of
debt are increasingly a problem as interest rates start to rise from historical lows.
FIG 14.5 : Net debt/EBITDA, ETNO members at the group level, 2014–2021
2,5
2,48 2,53
2,36
2 2,18
Net debt / EBITDA
2,06 2,03
1,80 1,81
1,5
0,5
0
2014 2015 2016 2017 2018 2019 2020 2021
The attempts to improve balance sheets run up against the need to continue to modern networks by deploy-
ing 5G and FTTH. FTTH is usually a greater capex burden than 5G, but the likelihood is that free cash flow will
improve substantially once that transformation is completed. However, this is still several years off for many
European operators, and there seems to be little prospect of mobile investment slowing down in a similar
manner to that for fixed services.
The current capex burden has forced operators to sell non-core operating subsidiaries and various assets.
Many ETNO members (and other European operators) have carved out tower businesses that are also open
to third-party tenancies. The expectation is that these newly formed businesses will deliver improved return
on operators’ assets. Carved-out captive towercos of this kind attract interest from infrastructure investors and
have commanded high valuations in relation to their EBITDA. As such, several operators have sold stakes in
the new entities, and have thereby enabled new investors to enter the market as partners rather than com-
petitors. There has also been a similar carve-out/sale plus leaseback approach to some data centre assets.
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
Many ETNO members have entered into co-investment partnerships for FTTH, sometimes for their entire
physical footprint and sometimes for just parts of that footprint. This enables:
Sales of assets and adjacent businesses have also occurred in other, more service-driven, areas. It has
sometimes proven difficult for operators in mid-sized or small European national markets to compete effec-
tively against large transnational entities in the consumer and enterprise digital services space.
These developments improve balance sheets and, particularly in the case of FTTH assets, lower future capex
burdens and hence future indebtedness. However, they also introduce the risk of national operators losing
control of end-to-end value chains, either to cloud players or to infracos. Partnerships with cloud players
might result in operators yielding strategic direction and hence value to the cloud players. Infracos typically
focus on single, usually passive, asset classes (towers, fibre and data centres), but some are starting to in-
vest a wider variety of asset classes, and inactive equipment and skills, all of which combine to make infracos
closer in nature to wholesale telecoms operators.
Return on capital employed (ROCE) has declined for ETNO members (Figure 14.6). The aggregate figure
for 2021 (5.1%) is perilously close to the weighted average cost of capital for the telecoms industry, although
an adjusted figure that excluded various write-downs would be closer to 6.1%.
10%
9%
9,1% 9,1%
8%
7%
EBIT/ capital employed
7,6%
6%
6,6%
5%
5,1%
4%
3%
2%
1%
0%
2017 2018 2019 2020 2021
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STATE OF DIGITAL COMMUNICATIONS | 2023
This issue is being discussed, among others, in an ongoing policy debate on whether CAPs should contrib-
ute to the network investment efforts that are currently shouldered by the European telecoms sector. The
European Digital Rights and Principles Declaration from January 2022 established that all market actors that
benefit from the dividends of the digital economy should make a “fair and proportionate contribution” to digital
network investment. This discussion is key to advancing towards the achievement of the EU Digital Decade
targets, and multiple different views are currently being put forward by stakeholders. More clarity on the poli-
cy objectives, scope, modalities and implications is expected during 2023. This is one of the debates that will
shape the longer-term strength of the European telecoms sector, as well as its overall investment capacity.
Notwithstanding the issue of meeting the Digital Decade targets, there are further reasons, with strategic
implications for Europe, to be concerned about the health of the European telecoms sector.
• Low profitability increases the risk that the European communications industry outsources the skills re-
quired for new technology paradigms, thereby yielding competence to non-European companies in Chi-
na, India or the USA. The development of a stronger domestic position in the communications technology
ecosystem has been a long-standing strategic challenge for Europe since the beginning of the 4G era.
• Low valuations make the communications sector more susceptible to aggressive M&A and potential hos-
tile approaches from non-European actors, some of which may have little interest in developing a digital
advantage for Europe. Yielding control to outside entities could seriously damage the European aim of
open strategic autonomy and could dent any hope of a renaissance of innovation and investment in new
digital communications technologies.
• In terms of governance and ownership models, we observe that, in addition to the vertically integrated
model, several markets are now proceeding to separate network assets, fixed or mobile. Especially in
Europe, this is a way to create value in a low-growth sector. The way in which structural separation is
implemented is particularly delicate, as breaking up vertically integrated players might hamper resources
and skills to pioneer technology, especially vis-à-vis global competitors.
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ETNO Members
ETNO Observers
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STATE OF DIGITAL COMMUNICATIONS | 2023
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THE STATE OF DIGITAL COMMUNICATIONS | 2023
European Telecommunications
Network Operators’ Association
info@etno.eu
WWW.ETNO.EU
#StateofDigi
@ETNOAssociation
100