State of Digital Communications 2025

Europe’s now-or-never moment in connectivity.

Executive Summary

The European connectivity ecosystem, today, is identified as a major enabler of competitiveness, sustainability, security and resilience for the whole Continent. This year’s report finds that 2025 is likely to be a “now-or-never” moment for Europe, if it is to stay in control of its connectivity value chain and drive growth.

Leadership on crucial technologies such as 5G, FTTH, 6G and network innovation in AI are at stake. However, figures show that an overly fragmented market, burdened by heavy rules and lack of scalability, is seeing a halt in investment growth for the first time in years and a continuation of unhealthy trends in revenues and return on capital. At the same time, significant opportunities to innovate and become more secure and sustainable are up for grabs.

Europe’s connectivity ecosystem represents 4.7% of the GDP, driving competitiveness and societal growth

• This year’s report features new metrics measuring, for the first time, the size and importance of digital communications at large for the European economy and society. The market – comprising telecom services, network equipment and content & applications in Europe – was worth about EUR1 trillion in 2023, which represents around 4.7% of the European GDP. For comparison, agriculture, fisheries and forestry amount to 1.7% of the GDP together, while the automotive sector stands at 7%.
• The total investment in the market (including tangible fixed assets and R&D) amounted to EUR115.5bn, with telecom operators in the lead, representing 60% of the total, followed by content and application providers (just over 30%) and equipment manufacturers (almost 10%).
• If we zoom in on telecoms, Connect Europe members and their supply chain employed 1 million people, with 537.000 people employed directly, 376.000 indirectly, and over 100.000 contracted.
• Today, the connectivity services offered by Connect Europe members are used by 276 million Europeans (or 61.5% of the population).

Innovation and sovereignty in European connectivity: a “now-or- never” moment

• This year’s report shows how the connectivity ecosystem is dramatically transforming, driven by technology. There are sizeable opportunities – and important risks– related to Europe’s ability to stay in control of its own value-chain. The report therefore tracks progress on network innovation and shows Europe as still being weak on critical technologies such as 5G SA and edge cloud, but making inroads  slowly – on Open RAN, network APIs, AI for network operations and R&D for 6G.
• In Europe, the coverage of 5G Standalone (SA) – the most advanced form of 5G, able to serve the complex needs of industrial customers – continues to trail other areas of the world: at the end of 2024, 5G SA coverage of the population reached 91% in North America, 45% in Asia-Pacific and only 40% in Europe. This happens despite the fact that Europe almost doubled the number of its commercial 5G SA networks, from 10 in 2023 to 19 in 2024.
• In terms of adoption of Open RAN (virtualised and open Radio Access Networks), with a total of 62 trials and commercial deployments by the end of 2024, Europe (16) is ahead of North America (10), but behind Asia and Japan (24). In this context, a survey of European operators shows that 52% of them have already deployed some AI functionality for RAN automation and optimisation, or have started trials.
• As to edge cloud, by the end of 1H 2024, 8 operators in Europe had launched commercial edge cloud offers. Despite this, Europe trailed the Asia-Pacific region, which counted 21 operators with commercial edge cloud offers, but is comparable to North America, that counts 7. In terms of live edge nodes, Europe is still very far from the 10.000 target set by the European Commission, as we currently estimate 320 live operator edge nodes (versus 183 in North America and 148 in Asia Pacific).
• On Application Programming Interfaces (APIs) – which are essential enablers of the Network-as-a-service business model – Europe has so far dominated the early stage market, with European operators amounting to almost half of the Network API platform-related announcements by region (followed by the Asia-Pacific and North America).
• R&D in 6G is also tracked in this year’s report, with telecom operators, operator led industry groups and vendors leading 51% of the over 200 projects tracked by Analysys Mason.
 

Investment in connectivity decreases for the first time in at least ten years, in a low revenue context

• With the telecom sector being at the heart of the connectivity ecosystem and of European competitiveness, it should be a cause of concern that historic trends of low profitability and low investment appear to have aggravated.
• For the first time in at least ten years, the total telecom investment in Europe has declined by 2%, going from EU59.1bn in 2022 to EU57.9bn in 2023. This decline suggests that markets consider the CapEx heavy lifting completed, despite the EU still being far from achieving the Digital Decade Targets.
• When compared to our global peers, also in 2023, telecoms investment per capita in Europe – which stood at EUR117.9 – was lower than in Japan (EUR187.6), the USA (EUR226.4) and South Korea (EUR173.1).
•  Revenues and investment remain interlinked. The report finds that European operators have effectively absorbed inflation on behalf of their customers, meaning that revenue decreased in real terms. In 2023, European telecom revenue declined by 4.4% in real terms, as opposed to the Consumer Price Index, which increased by 6.4%.
• Meanwhile, in 2023, Mobile Average Revenue Per User (ARPU) in Europe declined by 5.9% compared to the previous year (real terms). Also, Europe continues to trail all global peers with a mobile ARPU of EUR14.8 compared to EUR41.7 in the USA, EUR26.0 in South Korea, and EUR22.6 in Japan.
• Of the total EUR64.5 billion invested in the European telecoms sector by operators and upstream partners in 2023, around 46% was dedicated to FTTH, about 30% to mobile networks, and the rest covered aggregation/core transport networks, IT and various non-network assets such as offices and stores.
• Connect Europe members consistently remain responsible for the largest part of operator investment in Europe, as they represent around 70% of the total sector capex.

5G: European coverage grows, but lags all global peers

• By the end of 2024, 5G in Europe is set to grow to 87% of the population, up from 80% the previous year. However, Europe will still trail behind all its global peers: South Korea (99%), the US (98%), Japan (97%), and China (90%).
• The European median mobile downlink speed of 71.0Mbit/s was lower than that in the USA (107.9Mbit/s), in South Korea (143.1Mbit/s) and in China (105.2Mbit/s).
• By October 2023, European operators had spent a total of EUR29 billion at spectrum auctions for the principal 5G bands and about EUR1.5 billion more is expected from operators in the future.

Gigabit connectivity: still far from the EU Digital Decade Targets

• In 2024, Europe still trailed all global peers on availability of gigabit-capable networks, but was ahead in terms of FTTH roll-out.
• Europe's gigabit-capable coverage reached an estimated 82.5% in 2024, as opposed to 99.0% in China, 97.6% in South Korea, 90.3% in the USA and 93.9% in Japan.
• In comparison, Europe's FTTH coverage of the population (excluding FTTB) reached an estimated 70.5%, which is better than South Korea's 67.4% and the USA's 54.8%.
• Our estimates confirm that by the end of this decade more than 8% of the European population – meaning at least 45.4 million people (of which 39,5M in the EU alone) – will still be without access to a fixed gigabit connection, thus falling short of the corresponding EU Digital Decade target.
• Analysys Mason estimates that, in order to reach 99% of the European population, an additional EUR109 billion in FTTH alone would be required between now and 2030.

Data usage keeps growing, with AI as a future driver

• Mobile data usage in Europe increased by 26.5% year-on-year in 2023, and is expected to rise a further 15.2% in 2024.
• Fixed internet traffic increased by 16% year-on-year in 2023 (Figure 6.7) and is expected to rise by around 12% in 2024.
• The report also identifies a series of AI applications that have the potential to further increase volumes of data uploaded or downloaded over fixed and mobile networks. Among those identified, the following consumer applications stand-out: AI-assisted creation tools (making it quicker and easier to create content), AI generated game environments and in-game avatars (making games more appealing), or AI personal assistants (automating the collection and sending of data). In the enterprise market the collection of additional telemetry data from IoT systems for AI analysis, and enterprise use of AI-enabled AR tools are the most likely drivers of future traffic increases.
• The greatest impact on network traffic will be felt at data centres, where traffic volumes related to AI data ingest and AI-related data centre interconnect will grow fast, with a CAGR uplift of 50% or more.

Fundamentals of the sector: fragmented markets, low returns, stretched investment capacity

• European retail markets taken as a whole remain uniquely fragmented. In 2024, Europe had 41 mobile operating groups with more than 500 000 customers, compared with 8 in the USA, 4 in both China and Japan and only 3 in South Korea
ROCE, return on capital employed, is a common metric to determine the return of investment. The ROCE for Connect Europe members is 2.3 percentage points lower that it was in 2017: in 2017 ROCE was 9.1%, while in 2023 it was 6.8%, signalling that it is increasingly difficult for European telcos to generate adequate returns.
• In parallel, the sector's investment capacity continues to be stretched. In 2023, capital intensity for Connect Europe members (i.e. capex as a proportion of revenue) remained very high at around 21.4%, a level higher than all its global peers. Coupled with weak revenue this results in an increasingly indebted sector. In 2023, the net debt/EBITDA ratio of ETNO members touched 2.57, one of the highest levels it has been in recent years.

Tackling the challenges of the century: sustainability and security high on Europe's telecom agenda

• Connect Europe members are accelerating their efforts to reduce their scope 1 and 2 emissions, which are steadily decreasing year-on-year and represent now one-third of those recorded in 2017 (using the market-based calculation method).
• In 2023, the levels of total waste generated by Connect Europe members dropped to 481kTonnes, from 508kTonnes in 2020; and the proportion of waste recycled, reused or refurbished rose to 86%, from 82% in 2022.
• In parallel, the report lists and describes some of the top security challenges currently facing the sector, including the integrity of submarine cables, AI security, vendor embargoes and quantum encryption.

Large white inverted commas

From Enrico Letta's Report on the EU Single Market to Mario Draghi's Report on European competitiveness, it has now become clear that telecom operators and advanced connectivity services are recognized as key enablers of productivity gains and sustainable growth. The jury is still out on whether adequate reforms will be put in place that allow Europe's connectivity ecosystem to scale and grow again.

State of Digital Communications

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edition 2025