European Connectivity: Strategic Importance, Structural Fragilities

EXECUTIVE SUMMARY

2026 is crunch time for European telecoms. The industrial and political consensus is that digital networks are the backbone of our societies and economies. Citizens demand access to the latest technologies, businesses show increased appetite for sovereign data capacity and homegrown tech services, while governments become increasingly aware of the geostrategic value of the sector. With the Draghi Competitiveness report showing the way, will policy reform in Europe be able to finally meet the moment?

This year’s State of Digital Communications Report shows the huge efforts of the sector in network deployment and innovation, but it also points to continued underinvestment and fragmentation that need urgent fixing.

Europe’s digital communications ecosystem is worth 5% of GDP

The European digital communications ecosystem—comprising telecoms services, network equipment, and content and applications in Europe—was worth EUR 1.09 trillion in total market value in 2024, representing 5% of Europe’s GDP. For comparison, the agriculture and automotive sectors represent 1.5% and 7% of GDP respectively.

In the past year, telecoms operators invested heavily in networks, including FTTH and other gigabit-capable networks as well as 5G coverage. Investment in digital infrastructure also extended to data-centre capacity, edge and AI cloud infrastructure, and international subsea cables.

Progress was also evident in service innovation, including more AI solutions for enterprise, development of sovereign clouds, launch of additional edge cloud services, development of authentication services based on APIs, and work toward the introduction of direct-to-device (D2D) satellite services.

FTTH, gigabit-capable networks and 5G: coverage improves, but Europe still lags

By the end of 2025, 5G coverage in Europe reached 94.9% of the population, improving from 87% in 2024. Nevertheless, Europe remains behind global peers: coverage reached 96% in China, 98.4% in the USA, 97% in Japan and 99.9% in South Korea.

Adoption remains the lowest in Europe compared to peers. In 2025, the 5G share of all mobile connections stood at 73.4% in the USA, 70.4% in China, 60.2% in South Korea, 51.3% in Japan, and 43% in Europe.

When it comes to 5G Standalone—the most advanced type of 5G coverage—Europe also lags: 93% of the population is covered in China, 81% in the USA, 75% in Japan and 63% in Europe.

5G coverage came at great expense in Europe. The annualised cost of spectrum licences to operators has stood at over EUR 8 billion each year for the past five years, and over EUR 30 billion has been spent on 5G spectrum licences, contributing to a total of almost EUR 50 billion spent in spectrum auctions since 2020.

On the fixed side, by the end of 2025 FTTH reached 77.2% of European households, up from 70.9% in 2024. For all gigabit-capable networks, coverage reached 86.2% in 2025, compared to 83.1% in 2024. On FTTH, Europe is ahead of the USA, but behind China and Japan. On gigabit-capable networks overall, Europe is behind all peers.

In terms of median fixed download speeds, Europe remains behind global peers at 171 Mbit/s, compared to 289 Mbit/s in the USA, 206 Mbit/s in China, 219 Mbit/s in Japan and 234 Mbit/s in South Korea.

Investment continues declining as revenues stagnate and markets remain fragmented

For more than a decade, European telecom operators have faced low investment and low revenues compared to global peers. This chronic situation has not changed.

Total sector investment continued decreasing: capex in European telecoms fell by 2%, reaching EUR 64.6 billion in 2024 compared to EUR 65.8 billion in 2023.

This decline is mainly due to slowing FTTH investment. Alarmingly, in the absence of increased investment capacity, an estimated 41.8 million Europeans will still be left unserved by FTTH in 2030.

A silver lining for Connect Europe is that its members lead the pack among telcos, investing EUR 17.2 billion in FTTH in 2024—representing 54% of total FTTH capex.

Overall telecom investment per capita in Europe remains below global peers, at EUR 118 per person, compared to EUR 217 in the USA, EUR 173 in Japan and EUR 151 in South Korea.

This occurred against flat telecom revenues. In 2024, mobile ARPU adjusted by GDP was EUR 14.9 (-2.4% vs the previous year) in Europe, compared to EUR 26.1 in the USA, EUR 21.7 in South Korea, EUR 21.3 in Japan, and EUR 18.3 in China.

For reference, European mobile ARPU stood at EUR 15.3 in 2015, meaning the current value is effectively lower than a decade ago.

Fragmentation remains one of the key drivers of this situation. The number of mobile network operators (MNOs) with over 500,000 subscribers in Europe is 44, compared to 8 in the USA, 4 in Japan, 4 in China and 3 in South Korea. Fragmentation is also evident in fixed markets: the number of fibre network operators with over 500,000 premises passed is 70+ in Europe, compared to 28 in the USA, 6 in Japan, 5 in South Korea and 4 in China.

European telecoms operators are going big on network and service innovation, as AI redefines connectivity

On the service layer, European telcos are increasingly supporting customers with cybersecurity solutions. Cybersecurity revenues stood at EUR 5.3 billion in 2025, up from EUR 3.2 billion in 2020.

The report also finds that telcos are now offering a broad range of AI services, from AI infrastructure to AI models, data management, data insights, AI applications and AI professional services.

This is enabled by fundamental network innovation. European operators are ahead of global peers in open RAN trials and deployments (57 in 2025 alone) and in the number of active network APIs (38% of all API announcements globally came from Europe).

Operators are also expanding into cloud. In 2025, telecom operators owned around 19% of European data centres (around 600 data centres out of 3,177). In edge cloud, European operators are estimated to have deployed around 750 edge nodes by the end of 2024.

When it comes to network usage, data traffic has continued increasing steadily, reaching 1104 exabytes on fixed networks in 2025, compared to 989 exabytes in 2024. Mobile traffic also grew, reaching 169 exabytes in 2025, compared to 149 in 2024.

AI-related traffic is also expected to contribute to filling up networks in the future. Connect Europe: Data centre interconnect traffic is expected to grow by up to 50% per year between 2025 and 2030.