Operators find themselves at the heart of the digital economy as 5G drives transformation and productivity growth across industries.
In this new era of intelligent connectivity, 5G will play a critical role, offering the chance to recast customer value propositions, accelerate industrial transformation and reinvigorate the digital society. In Europe, mobile technologies and services accounted for 3.3% of regional GDP in 2017, and this contribution is expected to surpass 4% by 2022.1
However, a positive outlook for the European mobile industry is by no means certain. Fragmented market structures, uncertain demand scenarios and ongoing regulatory complexities present substantial obstacles. Meanwhile, internet of things (IoT) services currently account for a low single-digit proportion of telco revenues.
More robust digital transformation roadmaps, improved dialogue with stakeholders and more meaningful customer interactions will all have a vital role to play.
5G: The European opportunity
Mobile at the heart of a digital continent
The European telco industry stands on the edge of an exciting change. The region boasts the world’s highest rate of mobile penetration and this is set to increase further, from 85% of the population in 2017 to 88% by 2025.2
European governments and policy makers recognize 5G’s ability to create positive externalities, which can help drive productivity growth across traditional industries. This is recognized in regional 5G targets. For instance, the European Union (EU), in its 5G action plan calls for major roads and railways to have uninterrupted 5G coverage by 2025.3
At a national level, 5G trials are well underway in a number of countries, many with a focus on leveraging its potential to create new economic centers. Policymakers also recognize the need for greater levels of regulatory certainty.
The EU’s 5G Action Plan, for example, emphasizes the importance of coordinated spectrum release, testing and trials alongside a pro-investment regulatory environment at large.
5G for operators: the reassertion of control
5G’s credentials as a transformational technology are strong. Beyond improved data rates, ultra-low latency will bring new levels of network responsiveness. 5G can support a hundredfold increase in connected devices per unit area, redefining what’s possible in IoT, while network slicing enables highly differentiated services at specific locations.
Other emerging technologies are set to complement 5G. Mobile edge computing can unlock more efficient data transfer and perimeter security, helping operators to relieve network congestion, and realize low latency. Network function virtualization (NFV) will support more dynamic management of network resources, aiding operating expense (OPEX) and capital expense (CAPEX) reductions in the process.
In this light, 5G paves the way for new paradigms of network operation and service creation. By leveraging analytics, artificial intelligence (AI) and machine learning in conjunction with 5G, operators can offer a range of location- and context-aware services across millions of end-points, backed by a significant change in network control, service quality and personalization.
As a result, operators can play a more assertive role in the industry value chain. No longer relegated to the role of dumb pipe provider, operators’ much more intimate relationship with their networks will help them pave the way for new forms of customer experience and service monetization.
A chance to reignite the sector growth story
Despite mobile’s role as a productivity driver, operators’ financial performance in Europe has underwhelmed in recent years. Regulatory burdens remain pronounced, competitive intensity is increasing and new growth stories in IoT have, thus far, been slow to emerge.
Looking ahead, market conditions are set to remain challenging, intensified by macroeconomic pressures as Eurozone GDP growth slows, from 2.6% in 2017 to 1.9% in 2018 and 1.8% in 2019.4