Why europe is lagging behind in the global race for 5g connectivity

At this year’s Mobile World Congress in Barcelona, the latest innovations powered by 5G technology were on full display, from Telefonica’s firefighting drones to Nokia’s driverless cars. Yet while these advancements turn heads, Europe’s 5G rollout lags significantly behind its global competitors. Despite the growing appetite for high-speed connectivity across the continent, less than half of Europe is covered by 5G, compared to 90% in the US and 95% in countries like India and China.

Industry leaders have repeatedly pointed to fragmentation within Europe’s telecommunications market as a core reason for the region falling behind. Across the UK and EU, there are 38 main mobile network operators and hundreds more virtual network operators (MVNOs) leasing spectrum from larger players. Comparatively, the US market is dominated by just three primary operators, and China only has four. According to Margherita Della Valle, Vodafone’s CEO, this fragmented market prevents operators from scaling enough to fund meaningful investment in upgrades to 5G networks.

The recent approval by the UK’s Competition and Markets Authority (CMA) of the £16.5 billion Vodafone and Three merger has sparked both discussion and hope among telecom executives. This merger will reduce the number of UK operators from four to three, creating the largest mobile network in the country and promising an £11 billion investment in 5G infrastructure. Industry insiders, including Vodafone’s technology officer Scott Petty, argue that consolidation is key to spreading costs over larger customer bases and making the economics of network maintenance more viable.

While this move hints at potential change in how regulators view the sector, Europe’s overall hesitation towards consolidation has long hindered its telecom market. Unlike its US and Asian peers, where more consolidated markets allow companies to focus on innovation and infrastructure development, European regulators are wary of reduced competition and its potential knock-on effect of higher prices for consumers. This fear has led to structural remedies for mergers, such as spin-off brands, that effectively undermine the benefits of consolidation.

Price competition in Europe remains intense, driven by the wide number of network operators. Mobile service revenues have dropped by nearly 30% in real terms over the past decade, while traffic has surged more than thirtyfold during the same period. European operators typically allocate only 15% of their revenue to capital expenditure, compared to 8% in the US market, exacerbating the challenge of upgrading networks to handle growing demand. Despite this, partial 5G rollouts make charging a premium challenging, leaving smaller operators scrambling to stay afloat.

The industry’s failure to sell the true value of independent 5G technology has also undermined adoption. Many companies launched early versions of 5G reliant on legacy 4G systems, creating confusion and diminishing the demand for full-scale 5G deployments. Exhibitors at this year’s conference highlighted artificial intelligence as a potential game-changer for monetising 5G, but whether Europe can turn this into an advantage remains to be seen. The broader question lingers over whether European regulators will take steps to encourage consolidation to enable stronger investments and drive the continent back to the forefront of telecom innovation.