Deutsche Telekom & Ericsson CEOs: Europe’s Dysfunctional Telecom Industry Must Consolidate

Europe’s telecommunications industry needs to consolidate, Deutsche Telekom Chief Executive Tim Hoettges said on Friday, as the region’s 100 operators invest more in 5G networks at a time when revenue and profits are under pressure.

“The industry is in a dilemma that it can only escape through cost synergies,” Hoettges told a news conference, repeating earlier calls for consolidation. “I believe deeply that European consolidation is necessary.”  Yet the Germany-based telecom provider, that owns a majority stake in T-Mobile US, is not in active merger talks.

Earlier this month, Borje Ekholm, chief executive of Sweden based equipment maker Ericsson told the Financial Times that Europe has a “non-functioning” telecoms market. Ekholm suggested it was rational for Europe’s telecoms operators not to invest in 5G networks, because many of them failed to earn their cost of capital. “The problem is that the guys that are supposed to build out that infrastructure (wireless telcos) don’t make any money. There is a very big cost to waiting,” he added.

Ericsson is worried that Europe is falling far behind China and the U.S. in the rollout of 5G, which it argues will be crucial for the digitalization of businesses.  The company has forecast that 5G could boost the continent’s gross domestic product by 2 percentage points a year.

“Without [5G], general industry will be less efficient and less competitive. Without the infrastructure, it’s hard to develop the digital industry, and that impacts huge value potential and potentially millions of future jobs,” said Ekholm.

The European 5G network equipment makers — Ericsson and Finland’s Nokia — also have a big strategic and security role, as Europe grapples with how much market access to give to their Chinese rival Huawei.

Europe has dozens of telecom operators, but attempts to consolidate in some countries have been blocked by the European Commission because of competition worries.  That led some operators to complain their profitability lags far behind bigger U.S. rivals.

Vodafone may announce IPO of its European towers unit as soon as Wednesday

Several countries, including Germany and the UK, are pushing for the creation of additional telecom equipment makers, as well as the opening up of networks to other companies. Ekholm expressed surprise that Europe would do anything to undermine Ericsson and Nokia, as telecoms was one of the few technology sectors where the continent had “strategic autonomy,” he said.

“It is interesting to see that now there is a discussion about giving EU subsidies to develop competing companies, mostly they are based in the US and Asia.”

He added that it was vital for Ericsson “to be in markets at the forefront of tech development: China and the U.S.”

“For us to have a presence in both China and the U.S. allows us to be a global tech leader. It is high risk to be only in one ecosystem and not the other. It could ultimately lead to the Chinese ecosystem developing faster thanks to its scale.”

Ericsson’s CEO previously spoke out about Sweden’s ban of Chinese telecoms vendors, e.g. Huawei and ZTE. Ekholm insists that there are currently too many disincentives to invest in European telecom infrastructure.  He’s probably right.




2 thoughts on “Deutsche Telekom & Ericsson CEOs: Europe’s Dysfunctional Telecom Industry Must Consolidate

  1. The Dysfunctional Europe Telecom article was very candid as to where Europe stands. The brutal fact is that the continent is falling far behind China & United States with respect to 5G and other telecom technologies.
    Why aren’t the European telcos acting in unison to share spectrum and their mostly proprietary specifications for 5G core network, virtualization and automation of network functions?

    The author points out that nothing can change unless they consolidate their energies together to attempt to improve where they stand on the global telecom stage

  2. Deutsche Telekom unveils €17 million Open RAN lab in Berlin

    Germany’s top three network operators and an ecosystem of vendors, researchers and testing specialists are to germinate their ideas at the i14y, a lab and think tank designed to hothouse the growth of Open RAN and beyond into new types of disaggregated network architectures.

    Telefónica Deutschland and Vodafone Deutschland are contributing to events at Deutsche Telekom’s Innovation Campus Winterfeldtstraße. The lab has a €17 million grant from the German Federal Ministry for Transport and Digital Infrastructure (BMVI) to fund the first three years of work on Open RAN integration and interoperability testing, which will be the primary purpose of the lab.

    BMVI announced the grant as part of a national €300 million economic stimulus package which aims to “support the establishment of [Germany’s] own, independent manufacturing industry.”

    BMVI’s investment plans:
    For a three period starting in November 20201 and ending in 2024, BMVI is supporting the BerlinOpen RAN Lab with €17 million in funding. BMVI says ‘around’ €11.5 million of funding will support two model projects in Open RAN cities. According to the BMVI statement ‘around’ €2.5 million is supporting a research project for an “open RAN ecosystem”.

    In June DT announced it had worked with NEC and Mavenir to test live 5G Open RAN mMIMO in Neubrandenburg. It said il4y will be an “environment for end-to-end integration and performance testing and ultimately a market-ready certification.” TelecomTV described i14y as a Lab-as-a-Service with cultivations from the nursery in Berlin being transferred by Telefónica and Nokia managed satellite facilities for planting in Düsseldorf and Munich.

    MoU for European ecosystem
    The i14y lab is the culmination of an Open RAN MoU declared by DT, Orange, Telefónica, TIM (Telecom Italia) and Vodafone in June. DT says the lab is of “outstanding importance for the rapid development of a German and European ecosystem of system component providers, software suppliers and system integrators.”

    The lab will have the ear of influential bodies of OCP (Open Compute Project), ONF (Open Networking Foundation), ONAP (Open Network Automation Platform), the O-RAN Alliance and the TIP (Telecom Infra Project), according to DT.

    Participants include Berlin-based software-defined networker BISDN, integrator Capgemini Engineering, Fraunhofer HHI (Heinrich Hertz Institute), the German institute for telecoms research and The Technical University of Berlin. All developments will be verified by testing specialists EANTC and Rohde & Schwarz.

    Rohde & Schwarz has announced that it’s working with MediaTek to create testing systems for Wi-Fi 6E devices, by integrating its CMP180 radio communication test platform into MediaTek’s ATE tool.

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