Europe has a “non-functioning” telecoms market, according to the chief executive of Ericsson, leading to a lack of investment and problems for manufacturers in competing with the US and China.
Borje Ekholm, chief executive of the Swedish telecoms equipment maker, told the Financial Times that it was rational for Europe’s telecoms operators not to invest in next generation 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 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 US in the rollout of 5G, which it argues will be crucial for the digitalisation of businesses. It 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 equipment makers — Ericsson and Finland’s Nokia — also have a big strategic and security role, as the bloc grapples with how much market access to give to their Chinese rival Huawei.
European countries including France, Poland and the UK have placed more restrictions on Huawei’s network access after heavy pressure from Donald Trump’s administration over perceived security risks. European diplomats expect a similar tone from Joe Biden’s government.
Europe has dozens of telecoms operators, but attempts to consolidate in some countries have been blocked by Brussels because of competition worries, leading some to complain their profitability lags far behind bigger US rivals.
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. He added: “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.”
The Ericsson chief executive also renewed his criticism of Sweden’s decision to ban Huawei from its telecoms networks because of concerns about spying and technology theft, warning that doing so ran “significant risk of hurting our ability to compete on a global scale”.
He said he had two concerns about the ban: that other countries could “restrict free trade”, endangering the 99 per cent of group revenues that came from outside Ericsson’s home country; and that it was vital for Ericsson “to be in markets at the forefront of tech development: China and the US”.
He added: “For us to have a presence in both China and the US 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.”
Huawei has always denied it presents a security threat to countries that buy its 5G equipment.
